How important are tax credits in keeping companies in Illinois?

There are a wide variety of reasons why a business decides to headquarter itself in the city and state that it does. One of those reasons is tax incentives in the form of credits.

Recently, in an effort to keep some businesses in the state, Illinois has provided corporate tax breaks to a variety of companies including Sears Holding Corp., CBOE Holdings Inc, CME Group Inc. and Motorola Mobility. But just how much sway do those incentives really have? According to some experts in the field not as much as all are led to believe.

Currently, each company seeking tax breaks in the state of Illinois must negotiate with state to obtain them. This means that different requirements could pertain to each company. For instance, the deal Motorola struck with the state included a clause requiring the business to employ a minimum of 2,500 individuals in the state. In exchange, the deal, which was made in 2011, provided the company a total of $100 million in tax breaks over the course of the following 10 years.

Readers may be aware that Google Inc., the business that purchased Motorola after that deal was struck, recently announced the plan to downsize its workforce in the state by 700 positions, dropping their total number of workers in Illinois to 2,256. This, of course, will eliminate any business tax credits remaining under that deal. According to an economist from the University of Illinois, Google's willingness to lose the tax benefits is an indicator of how little they really matter in the overall scheme of things.

What do you think about this? Do corporate tax incentives really matter when it comes to a business choosing to remain in a state?

Source: Business Week, "Job cuts to cost Motorola tax credits in Illinois," David Mercer, Aug. 14, 2012

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