By ALD. WILL BURNS (4TH)
Chicago — like the State of Illinois — is in fiscal crisis. Meanwhile, the Illinois Department of Revenue’s 2010 Annual Report states on page 14 that fully two-thirds of corporations operating in Illinois paid NO corporate income tax to the state. When the state grants tax breaks to large corporations, the City of Chicago also loses revenue.
This ordinance, the Chicago Corporate Responsibility and Tax Disclosure Act, would require publicly traded corporations who are asking for city actions, city subsidies, or city contracts to disclose what they pay to Illinois in state income taxes and what they receive in state tax expenditures. Small, family-owned businesses and privately held corporations will not be affected by this legislation. (A statewide version of corporate tax transparency passed the Illinois Senate in the fall of 2012. The Illinois House Revenue Committee held a hearing on the house version, HB 3627, in September of 2013, but has not taken a vote on the bill.)
Chicagoans are tired of crumbling infrastructure and cuts to school funding and other vital government responsibilities. Citizens are demanding to know which large, publicly traded corporations don’t pay any income tax to the state of Illinois and why. When publicly traded corporations take advantage of city and state infrastructure in order to do business but fail to pay taxes, the city often seeks alternative sources of revenue by increasing taxes, fines and fees on working people and small businesses and delays critical investments in old infrastructure.
The Governor’s Office of Management and Budget reports that 80 percent of state revenue comes from the income taxes paid by individual wage earners and from sales tax revenue. A meager 9 percent of Illinois revenue comes from corporate income taxes.
Right now, Chicago’s elected officials are focused on proposing deep budget cuts to resolve our fiscal crisis. But with two-thirds of corporations paying zero Illinois corporate income taxes, individual taxpayers want to know which tax breaks large, publicly traded corporations are using and whether these tax breaks are really a sound investment or an expense Illinois can’t afford.
Smart public policy is grounded in fact. But without the Chicago Corporate Responsibility and Tax Disclosure Act our elected officials and the public lack vital information about what corporations pay — or don’t pay — in taxes, and why. No responsible budget process can be crafted without this vital information. Companies supported by city contracts, city subsidies, and other city actions have a particular responsibility to disclose this information.
At the federal level, we know the following about corporate tax dodging:
• The federal corporate income tax rate is 35 percent, but because of loopholes and other factors corporations pay an average effective tax rate of about 25 percent. And in 2011 corporations paid just a 12 percent rate. [Congressional Budget Office, The Budget and Economic Outlook, Fiscal Years 2012 to 2022, January 2012]
• The corporate share of federal revenue has declined by more than 60 percent over the last 50 years — plummeting from 22 percent to 8 percent. [OMB FY 2013 Budget Historical Tables, Table 2.2 Percentage Composition of Receipts by Source: 1934–2017, 2012]
• Thirty corporations spent $476 million to lobby Congress over three years and they dodged $68 billion in federal taxes. [Citizens for Tax Justice and US PIRG, Representation Without Taxation: Fortune 500 Companies that Spend Big on Lobbying and Avoid Taxes, 01/18/12]
According to Citizens for Tax Justice research, the following Illinois-based corporations paid no net federal income tax from 2008 through 2011:
• Boeing — whose Chicago headquarters was subsidized by TIF money — earned $14 billion in profit, paid federal tax rates of -5.5 percent and received $6 billion in federal tax subsidies
• Baxter International — earned $1.3 billion in profit, paid federal tax rates of -0.6 percent and received $462 million in federal tax subsidies
• Integrys Energy Group – earned $1.178 billion in profit, paid federal tax rates of -11.6 percent and received $549 million in federal tax subsidies
• Navistar International — earned $1.114 billion in profit, paid federal tax rates of -1.3 percent and received $415 million in federal tax subsidies
We can surmise that these same large, publicly traded corporations don’t pay any corporate income taxes to the state of Illinois. However, without requiring disclosure, we will never know.
According to a poll by Public Policy Polling, nearly 80 percent of Illinois voters say legislation to require publicly-traded corporations to disclose how much they pay in Illinois corporate income tax is a good idea — with 75 percent of Republicans, 80 percent of Democrats and 84 percent of Independents saying it is a good idea.
The Chicago Corporate Responsibility and Tax Disclosure is supported by Fair Economy Illinois – a coalition of grassroots community organizations from Chicago and downstate including, IIRON, Illinois People’s Action, National People’s Northside P.O.W.E.R., ONE Northside, The People’s Lobby, and Southsiders Organized for Unity and Liberation (SOUL).