This could give the term corporate tax an entirely new meaning .The State of Illinois is now allowing certain corporations to keep their employee’s state income tax withholding for ten years. Recent Illinois legislation allows chosen companies to retain all of the income taxes withheld from new hires that expand payroll and half of the taxes for existing workers whose jobs are retained.
Moveon.org has a video (via Atrios) and here is an earlier article by David Cay Johnston.
The Illinois deal shows how competition between the states, and with other countries, helps big corporations wring subsidies from state governments even as the states are being forced to fire teachers and other public workers because of a weak economy that has cost jobs and tax revenue.
Why would the state let companies do this? Most big companies pay little or no state corporate income tax, because companies arrange to take expenses in higher tax states and profits in states with little or no corporate income tax. So the only way to finance incentives without the state writing a check is to let the companies pocket their workers’ state income tax.
However while diverting tax taxes from public purpose to private use the State of Illinois is deep in red ink juggling its own finances. Turns out they are having trouble paying their bills. Three years ago they had a two week turn around on state payments now late payments are the norm. In order to handle budget shortfalls they are deliberately delaying billions of dollars worth of payments for months at a time .The AP found almost half the outstanding sum was more than a month overdue.
It’s hard to imagine any corporation operating here in Vermont ever being shy in the endless effort to get what they must see as only their fair advantage (example here) - so it’s hardly out of the question this scheme in some form might not be lurking in our own future debates.
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