A Vicious Cycle: Tax Hikes and Corporate Welfare

Illinois Governor Patrick Quinn, a Democrat, thought signing massive tax hikes on the people and businesses in his state would be a great way to do close the state’s budget gap. The personal income tax was increased by a massive 67% and the corporate tax rate rose to 9.5%. Naturally, businesses balked, so what is Quinn doing? He’s doling out special favors to keep the businesses from fleeing his state. The Wall Street Journal pointed out the insanity of the situation.

The irony is that the recipients of these sweetheart deals are the very enterprises that Mr. Quinn was counting on to pay more taxes. Six months ago the Governor and union economists said the Illinois tax hike wouldn’t chase businesses out of the state. Now Mr. Quinn is seducing businesses to stay by chopping their tax liabilities.

Illinois voters who were sold the historic tax hike on grounds that profitable corporations should pay “their fair share” might wonder how tilting the playing field in favor of those with the highest-priced lobbyists is fair. “Why should we pay the taxes that Motorola and other corporations don’t?” asks Jack Roeser, the owner of Otto Engineering, an employer of 600 workers in Carpentersville. Good question.

But for Mr. Quinn and the political class, this is precisely the point. Politicians love high tax rates because they can act as brokers to offer tax breaks to the lucky few. Mr. Quinn poses as a populist for unions and the Democratic left in supporting high tax rates, while he then takes credit a second time for doling out tax favors that he claims will keep jobs in the state.

Maybe it’s not so insane after all. Sinister is more like it, and heart breaking for the little guys.

The victims are the thousands of businesses that don’t get the favors, and an overall state economy that is less attractive for employers. That’s one reason Illinois has ranked 47th of the 50 states in job creation in the last decade, and has lost more private jobs (360,000) than the entire private work force of Delaware, according to the Illinois Policy Institute.

Read the whole thing, it’s really quite sickening. But this isn’t limited to Illinois, and if people don’t wake up to what’s happening out there we’re all doomed. Oh, unless you happen to be one of the winners some politician has chosen.