SPRINGFIELD – Gov. Rod R. Blagojevich today proposed major reforms to Illinois’ tax laws that would require corporationsbusinesses to publicly disclose the Illinois income taxes they pay and the loopholes they use to reduce their taxes.
"Every year, the State of Illinois provides over $1 billion in 42 different corporate tax breaks and credits. Every year, some of those loopholes help some companies avoid paying their fair share of taxes, which means hard-working men and women have to make up the difference. The average Illinois resident pays more in state income taxes than 42 of the nation’s largest corporations. And yet, despite the fact that the hard working people of this state are subsidizing some of our biggest, most profitable corporations, the very people who pay taxes and subsidize those corporations are prohibited by law from knowing who is taking advantage of these tax breaks, and how much they’re getting," said the Governor. "Despite the fact that the hard working people of this state are subsidizing some of our biggest, and most profitable corporations, the very people who pay taxes are prohibited by law from knowing who is getting the benefit of these tax breaks, and how much they’re getting. If the people of this state are going to pay for tax breaks for big corporations – they ought to at least know what they’re paying for, and what they’re getting for their money."
"Corporations who do business in Illinois, who sell goods and services in Illinois, and who make money here in Illinois, are currently entitled – by law – to an array of loopholes that allow them to avoid paying their taxes on everything from software to income sheltered tax havens."
The Governor pointed to the state’s historic revenue statistics, which indicate that in 1980, one in every five income tax dollars in Illinois was paid by corporations. In Fiscal Year 2003, corporations paid only one of every eight dollars in income taxes. And in Fiscal Year 2005, the ratio is expected to drop to one of every nine dollars. oOf the 95 Fortune 100 companies that are doing business in Illinois, 30 paid no state income taxes at all in 2002. Twelve others that did pay taxes in 2002 paid no state income taxes in 2000 or 2001.
The legislation announced today by Gov. Blagojevich would require publicly traded companies, insurance companies, banks and privately-held corporations with assets over $100 million to disclose to the Department of Revenue the income taxes they pay to the state and the loopholes they use to reduce their taxes. The Department would then make that information available to the public.
In addition, the proposal would require administrative hearings at which corporate taxpayers challenge the tax code be made public.
Other states have corporate tax disclosure requirements. Wisconsin discloses the amount businesses pay in state income taxes. West Virginia and Arkansas both disclose how corporations use some tax credits. Massachusetts discloses state income taxes paid by corporations and the loopholes used to reduce payments, but companies’ identities are not longer disclosed.
In 1993, when Massachusetts did disclose company names, the Boston Globe used information available under the corporate disclosure law to show that some companies took hundreds of thousands of dollars in state tax credits intended to create jobs – while actually laying off workers.
The U.S. Congress is also contemplating making federal corporate income tax information available to the public in the wake of the Enron and WorldCom scandals that deceived shareholders and employees. Enron told its shareholders it had profits of $1.8 billion between 1996 and 2000; but told the IRS it had lost a billion dollars during that very same period. In a similar incident, WorldCom told its shareholders it had $16 billion in earnings from 1996 to 2000; but told the IRS that they totaled less than $1 billion in taxable income during that same time.
In addition to pushing for more openness in Illinois’ corporate tax system, the Governor renewed his call to close corporate loopholes that benefit a limited number of big companies while increasing the tax burden on individual taxpayers and small business.
"There’s one more thing we can and should do right now: close unfair corporate tax loopholes. If the General Assembly passes the budget I’ve proposed, more than $400 million previously used for loopholes – will instead be invested in education, health care, and public safety," said the Governor.
"I know that many legislators are receiving pressure from many big corporations not to close these loopholes. They’ve hired armies of lobbyists to protect their turf. But I hope everyone here realizes that time is passing, and this is a time to choose. It’s time to choose between children who need health care, and certain corporations who hide their tax breaks from the people. It’s time to choose between early childhood education, and corporations who hide their tax breaks from the people. It’s time to choose between hiring more police officers, and corporations who hide their tax breaks from the people. I’m choosing more money for education, health care for working parents, and better equipment for our police. I hope the men and women of the General Assembly do too."