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Lawmakers Join Drive to Cut Wasteful Tax Expenditures

Date: 
04/19/2013
WICS-TV: Coalition Pushes for Tax Loophole Closures

Backing legislation to eliminate wasteful tax expenditures in the FY2014 budget, more than a dozen state senators and representatives joined with Citizen Action/Illinois and other members of the Responsible Budget Coalition at an April 18 state Capitol news conference. 

"Tax expenditures drain billions from the state coffers every year," said William McNary, co-director of Citizen Action/Illinois and legislative chair of the Responsible Budget Coalition. "They include loopholes that allow large profitable corporations to avoid state income taxes entirely, making it harder to fund our budget priorities and pay our back bills."

Champaign’s WCIA-TV was there (click to see video):

 Citizen Action Co-Director Wm McNary speaking to Champaign’s WCIA-TV.

"We need to view tax expenditures like all other state spending," said Senator Toi Hutchinson, lead sponsor of Senate Bill 1159. "What is their purpose? Do they work? Can we afford them? If not, we need to end them."

"Our state's key priorities, like education and human services, are being seriously underfunded because we don't have adequate revenue," said Rep. Will Davis, House sponsor of SB1159. "This bill is a step towards setting our priorities right by cutting handouts to corporations rather than payments for schools and services."

Here’s another great news clip, this one from WICS-TV in Springfield (click to see video):

 

Other lawmakers backing SB1159 include Senators Melinda Bush, William Delgado, Michael Noland and Heather Steans, and Representatives Kelly Cassidy, Ken Dunkin, Marcus Evans, Greg Harris, Naomi Jakobsson, Bob Martwick, Brandon Phelps, Art Turner, Mike Smiddy, Chris Welch, and Ann Williams.

As currently amended, SB1159 suspends three major loopholes that allow corporations to avoid state income taxes:

Taxing Foreign Dividends. Illinois doesn’t currently tax profits produced by corporate subsidiaries located in other countries, even when the company is headquartered in Illinois. Companies that aren’t generating business and creating jobs in the state shouldn’t be able to deduct these profits from their tax liability. Closing this loophole would generate $320 million annually.

Decoupling from Federal Domestic Activities Production Credit. Currently, Illinois allows a deduction for companies that are engaging in production activities that benefit other states. The reason this loophole persists is because Illinois is simply following the federal tax model – this is not something we are required to do. It’s not fair for taxpayers to have to subsidize activities in other states that are trying to steal business away from Illinois. Put simply, just because a corporation is headquartered in Illinois does not necessarily mean that they are creating jobs here.  22 other states have decoupled and closing this loophole would generate $100 million annually.

Repealing the Noncombination Rule. While companies are required to file their taxes in a single combined return, large corporations have been able to set up complex tax avoidance structures by utilizing a loophole that exempts financial, transportation and insurance corporations. A number of large corporate institutions use this loophole to create a subsidiary in one of these categories and shift profits to avoid paying Illinois taxes. 23 states already have repealed this rule and closing this loophole would generate $25 million annually.

Any revenue captured through the closings would be dedicated towards paying down the state's $9 billion in past-due bills. Sen. Hutchinson noted that the Senate has previously voted to end a tax credit for offshore drilling by oil companies, and is open to examining other unnecessary tax expenditures.