Tuesday, December 20, 2011

Democrats favoring big businesses

This is how corporate welfare and higher taxes work. Illinois had such huge deficits that they've raised taxes on businesses to one of the highest taxes on business in the country. But then certain big businesses like the Chicago Board of Trade and the Chicago Mercantile Exchange plus Sears threatened to leave Illinois due to the higher tax rates.

Democratic Governor Pat Quinn and the Democrats panicked because they feared facing a steady stream of companies leaving the state. So they started handing out tax breaks to the bigger companies.
That law fired up a motorcade of lobbyists from major Illinois companies like Motorola, Caterpillar, Sears and others to descend on Springfield and seek tax breaks lest they leave for states where business taxes are much lower. More than a dozen companies have already left for Indiana and Wisconsin.

So Mr. Quinn started giving special tax passes to the biggest and most influential 1%. The Chicago Tribune reported in May that Mr. Quinn had already doled out corporate welfare to at least 80 firms, costing the state nearly $500 million since 2009. The Chicago Merc and the Board of Trade complained that the Quinn tax grab would cost them $50 million a year.
That refutes the idea that liberals pretend to believe that higher tax rates on businesses won't affect their behavior.

And who is stuck holding the bag: those smaller businesses that didn't have the leverage to squeeze tax breaks out of Springfield.
Naturally, Mr. Quinn justifies the carve-outs as essential to job creation. But in January Democrats claimed that tax increases would have no economic impact. Now small and medium-sized businesses that don't have lobbyists are stuck paying the higher tax rates. Mr. Quinn's policies benefit the 1% of politically connected businesses at the expense of the other 99%, often small shops with 10, 20 or 50 employees.

Mr. Quinn's other claim in January was that the tax hike was essential to balance the budget. Yet the Illinois Policy Institute recently calculated that over 15 years the revenue loss from all the corporate tax giveaways will exceed the revenues raised from the corporate tax increase. Oh, and there's still a budget deficit.

Once again the lesson is that high tax rates fail to raise the revenue that liberals claim, not least because liberal politicians follow their tax increases by passing out favors to the rich and powerful. The same will happen in Washington if President Obama gets his way to allegedly soak the rich. Too bad the liberal media won't admit it.
And while they're admitting things, they could also acknowledge that higher and lower tax rates do influence behavior, not only of individuals, but of businesses too.