Ahead of Gov. JB Pritzker’s budget address next week, Republican lawmakers are calling on his administration to preserve tax credits for businesses — especially ones Pritzker himself helped negotiate during his first year in office.
Last month, Pritzker announced he would delay the implementation of economic incentives outlined in the so-called Blue Collar Jobs Act passed in 2019, and this week he announced he’d be seeking the closure of “corporate tax loopholes” in order to shore up the state’s budget.
Rep. Keith Wheeler (R-Oswego) said delaying the agreed-upon tax credits in the middle of the COVID-19 pandemic and recession will end up hurting the state’s economy in the long-term.
“Keep in mind that the Blue Collar Jobs Act was supported by both labor and business groups,” Wheeler said. “It would offer tax credits to companies making significant capital investments in Illinois based on a withholding tax paid to the construction workers who actually make that facility come to life.”
Wheeler said, unlike other economic incentive packages states offer, the Blue Collar Jobs program was designed to reduce the likelihood of abuse or undue financial risk to the state.
“The tax credits only become available after the work has been fully completed,” Wheeler said. “So there’s no risk to the state for a company not meeting its requirement, as the state has already captured the withholding tax prior to the credit being issued.”
An egregious example of tax incentive abuse lays just over Illinois’ northern border in Wisconsin, where the state agreed to tax incentives to attract tech manufacturer Foxconn in 2017. But instead of a promised LCD screen factory, the company has only built a small building on its campus in Kenosha. The state’s economic development arm is trying to renegotiate the deal.
Republicans are also sounding the alarm on another new tax credit, specifically targeted at attracting data centers — massive facilities which house computer systems for data processing and storage.
The program — which was also included in the package of economic incentives passed in 2019 — grants businesses up to a 20% income tax credit for building a data center and investing $250 million into the state.
Rep. Jeff Keicher (R-Sycamore) said the incentive helped to attract a planned Facebook data center to his district.
Keicher said the byproducts of such projects are the creation of STEM-related jobs and higher tax revenues for communities and schools — revenue sources which are particularly needed due to the financial impact of the pandemic.
“What the data center incentive does is it allows local areas like my own to rescue their own future by bringing in added revenues, added jobs, added residents,” Keicher said. “We cannot afford to see the state take that away.”
Keicher said he worries Pritzker could also decide to delay or pause such tax credits in order to stabilize Illinois’ budget for next year, which will reportedly include a deficit of around $3 billion.
Keicher said data center bids currently have to compete with neighboring states like Iowa and Indiana, and that taking away the program would further disincentivize businesses from coming to Illinois.
“One of the biggest concerns is that the governor’s budget continues to take the local distributive share at a larger percentage” Keicher said. “He’s going to force local taxing bodies to raise property taxes at the very same time he is proposing to potentially take away the tools that local governments have to solve their own problems.”
Republicans pointed out the governor himself has tried to court New York Stock Exchange data centers to Illinois using the very same tax incentive.
As first reported by Crain’s Chicago Business, the administration has been in talks for the past few months trying to court NYSE main data centers to move from New Jersey and into an existing hub in Chicago’s western suburbs — which currently acts as a secondary data center for the NYSE.
With state legislatures in both New Jersey and New York entertaining the passage of a financial transaction tax, there have been talks both data centers and the stock exchange itself may want to find a new home.
Although bidding for data centers to come to Illinois could signify a future push to bring the stock exchange to Illinois, some Illinois lawmakers have also advocated for the passage of a financial transaction tax (HB 283).