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One of Illinois' top tax credit recipients to shutter 1,000-employee HQ

Madison County Record

Wednesday, September 12, 2018  |  Commentary  |  By Austin Berg, Illinois Policy Institute

Economic Development (35) , Taxes, misc. (89)
Takeda Pharmaceuticals announced Sept. 10 plans to close its U.S. headquarters in Deerfield, Illinois and continue consolidating its operations in Boston, according to Crain’s Chicago Business. The Deerfield office houses around 1,000 employees.

The biopharma company’s decision to shutter its Illinois-based headquarters comes despite having enjoyed one of the most lucrative tax credit arrangements in the state, calling into the question the efficacy of Illinois’ Economic Development for a Growing Economy, or EDGE, tax credit program.

From 2003 to 2013, Illinois issued more than $60 million in EDGE tax credits to Takeda via two separate agreements, according to documents obtained from the Illinois Department of Commerce and Economic Opportunity. In exchange, the company promised to create 566 new jobs.

No other company in the state received more EDGE tax credits over that time.

Gov. Bruce Rauner’s administration in 2017 pushed to replace EDGE with a reformed economic development program called Transforming, Helping, and Reviving Illinois’ Versatile Economy, or THRIVE. Proposed reforms included:

  • Reducing the credit amount available to businesses
  • Reserving tax credits for jobs created, rather than jobs retained
  • Changing the tax credit threshold to allow more businesses to claim them, rather than unduly advantaging large businesses
  • Making tax credits transferable
  • Instituting a more aggressive claw-back mechanism to reclaim credits, should a company choose to leave the state

The General Assembly adopted just a few of the administration’s proposed changes when they renewed the EDGE program in August 2017.

Many states have tax credit and business incentives programs similar to EDGE. However, there is scant evidence that these programs, which often simply shift the tax burden onto nonparticipating businesses, spur broad growth.

A 2017 report by the W.E. Upjohn Institute for Employment Research shows state and local business incentives programs for export-base industries (industries selling goods and services outside the local economy) cost the U.S. $45 billion in 2015. Moreover, the study did not find a significant correlation between incentives programs and a state’s current or past unemployment or income levels, or with future economic growth.

A CityLab analysis of the Institute’s study noted that many state programs continue awarding incentives to companies regardless of whether they reach jobs projections, which only prolongs the failure of these programs.

Instead of handing out tax breaks to the few, state lawmakers would be wise to focus on passing reforms that lower Illinois’ heavy tax burden for all.