According to Gov. Mitch Daniels' meme, businesses are fleeing Illinois to Indiana to escape high taxes and regulations. If this report by Greg Hinz in Crain's is to be believed, they also are coming to take advantage of the large corporate welfare handouts Daniels is offering them. Hinz claims Daniels is offering
CME Group, a large derivatives and futures exchange based in Chicago which owns the Chicago Mercantile Exchange and Chicago Board of Trade, $150 million a year savings in economic development incentives to relocate its headquarters in Chicago to Indiana. Hinz
writes:
So, just how much is Indiana offering CME Group Inc. to move its headquarters and perhaps other operations to the Hoosier state?
I hear the figure -- in net tax savings -- is a mouth-watering $150 million a year. That's from a reliable source who claims to have obtained the information from Indiana Gov. Mitch Daniels' office.
CME isn't commenting on who's offering what, though CEO Terry Duffy earlier in the week said he expects the headquarters matter to be resolved by yearend.
But, in a conversation with my colleague John Pletz on Thursday, Indian's top economic development official, Dan Hasler, stopped way short of waving us off that number.
Mr. Hasler wouldn't give a number himself. But when told repeatedly that Crain's has heard the $150-million figure and wouldn't want to lead people astray, Mr. Hasler declined to comment on the number or whether Indiana has made an offer to CME.
Hinz's report contradicts an earlier report in June by the Northwest Indiana Times' Dan Cardin, which quoted Gov. Daniels as saying Indiana was not courting CME. Cardin
reported then:
Gov. Mitch Daniels would be happy to welcome the Chicago Mercantile Exchange to Indiana but admitted Wednesday the state isn't actively courting the trading floor operator.
"There's a whole lot of businesses over there (in Illinois) we're talking to before we get to that," Daniels said.
CME Group Executive Chairman Terry Duffy told shareholders this month the company is considering relocating its headquarters outside Illinois to avoid a business income tax increase enacted earlier this year.
The company also has announced it wants to sell most of the landmark Chicago Board of Trade building on LaSalle Street and lease back its trading pits from the new owner.
Daniels said representatives from the Indiana Economic Development Corp. have met with more than a dozen Illinois companies — but not CME — considering a move following the January increase in Illinois' corporate income tax rate to 7 percent from 4.8 percent.
Daniels is expected to be in Chicago next week to plug sales of his new book, "Keeping The Republic." Landing the company would be quite a feat for Daniels. According to CME's Chairman, Terry Duffy, the company
pays 6% of Illinois' aggregate corporate taxes, more than McDonald's or Boeing. The company claims its taxes have increased more than $50 million a year due to tax increases enacted to deal with the state's huge budget deficit. It's not clear which city in Indiana the company would move--either somewhere in the Region or Indianapolis.
CME owing $150 million less annually in corporate taxes to Indiana than they would owe to Illinois isn't the same as Daniels' offering them a $150 million incentive, as if that were a taxpayer giveaway. Any incremental move of the corporate hierarchy of the Chicago Mercantile Exchange to Indiana would be extraordinary. Isn't this the kind of big thinking we value Daniels for?
ReplyDeleteHistorically, Indiana's individual and corporate income tax rates have been higher than Illinois' tax rates. Illinois did not reach the rates of Indiana's until this last tax increase. Indiana is gradually reducing its corporate rate below Illinois' rate; however, Individual income tax rates in Indiana are as high or higher than Illinois' when you factor in the local income taxes Indiana imposes. Lake County, interestingly, is about the only large county in Indiana without a local income tax. I can't see CME saving that much money in rates; there must be some tax credits included with that as well. The EDGE tax credit, for example, allows a company a credit equal to 100% of its employee tax withholdings for the new jobs it creates within Indiana.
ReplyDeleteI would predict the $150 million tax reduction includes a signficant reduction in property taxes.
ReplyDeleteHammond's Mayor McDermott recently railed against Daniels for saying Northwest Indiana was hurt economically because of its political corruption. He hinted in a radio interview a week ago that he anticipated a major business announcement in the Region in the near future, and that when that announcement was made, he would throw Daniels' words back in his face. I'm wondering if this is what he had in mind? The consensus on the Illinois side is that CME would not move to Indianapolis because its top executives would still want to live in the Chicago area if a move was to be made.
ReplyDelete