Bowing to political pressure and threats that the company would move its operations to another state, Illinois Governor Pat Quinn last year promised Motorola Mobility $100 million over ten years if it agreed to keep 2,500 jobs in the state. (In case you’re wondering, that’s a taxpayer funded subsidy of $40,000 for each of those 2,500 employees.) Yet, as so often happens when states are in panic mode and governors believe their own rhetoric about how businesses are altruistic “job creators,” Motorola Mobility’s parent company, Google Inc., recently (and quietly) announced they will be cutting more than 700 Illinois jobs anyway.
Can it be that in the end, taxes aren’t all that important in the decisions a business makes? This news report makes that very point, citing a university economist: not even $100 million could convince the company to keep an extra 244 employees on the payroll and that’s “a good indicator that even big incentives don't dictate how a company behaves.”
Although Illinois taxpayers have already forked over $18.6 million in tax credits to Motorola, they aren’t obligated to cover the rest of the $100 million handout. That’s because despite the insanity of offering these tax breaks to begin with, the state did build into the deal that the company had to keep those 2,500 Illinois-based employees in order to qualify for the handout. That, at least, is something.
It’s well documented (in this national report and in more and more individual states) that there are no discernable public benefits to giving businesses tax incentives. That is why more states are getting serious about really measuring if these giveaways do anybody (other than politicians and their corporate friends) any good.
Illinois may be inching towards more tax break transparency but just this year, the legislature also killed a bill that would have created an expert committee to review tax break deals and determine if they’d contribute to the state’s economy. The sad truth remains, however, that shortly after Motorola’s incentives were awarded last year, Sears, the CME Group and CBOE Holdings (both financial companies) also threatened to relocate and were, like Motorola, rewarded by a jittery legislature with million dollar incentives. And then Sears turned around and fired 200 people anyway.
For more on the racket of tax incentives for businesses, check out Good Jobs First and this (PDF) policy brief from the Institute on Taxation and Economic Policy (ITEP).