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Politics & Government

Congressman: High Corporate Tax Rates Hinder Jobs Growth

U.S. Rep. Peter Roskam says economic recovery is slowed by an unfriendly government attitude toward businesses.

High corporate income taxes are no April Fool’s joke, an Illinois congressman said Friday.

Government spending and borrowing, coupled with high corporate income taxes, continue to hamper economic growth in Illinois and the United States, said U.S. Rep. Peter Roskam, a Wheaton Republican. A U.S. Department of Labor report showed nonfarm payroll employment increased by 216,000 in March, adding that private employment has grown for 13 consecutive months, with February and March showing the strongest growth since early 2006. Roskam said the national economy is slowly growing, and passing pro-business legislation will return millions of people to work.

Roskam laid the blame for the slow economic recovery at the feet of what he called irresponsible economic policies in Washington, D.C. and Springfield. He said the both the federal and state corporate income tax rates are too high. Roskam said the threat of new regulations and refusal to pass sensible spending cuts in Washington and Springfield cause businesses to look at setting up shop elsewhere—in other states or other countries.

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Nowhere is this more evident than in Illinois, Roskam said. In January the Illinois Legislature increased the corporate income tax rate from 4.8 percent to 7 percent. Coupled with an additional 2.5 percent property replacement tax on corporations, the tax rate rises to 9.5 percent. Roskam said private employers cannot be expected to create new jobs when they face such crippling taxes. He said the state has the fourth highest corporate tax rate in the country, which is driving several large employers, including Caterpillar and Jimmy John’s, to consider relocating to other states.

Last week Caterpillar CEO Doug Oberhelman sent a letter to Gov. Pat Quinn that said his company was being wooed to relocate to other states. However, Oberhelman said he never intended his letter to be a threat to leave Illinois. Rather, he said he wanted to find ways to improve the state’s business climate.

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Despite Caterpillar's plans to stay in Illinois, Roskam said it’s foolish for state lawmakers to “slap themselves on the back” at a time when other states and other companies are looking to leave.

“That’s just the direction of bad tax policy,” Roskam said. “It’s no wonder our job growth is so slow.”

told the Democratic Women of DuPage County last week that a higher corporate income tax will not be the primary reason for businesses to leave Illinois. Martire, the executive director of Center for Tax and Budget Accountability, said other states, such as Indiana, have a higher corporate income tax than Illinois and has shown strong economic growth. Martire, though, did not include the property replacement tax in his calculations. Still, he said the state’s economic problems are not due to the tax burden. Martire said increasing the corporate income tax rate was the right thing to do to cover a massive budget shortfall. Moody’s Investor Services, which downgraded Illinois’ bond rating last year, told Investment News the tax increases are a “major step toward beginning to address Illinois's chronic budget imbalances.”

Roskam disputed Martire’s claims about the high corporate income tax rates. He said he took notice when several manufacturers in the 6th Congressional District, which he represents, told him they are being wooed by economic development agents from other states primarily due to the state’s corporate tax rate. Although not in the 6th District, automotive parts maker Modern Drop Forge Co. said it expects to move one of two Illinois plants with 250 jobs to Indiana.

“That’s the reality I have to deal with,” Roskam said.

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