For this month’s Industrial Insider column, we interviewed Todd Maisch, the CEO of the Illinois Chamber of Commerce, to discuss what the current “hot topics” are for businesses in the state.
According to the chamber’s website, the history of the chamber dates back to May 27, 1919, when 24 business leaders from throughout Illinois met for the first time to organize the Illinois Chamber of Commerce. Those charter members formed one of the first statewide business organizations in the nation.
The chamber’s 1919 goals remain viable almost a century later: to deal with a “danger of too much government in business” and to “promote and protect the business climate of Illinois.”
Their mission states, “The unifying leader of policies that support growth in Illinois’ dynamic and diverse economy.” Their vision states, “A vibrant and prosperous future for Illinois.” Their value statement is, “Free enterprise is the foundation of a thriving state economy. Principled advocacy, committed people and bold thinking are essential for Illinois to succeed.”
My discussion with Todd confirmed that he and his team are committed to making Illinois one of the best states in the country in which to locate and grow their businesses. This important goal is not without some serious financial challenges that will need to be overcome in order to bring the state back into additional “growth mode,” which would be welcomed by us all.
What “pro-growth opportunities” do you foresee for Illinois in 2021?
According to Maisch, the governor has put a very good team in place at DCEO, which has been very helpful. They have been open to re-examining the economic development toolkit that Illinois currently has and will need to upgrade, going forward, in order to be competitive with other states.
Currently, one of the only business expansion incentives that is offered by the state is the EDGE tax credits. Illinois’ EDGE program provides annual corporate tax credits to qualifying businesses that support job creation, capital investment and improve the standard of living for all Illinois residents. Initial qualification criteria include certain job creation and project investment requirements.
One of the most recent and successful incentives that the state has offered are the Data Center Investment Tax Exemptions and Credits. The successful results from the data center incentives have been very beneficial to the state. Maisch would like to see the data center incentives expanded to make Illinois one of the top locations nationally, as the state has several natural advantages due to the abundance of internet lines and expandable power capacities.
Business organizations are continuing to expand their data collection capabilities, so storage needs are going to grow with them. This is driving the growth of more hyperscale facilities which are being built around the world that can store massive amounts of data, as the increasing demand for storage is clearly creating data center market growth.
Another distinguishing factor for Illinois is its workforce. Maisch believes it would be beneficial for Illinois to replicate the states in the southeast that have the ability to determine the skill set that an incoming business requires and then provide companies with a list of a large number (500+) of pre-qualified employees available for hire. Some states also pre-screen potential employees for companies. Maisch said it is a great opportunity to consider replicating this “workforce” model in Illinois as a distinguishing factor for the state.
What are the biggest concerns that businesses leaders have expressed to you most recently about?
Maisch said that, right now, one of the biggest concerns seems to be the Cook County tax assessor’s approach to property taxes. The change in approach has created plenty of consternation and a significant increase in real estate taxes for industrial and commercial property owners.
Additionally, the proposed “progressive income tax” legislation that is coming up for a vote has forced some business owners, who had been contemplating making an investment to expand their business and facilities, to put the projects “on hold” because of the proposed increase in income taxes.
The state tax income tax legislation was rewritten in 1970 to create an income tax as part of the state constitution. The legislation was passed as a “flat tax” at that time. According to Maisch, based on the way the constitution is currently written, the state cannot get around that by levying another tax based on income, however there would also be the ability to put “additional assessments” in place that are not being called “taxes.”
The new “progressive income tax” proposal opens the door to additional tax increases going forward, that could be targeted based on industry types and income levels. It also opens a door to the possibility of new local income taxes that individual municipalities could create, should they choose to do so. These municipal taxes do not currently exist in the state of Illinois, although they do exist in other states.
Hypothetically, with the new proposed legislation, a C-corporation could face a corporate tax rate above 15 percent, which can then go up any time the legislature wants to increase taxes on high-earners. There could also be up to a 160 percent increase to the maximum corporate rate, which could have impacts on new business expansions going forward.
Another part of the new proposed tax provisions expands the definition of the U.S. boundaries to include current tax havens such as Ireland, Bermuda, Puerto Rico and the Cayman Islands in order to increase the Illinois tax base. There are several pharmaceutical companies that are based in Puerto Rico, and a lot of offshore oil production that, if included in the expanded boundaries of the U.S., would generate additional tax revenues to the state.
These proposed new changes to the Illinois constitution have raised some concerns with the chamber and its members.
A Focus on Energy
The Chamber is concerned about a bill called the Clean Energy Jobs Act (CEJA) that is expected to be considered by the General Assembly in the next year; the bill could greatly increase energy costs for businesses and ratepayers throughout the state. According to Maisch, the chamber opposes this bill and instead seeks to help create energy policies that promote competitive costs and markets and electricity reliability, and that any investment asked of ratepayers is appropriate and delivers a measurable benefit. The chamber supports thoughtful and practical transitions in energy policy, such as alternative and renewable energy and carbon reductions. The chamber looks forward to working with Governor Pritzker, Senator Cunningham and other legislators, staff and stakeholders to continue to develop balanced energy policies for Illinois that will ensure reliability for its members and fair costs for all Illinois ratepayers.
Illinois electric rates have decreased by 4.5 percent since 2018, making it one of the best states in the country for energy costs.
According to data from the U.S. Energy Information Administration, Illinois is the fifth-largest energy-consuming state in the nation, and its industrial sector, which includes petroleum refining and coal mining, uses the most energy of any end-use sector in the state.
Additionally, Illinois ranks fourth in the nation in crude oil refining capacity and leads the Midwest states with a refining capacity of nearly 1 million barrels per calendar day. The estimated recoverable coal reserves in Illinois are the second largest after Montana in the nation, and the state’s coal mines account for 7 percent of U.S. coal production.
Illinois has the third-largest annual ethanol production capacity (1.9 billion gallons) and the fourth-largest annual bio-diesel fuel production capacity (162 million gallons) in the nation. In 2019, Illinois generated the most electricity from nuclear energy in the U.S., and the state’s six nuclear plants accounted for 12 percent of U.S. nuclear power net generation.
A sincere “thank you” to Todd Maisch for his time and outstanding insights into a few of the most important issues that Illinois businesses and residents are currently faced with. It is beneficial to all of us to have a better understanding of what will potentially be driving our state’s growth going forward into the future. Stay well and safe.
About the author
Elise Couston is senior managing director with Chicago’s Newmark Knight Frank.