Astounding withholding tax twist

 This could give the term corporate tax an entirely new meaning. The State of Illinois is now allowing certain corporations to keep their employees’ state income tax withholding for ten years. Recent Illinois legislation allows chosen companies to retain all of the income taxes withheld from new hires that expand payroll and half of the taxes for existing workers whose jobs are retained.

Moveon.org has a video (via Atrios) and here is an earlier article by David Cay Johnston.  

The Illinois deal shows how competition between the states, and with other countries, helps big corporations wring subsidies from state governments even as the states are being forced to fire teachers and other public workers because of a weak economy that has cost jobs and tax revenue.

Why would the state let companies do this? Most big companies pay little or no state corporate income tax, because companies arrange to take expenses in higher tax states and profits in states with little or no corporate income tax. So the only way to finance incentives without the state writing a check is to let the companies pocket their workers’ state income tax.

However while diverting tax taxes from public purpose to private use the State of Illinois is deep in red ink juggling its own finances. Turns out they are having trouble paying their bills. Three years ago they had a two-week turnaround on state payments, but now, late payments are the norm. In order to handle budget shortfalls they are deliberately delaying billions of dollars worth of payments for months at a time.The AP found almost half the outstanding sum was more than a month overdue.

It’s hard to imagine any corporation operating here in Vermont ever being shy in the endless effort to get what they must see as only their fair advantage (example here) – so it’s hardly out of the question this scheme in some form might not be lurking in our own future debates.  

6 thoughts on “Astounding withholding tax twist

  1. I once worked for a small liberal-lefty business where one partner was snorting employees’ withholding up his nose. The IRS eventually caught up with the business. When the other partner held a meeting to tell the rest of us, we were all shocked – not that he was snorting, but that he’d put the business in danger and betrayed a certain trust.

    I guess the amount was eventually paid in, none of us were held liable.

    The only other similarity here is that the snorting partner didn’t go to jail; maybe he went to rehab first, but then he got a scholarship to the Kennedy School of Government or something.

    Owners skate; workers pay, and pay and pay.

    NanuqFC

    The working class is now issuing from its hiding place to assert an Englishman’s heaven-born privilege of doing as he likes, and is beginning to perplex us by marching where it likes, meeting where it likes, bawling what it likes, breaking what it likes. ~ Matthew Arnold (1822-1888)

  2. So much influence has been ceded in our so-called “democracy” to corporations that we will soon be standing naked in a barrel, thumbing a ride to Canada.

    We’ve got to put an end to privately funded election campaigns.  We can’t afford not to.

  3. Watch out for another shoe to drop next month, just in time for Christmas.  It’s getting to the point that big corporations will just work on the big money, and get paid by us for the work they don’t (or don’t have to) do on the small stuff.  There will come a day when Wall St. will ask the federal government to meet its payroll for its people making less than $200,000.  We will be asked to pay for the making of the products and get a coupon (worth 10 bucks) for the buying of the products.  I think, bottom line, it would be cost-effective to close the fuckers down.

  4. it’s been here for years

    after many complaints about the old VEPC tax credit program, the Leg. changed it to something like what you describe in Illinois

    among the many problems with the old program was that some companies pay little or no taxes and had no use for credits; thus, the firms wanted assurances that they would actually get the cash; the new program (VEGI – Vermont Employment Growth Incentive) pays companies from their withholding accounts, exactly as you describe above

    of course some believe that Vermont’s program is better than others because (they say) no money goes out without evidence that the jobs were created; however, this assumes that “but for” the incentive, no jobs would be created, which is absurd on its face (and there is a deep flaw in the use of an industry average growth rate rather than company specific to set the bar for eligible jobs)

    all that aside, the real key is whether the jobs created survive a recession; not surprisingly, many have not; that means the program is not a good long-term investment, especially compared to alternatives such as infrastructure and training & education; the state spent tens of millions and has very little to show for it because the recession destroyed most of the jobs created by participating firms

    it’s really a shame that the Leg. has not been able / willing to eliminate this program and reallocate these resources; moreover, business interests come in every year and ask that it be watered down (e.g., lower the threshold wages required)

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