Stop subsidizing jobs overseas!

Note: Politicians are trying to blame the state’s pension funds for Illinois’ chronic fiscal woes. This item is part of “Big Biz, Big Breaks,” a series on tax loopholes that pulls back the curtains on the billions in tax giveaways that are a major cause of the state’s budget shortfall. To learn more about these loopholes – and read other installments in the series – click here.

When tax loopholes find their way into the law, it’s often through the promise of jobs. Big corporations will convince politicians that, if they get a certain loophole enacted, new jobs will come to their district and existing ones won’t be shipped overseas.

Yet one of Illinois’ most costly corporate tax loopholes seems to do the exact opposite – it rewards multinational corporations for profits generated overseas by exempting them from state taxes once the money is sent back to the U.S.

This loophole – the foreign dividend income loophole – is doing nothing to bring jobs to Illinois. And it’s costing the state $386 million that could be used to pay overdue bills, shore up state pension funds, or pay for vital public services.

In other words, profits generated in the United States, through the work of American men and women, are taxed in Illinois. But profits generated overseas, through jobs created overseas, face no taxes when they’re sent back to the U.S. as dividend income.

That’s not a recipe for creating jobs in Illinois or the rest of the country. The federal government already knows this – unlike Illinois, it taxes foreign dividend income.

Gov. Pat Quinn knows it, too. He’s called for closing this particular loophole. Support for closing it is also growing in the General Assembly, where legislation (SB 1159) was recently introduced, with the backing of a dozen lawmakers, to eliminate this costly exemption, as well as others.

The truth, however, is that this loophole and others like it are easy to open, but hard to close. That’s why it’s important legislators hear from their constituents.

Call your legislators now – tell them to close corporate tax loopholes and pass a balanced plan for pension reform supported by the We Are One Illinois coalition. You can reach your legislators using the toll-free AFSCME hotline at (888) 912-5959 or use our click-to-call tool.