All my bags are packed, I'm ready to go
I'm standin' here outside your door
I hate to wake you up to say goodbye
…
So kiss me and smile for me
Tell me that you'll wait for me
Hold me like you'll never let me go
"Leaving On A Jet Plane"
Eddie Lampert is threatening to pick up Sears (SHLD, Financial) and its 125-year history and leave the state of Illinois on a jet plane. Why, you ask? Taxes, of course! And no, this has nothing to do with Amazon.com (AMZN, Financial) or Lampert’s unwillingness to commit.
Sears moved to the 200-acre Hoffman Estate headquarters in 1989 from Chicago’s historic Sears Tower, which is now Willis Tower. Why, you ask? Taxes, of course! Transferring HQ’s 6,000 employees earned Sears large subsidies from the Illinois State and local authorities, aid which is set to expire in mid-2012. Sears is now positioning itself for a new set of incentives.
It is important to note that this is commonplace for corporations and the states in which they operate. Governments are rightfully concerned with employment, and by offering subsidies to big businesses, politicians are quick to cement the employment stability and promises of future growth that corporations can bring.
On the other hand, as large tax contributors and employers, corporations are willing and able to look for the best deal. Usually, both parties come to a satisfactory agreement; however, this compromise does not always work out as planned. Promised jobs sometimes fail to materialize, and governments then attempt to claw back subsidies, especially in poor economies like today’s, in which states and local authorities are looking under their couch cushions for extra change.
A poor macro environment does not seem to bother the state of Illinois, which currently has an unemployment rate over 9% and a budget deficit of over 47%, or a $13 billion shortfall in out of its $27.5 billion total revenue of the State General Fund. Just recently, Illinois granted millions in tax credits to U.S. Cellular Corp., Continental Tire, Navistar, Motorola Mobility’s Libertyville headquarters, and Caterpillar is waiting in line for its respective break from the governor.
While Lampert stands ready with his packed Lands’ End bags in hand for New Jersey, the Carolinas, or Texas, it is certainly a ploy for negotiating leverage. More importantly, it already looks like it is paying off. State Rep. Fred Crespo (D-44th) has floated a compromise that calls for property tax breaks for 15 years, with the caveat that Sears maintain its Hoffman Estates payroll at 4,000 jobs. The 1989 agreement requires 2,000 jobs. Whether Lampert agrees to the Crespo plan or utilizes it to influence Sears’ out-of-state negotiations remains to be seen.
“Some people are just not very big into giving businesses any breaks,” Crespo said. “But I’m of the opinion keeping jobs has been a challenge, not only for us, but other states. When you have a good corporate citizen, as Sears has been, we’d be remiss not to do this.”
And both Eddie Lampert and Sears would be remiss to not leverage the offer.
'Cause I'm leaving on a jet plane
I don't know when I'll be back again
Oh, babe, I hate to go
Sources:
http://www.state.il.us/budget/FY2011/FY2011_Operating_Budget.pdf
http://www.state.il.us/budget/FY2011/FY2011_Budget_Briefing.pdf
http://heraldnews.suntimes.com/business/5282394-420/sears-considers-moving-out-of-illinois.html
http://qconline.com/archives/qco/display.php?id=540803
http://www.azlyrics.com/lyrics/johndenver/leavingonajetplane.html
I'm standin' here outside your door
I hate to wake you up to say goodbye
…
So kiss me and smile for me
Tell me that you'll wait for me
Hold me like you'll never let me go
"Leaving On A Jet Plane"
Eddie Lampert is threatening to pick up Sears (SHLD, Financial) and its 125-year history and leave the state of Illinois on a jet plane. Why, you ask? Taxes, of course! And no, this has nothing to do with Amazon.com (AMZN, Financial) or Lampert’s unwillingness to commit.
Sears moved to the 200-acre Hoffman Estate headquarters in 1989 from Chicago’s historic Sears Tower, which is now Willis Tower. Why, you ask? Taxes, of course! Transferring HQ’s 6,000 employees earned Sears large subsidies from the Illinois State and local authorities, aid which is set to expire in mid-2012. Sears is now positioning itself for a new set of incentives.
It is important to note that this is commonplace for corporations and the states in which they operate. Governments are rightfully concerned with employment, and by offering subsidies to big businesses, politicians are quick to cement the employment stability and promises of future growth that corporations can bring.
On the other hand, as large tax contributors and employers, corporations are willing and able to look for the best deal. Usually, both parties come to a satisfactory agreement; however, this compromise does not always work out as planned. Promised jobs sometimes fail to materialize, and governments then attempt to claw back subsidies, especially in poor economies like today’s, in which states and local authorities are looking under their couch cushions for extra change.
A poor macro environment does not seem to bother the state of Illinois, which currently has an unemployment rate over 9% and a budget deficit of over 47%, or a $13 billion shortfall in out of its $27.5 billion total revenue of the State General Fund. Just recently, Illinois granted millions in tax credits to U.S. Cellular Corp., Continental Tire, Navistar, Motorola Mobility’s Libertyville headquarters, and Caterpillar is waiting in line for its respective break from the governor.
While Lampert stands ready with his packed Lands’ End bags in hand for New Jersey, the Carolinas, or Texas, it is certainly a ploy for negotiating leverage. More importantly, it already looks like it is paying off. State Rep. Fred Crespo (D-44th) has floated a compromise that calls for property tax breaks for 15 years, with the caveat that Sears maintain its Hoffman Estates payroll at 4,000 jobs. The 1989 agreement requires 2,000 jobs. Whether Lampert agrees to the Crespo plan or utilizes it to influence Sears’ out-of-state negotiations remains to be seen.
“Some people are just not very big into giving businesses any breaks,” Crespo said. “But I’m of the opinion keeping jobs has been a challenge, not only for us, but other states. When you have a good corporate citizen, as Sears has been, we’d be remiss not to do this.”
And both Eddie Lampert and Sears would be remiss to not leverage the offer.
I don't know when I'll be back again
Oh, babe, I hate to go
Sources:
http://www.state.il.us/budget/FY2011/FY2011_Operating_Budget.pdf
http://www.state.il.us/budget/FY2011/FY2011_Budget_Briefing.pdf
http://heraldnews.suntimes.com/business/5282394-420/sears-considers-moving-out-of-illinois.html
http://qconline.com/archives/qco/display.php?id=540803
http://www.azlyrics.com/lyrics/johndenver/leavingonajetplane.html
