Mar 28, 2011 5:36 PM GMT
This is only the beginning. One blogger makes the argument that Illinois is in a worse shape than Portugal given that businesses are far more likely to leave Illinois than Portugal (http://ktcatspost.blogspot.com/2011/03/portugal-illinois-and-caterpillar.html) such that even the higher tax rates may translate into fewer overall taxes as the tax base in Illinois shrinks.
Caterpillar Urges Illinois to Roll Back Tax Increases
Caterpillar Inc., suggesting that it could shift jobs out of Illinois, is prodding its home state to cut government spending and roll back tax increases.
Doug Oberhelman, chief executive officer of the giant Peoria, Ill.-based maker of construction and mining equipment, protested against the state's tax and spending policies in a March 21 letter to Illinois Gov. Pat Quinn, a Democrat who took office in January 2009.
In the letter, first reported Friday by the Lee Enterprises newspaper chain and provided to The Wall Street Journal Saturday, Mr. Oberhelman said other states have stepped up their efforts to lure Caterpillar investments since Illinois raised income tax rates in January.
"I want to stay here," the letter said. "But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest. The direction that this state is headed in is not favorable to business, and I'd like to work with you to change that."
A spokeswoman for Gov. Quinn said he "welcomes frank and open exchanges between the business community and government" and will discuss the matter with Mr. Oberhelman at a meeting soon.
In January, the state's General Assembly passed a Quinn-supported bill imposing a four-year increase in income taxes designed to reap $6.8 billion in added revenue and help the state balance its budget. The legislation raised the flat rate for personal income taxes to 5% from 3% and for corporate taxes to 7% from 4.8%. In 2015, both taxes are set to decline but remain above the prior rate.
Mr. Oberhelman enclosed letters from governors or other officials in Texas, Nebraska, Virginia and South Dakota, all citing the recent Illinois tax increase and urging Caterpillar to invest in what they described as more business-friendly environments.
"If Illinois doesn't want your business, Texas does," wrote Rick Perry, the governor of that state.
The governor of Nebraska, Dave Heineman, wrote: "In Nebraska, we balance our budget by controlling spending, not by raising taxes."