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Chicago Politicians Identify the Cause of Illinois’ Economic Woes: Kankakee Taxes are Too Low

Jim Ridings 23 August 2011 10 Comments

A lesson on tax policy is being played out in a battle between Chicago and Kankakee.

“Tax the rich” is a mantra that liberals, socialists and marxists will never stop chanting, even though they don’t really know what they are talking about. They think the solution to everything is to just keep increasing taxes, despite the evidence that lowering taxes actually increases government revenues. It’s simple: when individuals or businesses are taxed less, allowing them to keep more of their own money, they spend that money, increasing sales and creating jobs. John F. Kennedy proved it. Ronald Reagan proved it. But proof never meant anything to liberals, who have never let facts get in the way of ideology. So we won’t pursue that argument further here.

“Tax the rich” is a chant that is said without much thinking. It sounds good, doesn’t it? But “the rich,” who were smart enough to get rich, also are smart enough to resist taxes when they feel tax rates are becoming confiscatory. Millionaires move bank accounts offshore, or to foreign countries. Tax loopholes become even more creative.

Sometimes the efforts to avoid increasing taxes isn’t clever or questionable, it is straightforward. Businesses move out of America completely. China, India, Korea and other countries have benefitted greatly from this. Millions of Americans are out of jobs because American companies felt they had to cut costs, including oppressive taxes, in order to survive.
The exodus of jobs isn’t always overseas. This week, Modern Drop Forge of Blue Island announced it will move its factory and its 250 jobs to Indiana. The oppressive taxes and hostile business climate of the state of Illinois convinced the company it had to move out of Illinois. Indiana — a state that has no deficit — is a much friendlier state to business, and has attracted a number of companies from Illinois.

This is part of Illinois Gov. Pat Quinn’s jobs program. He just didn’t mention that he is creating jobs in Indiana.

Another example of companies being creative to avoid oppressive taxes is happening in Kankakee. In the past decade, about four dozen businesses in Cook County have set up sham offices in Kankakee County in order to avoid Cook County’s higher taxes. This is a “rebate” program, where Kankakee kicks back part of the sales tax to the companies that set up an office there. The business is run though the sham office. The companies pay a lower county sales tax, and they get part of that back. Kankakee makes money on sales it does not make, from companies that are not there.

Kankakee is adding about $2 million a month to its treasury. In fact, Kankakee’s mayor today admits that the city could not balance its budget without this unearned income.
(Kankakee is not the only city doing this. Channahon in Will County does this. Even a tiny farm town like Herscher, population 1,500, in Kankakee County earns money this way).
This practice may be questionable, even dishonest, but it is not illegal. It is another way people will find to resist unfair taxes.

By the way, Kankakee’s black-owned City News has been leading the charge on this story for a long time. The establishment Daily Journal has ignored it until recently.
Chicago Mayor Rahm Emanuel said he will sue Kankakee to end this practice. We will see what happens.

But what we do know is that smart businessmen will always outsmart dumb politicians, and smart rich people will always outsmart dumb liberals.

Liberals can keep their mantras and slogans. The rich will keep their money.

**

Jim Ridings is an award-winning author whose books include “Len Small: Governors and Gangsters” and “Chicago To Springfield: Crime And Politics In The 1920s,” both on Amazon.com

image Kankakee County Courthouse

10 Comments »

  • Pat Hickey said:

    Tax Haven Triple K!

    All the plutocrats tucking away on the modestly priced meals at Blue’s Cafe on Station Street and the Burr-Bone-Us ( Bourbonnais) Fat Cats quaffing cold $ 2.00 Miller’s TJ Donlins on 102 can hide no longer from Gov. Quinn and his faithful four-eyed companion Ralphie “The Pie-Chart” Martire!

    Say goodbye to all them free fishing days, Moneybaggers!

  • John Powers said:

    Channahon is sort of the Grand Caymans of the Illinois-Michigan Canal

  • Windy City Commentary said:

    “By the way, Kankakee’s black-owned City News has been leading the charge on this story for a long time.”

    Most of their readers are in Section 8 Housing and use up city services, so you would think that they would actually want their city to have the extra money, but I guess not. I guess they are just looking out for Rahm Emmanuel. I can’t believe Emmanuel is going to bleed the small towns dry. Let’s not forget, this is perfectly legal and has been going on for at least 10 years. If it was illegal, the Illinois Dept. of Revenue would’ve been on the case long ago.

    Are we now saying the loopholes are a crime?

  • Windy City Commentary said:

    Is there legal precedent for such a lawsuit?

  • Jim Ridings said:

    We are not saying that loopholes are a crime. In fact, I said it is legal. The point is that people will always find a way to get around tax rates that they believe are unfair. Today, both the RTA and the city of Chicago filed lawsuits against Kankakee. The result will be that Kankakee will prevail against Chicago’s frivilous lawsuits, but only after spending a fortune in taxpayers’ dollars in legal fees. Only the lawyers win.

  • Windy City Commentary said:

    Most of the news accounts of this story read as if a tax loophole is a crime; and it’s not just the Kankakee story, it is nation wide. I wonder if there have been similar lawsuits as this one.

  • Jim Ridings said:

    Certain newswriters with a liberal bias will always write as if a legal loophole is a crime. Look at the recent accounts of local non-profits and even clergy being targeted to have tax-exempt status taken away. The greedy maw of government taxers knows no satiety.

  • Dan Miller said:

    Brilliant analysis, Jim. Your headline and your content expose all the fault lines in Illinois’ public policies on taxes, business development and job creation-and-retention. Nice going.

  • Herb Dulzo said:

    News flash. Chicago drafting militia to attack Kankakee.

  • Dan Kelley said:

    Next week’s headlines will report that Emanuel will be urging Quinn to sue all of the foreign corporations based in Illinois that are availing themselves of Delaware’s corporate business friendly laws to incorporate there rather than paying the onerous Illinois corporate tax rates!

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