Illinois Taxes May Lead To Relocation Of Sears Corporation

Once, the tallest building in the world was in Chicago. Though no longer called the Sears Tower (it was sold and renamed the Willis Tower in 2009), Sears has ties even deeper than Illinois bedrock.

Or so it has seemed, since 1887, when Sears first began its fabled operations as a watch seller in the Land of Lincoln. Times have indeed changed.

Sears is now threatening to pack up and move from Illinois, because of what the venerable company has described as “something we can’t ignore,” according to Sears’ corporate spokesperson. Sears’ principal location is in a Chicago suburb, which hosts more than 6,000 employees, making Sears a key player in government finances. Property taxes alone generate more than $26 million in annual revenues.

By the end of May, Illinois state lawmakers must decide whether to extend a package of tax breaks for Illinois corporations. The Sears Company is beginning to catalog its reasons for needing these incentives. So far, however, a bill in Springfield to favor Sears has not been presented for a vote.

In January, 2010, the corporate tax rate for Illinois-based companies was raised from 4.8% to 7%.

Some lawmakers are reluctant to approach what are perceived as further corporate “bailouts.” Others point to a set of 1989 tax breaks, which were designed specifically to advantage Sears.

Sears is not the only company to be pondering the fate of its Illinois operations. Caterpillar is also considering a move to some other state. Now based in Peoria, Caterpillar employs more than 23,000. Texas has been actively recruiting the international mover and shaker.

Illinois has been heralding some good news, however. Tax incentives were cited by Illinois Governor Quinn’s office in fostering new, and desperately needed, business retention. Continental Tire will add almost 500 jobs and build a $224 million facility. A $19 million dollar tax break was credited with the deal. Motorola, which like Sears was looking for a new area code, decided to stay put…but only after state officials offered a package worth $100 million in state and local tax incentives and savings.

Critics are not entirely in favor of such deal making, however. Some tax experts charge the deals are simply delaying inevitable, and necessary, changes in Illinois’s overall tax structure. For its part, Illinois government officials counter that they cannot afford to deal with the long term problem…the state’s current fiscal year is forecast to end on a sour note of $8.3 billion in unfunded obligations.