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August 26, 2015

If You Were Oreo, You'd Leave Chicago, Too

 

Last week Republican presidential candidate Donald Trump declared that he was “not eating any more Oreos.”

No, it wasn’t a commitment to a healthier lifestyle. Rather, Trump was criticizing the maker of Oreos, Illinois-based Mondelez International, for announcing it would expand one of its plants in Mexico rather than making that investment in the U.S., thus shifting 600 jobs from Chicago to Mexico.

Trump is obviously using the Oreo move to try to score political points, and he’s not the only one. But instead of cheap demagoguery designed to get applause, real political leadership would ask why jobs are leaving Illinois and the U.S. for greener pastures overseas and try to address the policies causing those moves.

For one thing, Chicago and Illinois are doing everything they can do drive businesses away. While many states have been cutting spending, lowering taxes, limiting union power and addressing their debt problems, Illinois is still headed full-steam in the wrong direction. Despite the election of a Republican governor, the legislature continues to resist taking the necessary steps to make Illinois competitive.

The Illinois Policy Institute has documented the flight of businesses and taxpayers from Illinois to both faster-growing states like Texas and Florida, as well as neighboring states that are more competitive, and it isn’t pretty. Illinois is well into a feedback loop where bad policies drive the most productive away, which only worsens the financial situation, driving politicians to advocate ever-higher taxes in an attempt to fill the gap.  That process never works.

Businesses (and thus taxpayers) leave Illinois because of high labor union costs, heavy state regulation, high property taxes and high overall taxes.

And Chicago just compounds the problem with its own ill-conceived additional taxes. As just one example, as of July 1, city administrators decided by fiat to extend the city’s 9 percent “amusement tax” to “any paid television programming, whether transmitted by wire, cable, fiber optics, laser, microwave, radio, satellite or similar means.” In other words, a new tax on Netflix, Hulu, Amazon Prime and similar video services. Chicago is the first major city to implement such a punitive tax on cloud services. Why not just put up signs at the city limits proclaiming “Innovation and Productivity Not Wanted Here”?

IPI has long documented the incredible burden and competitive disadvantage U.S. businesses face under our corporate tax code. Both Canada and Mexico have significantly lower corporate tax rates.

In a global, mobile economy, cities, states and nations have to compete. So don’t blame Oreo; the company is making a rational decision.  Blame the elected officials who make Mexico a more attractive business climate than Chicago.


 

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