Editorial: Disclosure bill misses target of corporate tax reform

The desire for open information and the want of a friendly business climate are at odds in a proposal halfway through the General Assembly. The bill would require publicly traded corporations to disclose their state tax liability, with Senate President John Cullerton pushing it as a way to promote accountability to businesses that receive tax breaks.

The intentions are noble, but the bill’s timing is poor and its scope too broad. At stake is Illinois’ already damaged reputation as a place not to do business. While transparency for corporations that accept state incentives to stick around is a good idea, others should not be saddled with cumbersome requirements that threaten their privacy. Such action would only delay an urgently needed economic recovery.

The legislation, called the Illinois Corporate Tax Disclosure and Responsibility Act, would require certain publicly traded corporations that do business in the state to file an annual statement with the secretary of state detailing their income tax liability. The information would be posted online two years after the initial disclosure.

Most states do not publicize such information, and the federal government has a long tradition of keeping tax filings confidential. Because of the privacy issue, lawsuits already are being threatened if the bill passes. Illinois is in no position to defend itself from costly litigation that can be avoided.

In addition, experts say disclosure would hardly be enlightening to the public and would offer murky images of taxes paid because of the complicated nature of the revenue generated by businesses, especially those with a presence in several states.

Any plan to promote accountability has some merit. Corporations that accept tax breaks should be able to show what comes of them. But a better approach would be for lawmakers to require a business to disclose tax information as part of an incentive deal: You get a tax handout, we get to see how it’s being used. Hoffman Estates-based Sears, which secured an expansive incentive package from the state last year, voluntarily offers some of its tax information on its website, which states the company paid $207 million in all state taxes in 2011.

The Senate narrowly passed the Corporate Tax Disclosure bill in November, and it is expected to come up in the House in the lame duck session. Corporate taxes generate about 8 percent of Illinois’ total tax revenue each year. Accountability needs to be part of the game, but a sweeping bill that requires revealing private information might be too hard for some corporations to swallow.

In Illinois, as in other states, about two-thirds of corporations pay no state income taxes. If the tax code is inefficient or unfair, reform should be the avenue to ensure they pay their share. Calls for tax reform have bounced around for years, and it’s time to get serious about it. But if our tax code needs revision, this proposal would give the process a chilly start.