Loyola University Chicago School of Law, JD 2024
Several big-name companies, corporations with recognizable names, headquartered in Illinois are exiting the state in mass numbers for a variety of reasons. This blog discusses the impacts and outlook for Illinois as this corporation exodus affects the state’s revenue streams. It also looks at how lawmakers, in-house lawyers, and internal compliance teams can keep companies in Illinois.
Earlier this summer, Ken Griffin, CEO of Chicago’s largest hedge fund, Citadel, announced that it is moving the firm’s headquarters to Miami. This news follows the departure of several other companies that were headquartered in Chicago like Boeing, Caterpillar, and grocery stores like Aldi.
Experts attribute the leave to a variety of factors including crime, lack of talent in the state, and Illinois tax hikes. According to CNBC’s “Top States for Business 2021” list, Illinois ranked as the third least friendliest business state in the country based on analysis from expert policy makers and CEOs. CEOs and the CNBC list mainly attribute the low rankings to high property taxes which do not help with the cost of business.
Companies like Boeing and Amazon are moving to the new hub for technology, Arlington, Virginia. Virginia has a greater pool of talented people who are skilled in areas like technology, programming, and engineering. Virginia also ranked as the top state for businesses in 2021 by CNBC. Meanwhile, companies that are concerned about their taxes are moving to corporate tax friendly states like Texas or North Carolina.
Similar to Illinois, the state of California bears the consequences of high taxes and several big businesses leaving their state for Texas. What was once known as the land of opportunity is now struggling to keep its citizens in the state. When big name companies leave the state, it also means job opportunities leave and less people are incentivized to stay. The consequences of big companies leaving ultimately falls on politicians and remaining citizens. The result is increased taxes and disgruntled citizens.
The affects of companies leaving Illinois
Ken Griffin alone pays over $200 million in state income taxes every year. Citadel and its employees funnel about 1 billion dollars in revenue. Accordingly, with Citadel’s exit, Illinois tax revenue will take a toll.
There are several factors that play into the reasoning behind why companies are leaving the state. The two most cited reasons: crime and taxes. Although Mayor Lori Lightfoot has attempted to reduce crime rates through community outreach programs, the reality is that shootings in downtown Chicago have increased by 64%. These high shooting rates are not only pushing big name companies out of Chicago, but also detracting tourists from visiting the city as well. Employees do not want to risk their lives while going to work and have requested their companies to relocate to “safer” cities. With companies uprooting their headquarters, out of state citizens are less likely to move to Illinois for job prospects and opt to find opportunities elsewhere.
Illinois also currently has the fifth highest corporate tax rate in the United States, which stands at 9.50%. The companies that are already headquartered in Illinois are following talent and money. Companies are more likely to move to states where they can pay less taxes for their own profit. Less income from corporate state taxes means that less money will be available to fund important infrastructure in the state.
It is unclear how Illinois landmarks purchased or donated by big name companies will be affected by the migration of companies. Exelon Park, Millennium Park, and other landmark areas across the state are affiliated with several big-name companies. Perhaps, companies leaving will make room for new business prospects as seen with the Marshall Field’s building now bought by Macy’s and the Sears Tower transforming to the Willis Tower.
Illinois lawmakers need to save Illinois
Illinois lawmakers need to take action to prevent other big name Chicago companies like United Airlines, Walgreens, Exelon, Abbot Labs, and the like from leaving the state. Illinois lawmakers should provide incentives for companies to choose Illinois as its headquarters. For starters, the state could provide tax breaks to companies or lower their corporate tax rate.
For those concerned about companies not paying their fair share in taxes, there are other non-tax reduction related solutions. The state could fund more opportunities for Illinois residents to receive training and education in areas like math, science, technology, engineering, and supply chain management. Illinois could also do a better job of funding community outreach in areas where gun violence is prevalent to reduce gun violence and make our communities safer.
A strong compliance and legal team at every company may also be the solution. An effective compliance program at a company helps businesses mitigate risks, create efficient business practices, and drive better insights on how a company is performing. Given that Illinois receives a significant portion of revenue from companies and their employees, compliance teams can ensure their C-Suite employees abide by financial transparency regulations.
Although companies are leaving Illinois, we can remain optimistic and hope that changes by lawmakers and existing companies could bring more businesses open to making Illinois their new headquarters. As a law student and someone looking to enter the corporate in-house legal industry, it is a little disheartening to know that the companies I would love to work for are leaving the state I call home. However, it is also important to evaluate the role of our lawmakers and existing companies, as the future of our state is ultimately in their hands.