Costly Business Tax Break Fails to Check Illinois Manufacturing Job Loss– Again

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In a move reminiscent of Maytag’s 2002 decision to close its Galesburg, Illinois plant and transfer jobs to Mexico, Methode Electronics has announced it will close one of its three Illinois plants and eliminate a product line at another. A total of 700 jobs at the three plants will be cut, with some positions transferred to Mexico or China.

Methode, a multinational supplier of auto components like turn signals, cited fewer orders from the Big 3 automakers and pressure to cut prices.

Job cuts like these underscore the ineffectiveness of the Single Sales Factor method of determining the income tax liability of companies that–like Methode–operate in several U.S. states. Illinois adopted in 1998,

By excluding in-state property and payroll from the formula that determines income taxable, SSF provides a tax windfall to large companies like Methode with substantial in-state presence and substantial out-of-state sales. Proponents claimed an economic development bonanza would offset the revenue loss, as SSF’s tax advantages would attract new companies and investment and create 155,000 new jobs in the manufacturing sector alone.

However, after eight years and an estimated cost to the Illinois treasury of nearly $750 million, SSF has proven ineffective in stemming the loss of manufacturing jobs in Illinois. In fact, manufacturing employment has fallen by nearly 219,000 jobs since the beginning
of 1999.

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