Caterpillar CEO Warns He May Leave State In Response To Corporate Tax Hikes

Across the midwest, public workers have protested proposed cuts to benefits, pay, and collective bargaining rights. But in Illinois, one chief executive is now leading a different kind of protest: following personal and corporate tax hikes in January, Caterpillar CEO Doug Oberhelman has threatened take his business out of state.

Last week, Oberhelman sent a letter to Illinois Governor Pat Quinn, noting that four states have invited the Peoria-based heavy equipment colossus (Caterpillar employs more than one hundred thousand globally) to relocate, Reuters reports.

"I want to stay here. But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest," Oberhelman wrote.

Illinois is facing a potential $15 billion budget gap, according to Reuters. CNBC ranks it number one (tied with Nevada) for worst state budget gaps in 2011. In January, the state legislature passed a bill raising the corporate tax rate from to 7 percent from 4.8 percent and personal income taxes 5 percent from 3. The U.S. corporate tax rate is 35 percent.

A recent report by the Center on Budget and Policy Priorities concluded that U.S. corporations are now paying taxes at "historical lows as a share of the [total] economy," thanks, in large part, to creative use of tax structures.

While Oberhelman's letter does not specifically mention the tax increases, Caterpillar spokesman Jim Dugan said the recent tax increase played a significant role in triggering the note, according to Pantagraph.com. According to Dugan, the letter is not a threat, but rather "an olive branch to offer our help." In past interviews, Oberhelman has expressed concern about the state deficit but always cautioned that he didn't believe tax cuts would be the right way to address this issue.

Caterpillar employs 23,000 people in Illinois and 104,000 globally.

Oberhelman isn't alone among CEOs who have suggested they may be forced to move their companies over concerns about corporate taxes. Last month, 3M CEO George Buckley, suggested that U.S. companies could leave for Canada or Mexico.

Comments

[saintjule]

09:44 AM on 05/06/2011

This is what the political climate has created. These guys have purchased the government we now have and have states in a race to the bottom. When you can move to China and get 18.00 a day labor with no legacy costs, why would you give a damn about people and country. Caterpillar is already 65% off shore. Let them move and encourage Deer. Buy John Deer. Not made here don't sell it here. Sell it to Cuba.

[changling]

10:45 AM on 04/02/2011

More threats?

[relians]

07:44 PM on 03/30/2011

dear caterpiller, if you leave ill, don't come to cali.

[gerald4]

07:22 PM on 03/30/2011

Are the Illinois state financial promlems created by the Public Service Unions representing the Government Elite Bureaucrats that have an unfair advantage when they are negotiating wage and benefit contracts with the same elected politicians that the same unions helped to elect with campaign contributions from union member’s dues!

[gerald4]

07:25 PM on 03/30/2011

"Are the Illinois state financial problems created ..."

[CivilDebate10]

05:52 PM on 03/30/2011

I see the headline and I say "good for him"

[JohnnyWalkerBlueLabel]

04:32 PM on 03/30/2011

They need to move to a better governed red state. I would leave this den of liberal iniquity if I could.

[oilfield]

04:36 PM on 03/30/2011

they should move to texas....where there employees could have 0% income tax ....

[Jstplnefedup]

05:05 PM on 03/30/2011

and the state is just as broke as California....

[efmo]

04:13 PM on 03/30/2011

What effing hypocrites.

[Lex38]

03:21 PM on 03/30/2011

This is standard response every time, yet a company like Caterpillar would have to spend hundreds of millions in new plant construction and employee restructuring costs (paying off old, finding new), if they relocated because they got all emotional over a slight increase that would be much smaller over the long term then the costs of relocating.

ALL BUSINESSES THREATEN TO LEAVE AT THE SLIGHTEST HINT OF AN INCREASE. Standard business practice.

[MrStat1]

04:09 PM on 03/30/2011

But if they move to a state like Texas with no income tax they can get their investment back in a few years.

[oilfield]

04:37 PM on 03/30/2011

it wouldnt take long...

[Grannyover70]

06:30 PM on 03/30/2011

Texas has Franchise taxes and corporate income taxes

The 2010 State Business Tax Climate Index, compiled by the non-partisan Tax Foundation, placed Texas at No. 11 overall for favorable business taxes, dropping it two spots from last year. However, Texas was among the five worst states for corporate tax rates, as well as a property tax that is higher than average.

States that claim not to have an income tax have other taxes. Tennessee claims to
not have income taxes, but tax interest, dividents, and all Pensions. Indiana has
an income tax and taxes almost all Pensions,
They have an excise tax on automobiles depending on make and year. Illinois raised their income tax some, but they do not tax Pensions.

I think they aso said Texas has a low income tax, but they do have one.

You are going to be taxed whereever you go.
:

[Janine547]

03:07 PM on 03/30/2011

All companies and small businesses have "significant economic concerns" and NO CONFIDENCE in the direction Obama is taking us. His policies are job killers and the uncertainty of what is "coming down the road" is a major cause of this jobless economy remaining stagnant.

[Jstplnefedup]

05:06 PM on 03/30/2011

then why are corporate profits at record highs? just coincidence?

[commonsensor2009]

07:23 PM on 03/30/2011

It is amazing that someone who seems to do nothing but make negative comments all day would know the concerns of not just some, but, "All companies and small businesses" You are a regular Jim Cramer.

[SYR]

01:46 PM on 03/30/2011

Americans built Caterpillar from the ground up and made the company and its CEO what they are today. To walk out on Americans in Illinois because your taxes are going up is a slap in the face to these employees. Do you see the middle class walking out on our country and moving to a foreign country because our taxes go up. Only the well-to-do retired look for a low tax state to live in. Pay your rightly owed taxes and do something patriotic.

[shp]

02:38 PM on 03/30/2011

Yes, we know, the middle class has never relocated to a state where their hard-earned dollar goes further.

All you have to do is look at the Census to see that.

And, no, it's not only "well-to-do" retired that do it.

It's mainly retired middle class who can no longer afford the 5K a year in property taxes. As an example, many "Jerseyites" relocate a whole hour away to Delaware just because the taxes are cheaper.

One whole hour.

You might think they left the country or something. So, so, unpatriotic.

[oilfield]

04:38 PM on 03/30/2011

there is a limit.....americans have hit it

[CountryBeforeParty]

12:24 PM on 03/30/2011

Illinois is facing a potential $15 billion budget gap, according to Reuters. CNBC ranks it number one (tied with Nevada) for worst state budget gaps in 2011.

===========================

I thought that Texas and California were higher

[MrStat1]

04:10 PM on 03/30/2011

In dollar amounts they are, but maybe not in percent of budget.

[CountryBeforeParty]

12:13 PM on 03/30/2011

CEO Of Catepillar Threatens To Leave Illinois Over Tax Hike
=========================

Just don't pay your taxes. All the other corporate guys are doing it. Just blame some teachers.

[doodlebug2]

12:09 PM on 03/30/2011

maybe they will stay if the workers become slaves? or better yet workers can be indentured.
They can be fed enough to survive and then get some more.
Think of the savings, and stock price going up.

[doodlebug2]

12:06 PM on 03/30/2011

working in the shipping world, I see the following weekly. Cat machinery, loaded in Japan and Korea (built there) and shipped to Baltimore, Zeebruugge and Rotterdam. So they allready left there, I thought. Same with Manitinowoc Cranes. They all ready moved.

[drp103]

05:51 PM on 03/30/2011

Yeah, but the higher ups don't want to move; you know freedom and all

[gerald4]

07:07 PM on 03/30/2011

If US citizens are not willing to work for lower wages than the foreigner workers employed in foreign countries are willing to work for, then the USA cannot compete globally based upon lower product costs, and those jobs are gone forever.

If the USA cannot compete on lower product costs, then maybe the USA could be competitive internationally through other areas such as exporting superior technology.

The USA did win WWII and create good jobs for a few of the decades following WWII when technology was the primary goal of the US college education systems.

[ravenstarshine]

12:53 PM on 04/11/2011

Unfortunately, education and technology R & D have been cut so badly that we'll have a nation of people who HAVE to work at burger flipping wages to get by. Meanwhile, every other country on this planet is forging ahead with innovation and education.

If the middle class had to work at the wages that they do in some overseas nations, we couldn't afford to get by in the status quo American economy.

[maggiezee]

11:57 AM on 03/30/2011

What is wrong with this picture? No wonder states cave to the demands of the co.'s They have a lot to loose. Maybe we need to consider how the states can have some power in these negotiations.

[Janine547]

03:00 PM on 03/30/2011

What might you be suggesting, a firing squad. Businesses are going to go where they want, there is no stopping them.

[MrStat1]

04:11 PM on 03/30/2011

That is exactly right!