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Illinois Among Nation's Worst State Business Climates, According To CEO Survey

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Illinois has been struggling to keep big companies in the state since Illinois Governor Pat Quinn approved an income tax increase in January. Quinn has been widely criticized for the move, and a new survey ranking Illinois among the worst business climates in the U.S. will likely provide fodder to the naysayers.

According to a survey released Monday, California, New York and Illinois have the "least favorable business climates" to corporate executives in the U.S. Nearly 25 percent of the 322 corporate executives surveyed said Illinois was unfavorable due to high taxes and "anti-business climate/regulation."

"With the battle for business more intense than ever, states and their economic development organizations need to pay close attention to the results of this survey," Development Counsellors International (DCI) President Andrew T. Levine said in a statement. "Whether accurate or misguided, perceptions about a location's business climate often play a crucial role in site selection decisions and where companies invest money and create jobs."

Texas, North Carolina and South Carolina had the most favorable business climates, according to the survey.

Following a narrow victory in the 2010 election, Gov. Quinn, a Democrat, found himself surrounded by newly-elected Republican governors. Indiana Governor Mitch Daniels immediately tried luring Illinois businesses east, and Governor Scott Walker tried luring them north. Even New Jersey Governor Chris Christie began running ads in the state, and called Quinn "a disaster."

Since taxes went up in Illinois, several businesses have left--and others have threatened a move. Sears Roebuck and Co. moved its headquarters to suburban Hoffman Estates offices after leaving its home in Chicago's Sears Tower (now Willis Tower) more than 22 years ago. It was reportedly set to open up shop in North Carolina, when Illinois offered them $100 million in state infrastructure money to stay. At least 6,000 Sears employees live in the Chicago suburbs, and an additional 9,000 have jobs with nearby businesses, vendors and contractors--but the company is once again looking elsewhere. State lawmakers are hoping to pass a tax increment agreement that will keep the company in Illinois for at least 15 more years.

“It's our own tax policies that have made this an unfavorable climate,” State Rep. Tom Morrison, a Palatine Republican, told the Daily Herald over the summer. “And again, it's not just the big companies like Sears or Motorola or the (Chicago) Mercantile Exchange.”

Morrison is a co-sponsor of the bill that would keep Sears in Illinois. Motorola also threatened to leave the state before Quinn announced a $100 million deal to keep their headquarters in suburban Libertyville. The company agreed to spend nearly $600 million in research and development in return. Caterpillar Inc. CEO Doug Oberhelman sent Gov. Quinn a letter after the tax hike was approved, warning him that other states were "trying to lure his company."

Ultimately, Oberhelman met with Quinn and they worked out a deal to keep the company in Illinois.

Despite the deals, some smaller businesses aren't sticking around. Last month, Gov. Daniels welcomed metal-shaping company Modern Drop Forge to Indiana. The company was based in suburban Blue Island, Ill. since 1914, but claims Merrillville, Indiana offers lower business costs. The move will shift about 240 jobs to Indiana, WGN News reports.

While the tax hike certainly did not help Illinois' reputation, some economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois, according to the Associated Press. They say income taxes are just one piece of the puzzle when businesses decide where to locate or expand, and states should be cooperating instead trying to poach jobs from one another.

"The idea of competing on state tax rates is . . . hopelessly out of date," Ed Morrison, economic policy advisor at the Purdue Center for Regional Development told the AP. "It demonstrates that political leadership is really out of step with what the global competitive realities are."

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