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Biofuels, beer and Boardwalk Empire

Mon, 2014-04-07 10:10

From the Marketplace datebook, here's what's coming up April 8:

Is this town the Luxembourg of Illinois sales tax?

Mon, 2014-04-07 08:06

The Chicago area’s public transit agency says it’s been bilked of hundreds of millions of dollars over the last 15 years, a penny or two at a time. The culprits: towns in outlying parts of Illinois. Like Kankakee, population 27,000. Channohan, population 13,000. Sycamore, population 17,000. The agency says dozens of companies, including Target, AT&T and American Airlines, have used the towns as tax havens.

MTS consulting keeps an office in a faceless little building off Schuyler Avenue in Kankakee, about an hour south of Chicago. When no one answers, I look in the mail slot. No lights are on. A desk is visible, but no computer or phone. Later, MTS CEO David Polush tells me both are just out of view.

Down the hall, I ask a woman at Pinnacle Opportunities about MTS: Have you ever met anybody who’s been there?

"I haven’t. Sorry."  She's been working there for more than a year.

 In a court filing, Chicago’s Regional Transportation Authority says MTS records significant sales here, on behalf of clients based in the Chicago area. It’s one of several companies with offices like this in towns like Kankakee.

They’re here to save on sales tax. Illinois sets a statewide sales tax, but in Chicago the tax is higher because it adds levies for the city, the county and the RTA.

Carol Portman, executive director of the Illinois Taxpayers Federation, says peculiarities in Illinois sales tax law forced the Department of Revenue to write rules about where sales take place. "In some instances," she says, "it led to some rather unexpected results."

That is, some companies have been able to run their business one place— like Chicago— but, for tax purposes, book their sales someplace with a lower rate— like Kankakee. In some cases, it’s consultants like MTS that book the sales.

Additionally, towns like Kankakee offer an extra incentive to companies. Under state law, Kankakee gets a penny of the sales tax it collects— and the village gives 85 percent of that penny back to these companies.

The remaining sliver adds up to $2.5 million dollars a year for Kankakee. Ten percent of the village’s budget.

Portman sees nothing unusual about the arrangement. "That really isn’t any different from the income tax credits, or the property tax abatements that we’re giving people to come here," she says.

For instance, Boeing got tens of millions of dollars in city and state tax breaks when it moved its headquarters from Seattle to Chicago in 2001.

Jordan Matyas, the RTA's chief of staff, sees things differently. He’s suing companies like MTS and towns like Kankakee.

He says there are reasons companies base their operations in Chicago: Amenities like transit make it easier for them to do business.

"If they want to move somewhere else that has less resources, that’s their decision," he says. "But as long as they’re taking advantage of all our government services, they need to be paying the appropriate sales tax."

Kankakee’s mayor, Nina Epstein, makes no apologies.  "There are other parts of the state than the RTA district," she says.

Epstein says some of these companies don’t have Chicago offices at all. Some are Internet companies with no other physical presence in the state. Others simply don’t need full time staff to fulfill orders.

"This has helped fund police and fire services, public works," she says. "But now, it’s going to be taken away."

Last fall, the Illinois Supreme Court ordered a rewrite of tax regulation, to eliminate some of these arrangements.  That’s underway.

Meanwhile, some companies have ended their presence in Kankakee, and Epstein has zeroed out income from the tax deals for her next budget.

Tax expert Carol Portman says this is how tax policy works:  There are winners and losers.

"It’s easy for someone like the RTA to feel like they’ve been the loser and they want changes that make them the winner," she says. "But the problem is: There’s a loser then."

PODCAST: Tech bubble bursting?

Mon, 2014-04-07 06:36

At the end of the first week of April, tech stocks had their worst day in two months with the technology-suffused Nasdaq Composite Index falling 2.6 percent. In early trading in the next week, they aren't doing much better. Carl Riccadonna is Senior U.S. Economist at Deutsche Bank Securities, and joined us to discuss,

President Barack Obama is expected to issue two executive orders this week, in an effort to close the pay gap between men and women. The first would prohibit federal contractors from retaliating against workers who talk about how much they are paid. The second would require federal contractors to give the government pay information broken down by race and gender. But it is unclear exactly how these orders will be meaningful.

The University of Baltimore is like a lot of urban, public campuses. Most students here work, and more than half need to take remedial courses. That's partly why just 12 to 15 percent of students graduate in four years. So starting in the fall, the University of Baltimore will offer new freshmen a deal. If they finish in four years, the last semester's tuition is on the house.

The best and worst states on closing the gender pay gap

Mon, 2014-04-07 04:00

President Barack Obama is expected to issue two executive orders this week, in an effort to close the pay gap between men and women. The first would prohibit federal contractors from retaliating against workers who talk about how much they are paid.  The second would require federal contractors to give the government pay information broken down by race and gender. 

"Federal contractors employee almost a quarter of the workforce, so it’s going to be a really meaningful thing for many workers around the country" - Fatima Goss Graves, with the National Women’s Law Center

But it is unclear exactly how these orders will be meaningful. "I think they are much more symbolic, to get us talking about the wage gap," Linda Barrington with the Institute for Compensation Studies at Cornell noted, adding that "if we don’t do that, we can’t reduce the wage gap."

The American Association of University Women estimates that women make 77% of what men do.  The median annual salary for men is $49,398.  The median annual salary for women is $37,791. 

However, there are significant variations in the wage gap between states. To get some more context around how states compare to each other, take a look at the states where the pay gap is lowest (as calculated by the earnings ratio between men and women, in parentheses): 

  1. Washington, D.C.  (90%)
  2. Maryland (85%)
  3. Nevada (85%)
  4. Vermont (85%)
  5. New York (84%)
  6. California (84%)
  7. Florida (84%)
  8. Hawaii (83%)
  9. Maine (83%)
  10. Arizona (82%)
  11. North Carolina (82%)

And here are the states where the the gap between what men and women earn compared to each other is the highest:

  1. Wyoming (64%)
  2. Louisiana (67%)
  3. West Virginia (70%)
  4. Utah (70%)
  5. Alabama (71%)
  6. Indiana (73%)
  7. Michigan (74%)
  8. North Dakota (74%)
  9. Alaska (74%)
  10. Idaho (75%)

 How does the legal system apply to equal pay standards? According to the National Conference of State Legislatures, 45 states have equal pay laws on the books.  Five states, including Alabama, Mississippi, South Carolina, Utah, and Wisconsin have none.

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