The CME Group is upset over Illinois' corporate tax rate increase. The new corporate tax rate is the third highest in the country.
The CME chairman's threat to move his company to another state has put Governor Pat Quinn on the spot. Does Quinn come up with financial incentives to keep the giant trading company in Chicago? Or does he call CME's bluff?
The governor, who has negotiated tax breaks to keep other companies in Illinois, was asked if he thought the CME threat was an attempted "shakedown."
"I don't believe in that. We're not gonna have any of that. That's why I'm governor. We don't believe in that kind of approach to life," said Quinn.
The CME Group owns the Chicago Board of Trade and Chicago Mercantile Exchange. It directly hires about 2,000 people, but its business' trading activities support tens of thousands of other area workers.
CME Chairman Terrence Duffy says this year's 45 percent increase in the Illinois corporate income tax rate has reduced the company's profit margin. And, on the possibility CME could leave the state, he said, "We're investigating what would be in the best interests of our shareholders."
"The futures markets are all electronic. They can go anywhere in the world. One of the things we have to recognize as a city and state is that labor capital, intellectual capital and financial capital are mobile," said the Illinois Policy Institute's John Tillman.
Mayor Rahm Emanuel did not appear worried after he talked to the CME chairman Thursday morning.
"They acknowledge that the city has been great to them, and the city is a place that they've prospered," said Emanuel.
The CME threat to move also could end talk of a possible transaction tax on the city's exchanges.
"Any discussion of a transaction tax on the futures traders in Chicago in the CME group, anybody in this line of business, I think that's dead now," Tillman said.
After Governor Quinn negotiated tax breaks for Motorola Mobility company, other companies including Sears and Caterpillar announced they were considering leaving Illinois.
The governor did not rule out negotiations with CME.
"The taxpayers of Illinois are just not gonna subsidize private companies unless they give something back to the people of Illinois," said Quinn.
CME estimates the tax increase will cost the company about $50 million a year. The higher rates are supposed to be temporary, lasting only until 2015, but, apparently, that might be too long for CME Chairman Duffy, who says the company will continue to investigate a possible move.