By Howard Packowitz Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- Legislation providing tax breaks for Chicago's derivatives exchanges and an Illinois-based retailer won the endorsement Monday of a House committee. However, comments during the committee hearing, including from the Governor's budget director, suggest the bill is far from winning final approval. Leaders hope the measure becomes law by the end of this week. The Illinois House Revenue and Finance Committee sent the legislation to the full House. It must also win favor with the Senate and Democratic Governor Patrick Quinn. The scaled-back version delays tax relief for CME Group Inc. (CME), CBOE Holdings Inc. (CBOE), and Sears Holdings Corp. (SHLD) until the start of the 2013 fiscal year, which starts July 1 of next year. CME, which claims it pays 6% of all the corporate taxes paid to the Illinois government, initially sought to have its tax burden reduced this fiscal year. All three firms indicated they might move their headquarters to other states. Chicago has been CME's home for 163 years. In January, the legislature raised the corporate tax rate to 7%, from 4.8%, costing CME an extra $50 million a year, according to CME Chairman Terry Duffy. The legislation allows CME and options exchange CBOE Holdings Inc. (CBOE) to be taxed on 27.54% of all electronic trades, which account for the vast majority of the business performed at the exchanges. Currently, the exchanges pay taxes on 100% of their electronic transactions. The delay in implementing tax relief until the next fiscal year represents "significant concessions" by the exchanges, committee chairman John Bradley said on Sunday. The extra time allows the fiscally troubled state to pay its bills, said Bradley. The watered-down package, which includes aid for small businesses and workers, will cost the state approximately $200 million, down from the initial price tag of about $800 million to $900 million. Governor Patrick Quinn favored significantly larger allocations in earned income tax credits to help low-income Illinois workers. Putting money in the hands of low-income workers stimulates consumer demand and creates a "multiplier effect" for the economy, Quinn's budget director David Vaught told the committee. "The Governor supports the concept of the bill, but more work needs to be done," said Vaught. In its current form, the legislation gives the appearance that it "only caters to special interests," Vaught also said. A Republican on the committee, State Representative Ed Sullivan Jr., argued that earned income tax credits don't create or retain jobs, which he said was the initial goal of the legislation. -By Howard Packowitz, Dow Jones Newswires; 312-750-4132; howard.packowitz@dowjones.com
