2nd UPDATE: Florida Governor Aims To Lure CME Group From Illinois
June 21 2011 - 11:44PM
Dow Jones News
The governor of Florida on Tuesday appealed to CME Group Inc.
(CME) to relocate its corporate base to the Sunshine State,
responding to the exchange operator's vocal objections to a rise in
the Illinois tax rate.
Rick Scott, governor of Florida, touted his state's lower
corporate tax rate--which he seeks to phase out entirely--and lack
of any income tax on individuals as part of an environment where
the world's largest futures exchange company could thrive.
"As CME Group continues to explore cost-saving options, I ask
that you consider doing business in Florida," wrote Scott in a
letter addressed to CME Executive Chairman Terry Duffy.
Duffy this month said that CME was looking into the possibility
of shifting its corporate operations out of Illinois after the
state in January increased its corporate tax rate from 4.8% to 7%,
alongside a separate increase in the personal income tax rate. CME
has estimated the tax increase could cost it $50 million per
year.
"Imagine the growth your company could achieve if you could
reinvest those additional state taxes to hire more employees and
expand operations," said Scott in a letter dated June 16.
A spokesman for CME Group declined comment on the Florida
governor's letter but reiterated that the tax increase aside, the
company would prefer to remain in Chicago.
Voters chose Scott as Florida's governor as part of the
Republican wave of victories during last November's mid-term
elections. He has positioned his plan to lower and ultimately
eliminate the state's corporate income tax as a strategy to create
700,000 jobs by 2018.
Luring CME, which employs about 2,000 people in the Chicago
area, would be a major coup for Scott, who is a favorite of the
conservative Tea Party movement.
Florida is home to other financial services companies, including
online stock and options brokerage firm Tradeking, the founders of
which chose the state for its base of operations ahead of its
launch in 2005. The increasingly electronic nature of trade made it
feasible for the company to run from Florida as opposed to
financial hubs in Chicago or New York, according to Don Montanaro,
chief executive.
"Everyone gladly relocated to Florida for two simple reasons:
sunshine, and no personal income taxes," said Montanaro. Forty of
the firm's 92 employees are based in Boca Raton, Fla., with its
other main operations situated in Charlotte, N.C.
Moving the headquarters of the world's largest futures exchange
won't do much to help the broader U.S. economy, said Peter Morici,
a University of Maryland economist.
"It doesn't add jobs. It only moves them around," Morici
said.
Other potential locations for CME include Texas. CME was one of
dozens of Illinois firms to receive letters from Texas Gov. Rick
Perry, a Republican, describing the benefits of locating in his
state.
-By Jacob Bunge and Howard Packowitz, Dow Jones Newswires;
312-750-4117; jacob.bunge@dowjones.com
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