Florida Governor Aims To Lure CME Group From Illinois
By Jacob Bunge and Howard Packowitz
Published June 21, 2011
Dow Jones Newswires
Florida's governor sees CME headquarters shift as opportunity for expansion, new jobs
--Economist says CME relocation doesn't add jobs, just moves them around
--CME spokesman had no comment on governor's letter
(Updates with comments from Florida-based brokerage firm, additional background, beginning in second paragraph)
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.
Copyright © 2011 Dow Jones Newswires
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