Credit: CHema Skndl!

I know, I know—I should have already weighed in on the gazillion-dollar tax break Christmas present the state gave the Chicago Mercantile Exchange last month.

But I was preoccupied with holiday parties, Bulls games, old movies, giving my dog a bath—anything to dull the pain of what our elected officials were up to. Like the aforementioned gazillion-dollar tax break for CME.

To refresh your memory, that’s the one where CME, the international options-trading behemoth, decided it was paying too much in state corporate income taxes. And its top officials let it be known that if the state didn’t lower the tax tab right away, the Merc would move to Indiana. Maybe call itself the Munster Mercantile Exchange.

Governor Pat Quinn, house speaker Michael Madigan and senate president John Cullerton responded by pushing through a bill that effectively lowers what CME pays in income taxes by an estimated $125 million in the next two years and untold hundreds of millions after that.

After which Mayor Emanuel sent out a press release hailing the tax break as “reform.”

Once again: I think it’s a good idea not to use that word in relation to anything any politician ever does in Illinois.

So . . . the state that’s already tens of billions of dollars in debt now has to find new and creative ways to make up for the hundreds of millions of tax dollars it won’t be getting from CME. Probably by asking retired cops, firefighters, and teachers to live on less. Call it pension reform. Because as everyone knows, it’s not really financial reform unless you’re making old retirees pick up the tab.

As you can see, there’s so much bad about this deal it’s hard to know where to start. So I’ll start with 6 percent, which would be the percentage of the state’s total corporate income tax yield that CME supposedly paid in 2010.

I understand they paid 6 percent of the total because I read it in the papers—Terrence Duffy, CME’s executive chairman, made the original claim in an interview with Bloomberg News. I also heard it offered up as evidence by legislators who claimed that it’s just not fair for one corporation to pay so much of the state total. Even if that corporation made $951 million in 2010.

Just to make sure about that 6 percent, I called the state Department of Revenue and wound up talking to Susan Hofer, a public information officer. Our conversation went a little like this:

Me: So how much did CME pay in corporate income taxes in 2010?

Hofer: I can’t tell you because the amount anyone—individual or corporation—pays in income taxes is privileged information.

Me: So you might say that the 6 percent figure is a wholly owned subsidiary of CME?

Hofer: [Sound resembling a chuckle.]

Well, at least I got a laugh out of this deal, which is more than most taxpayers can say.

Dutiful reporter that I am, I then checked in with CME. I wound up getting an e-mail from a public information officer named Michael Shore, who wrote: “Info about taxes paid by CME group can be found in our 10-k.”

That would be the annual 10-k disclosure report all publicly traded companies must file with the Securities and Exchange Commission.

So I clicked on the accompanying link and found myself confronting a daunting 122-page document—every line of which was riveting. On page 89, I found that CME claimed to have paid $148.9 million in state taxes, of which $76.1 million was deferred.

It also said that the state tax rate was 5.8 percent, even though the state’s tax rate was 4.8 in 2010. Plus, the document didn’t indicate how much of the $148.9 million went to New York, where CME also has operations. Nor did it explain what the deferred $76.1 million revealed about how much the firm actually paid in 2010.

All in all, the SEC document raises more questions than it answers about how much CME paid in Illinois corporate income taxes in 2010.

I e-mailed Shore for clarification, but alas, he did not respond.

Even worse, lawmakers I spoke with said they didn’t get any detailed information, either.

So I then called the smartest CPA I know, an old friend I’ll call Birdie.

He wound up telling me more than I’d ever want to know about Generally Acceptable Accounting Principals (aka, GAAP). The bottom line being that there’s no one way of knowing exactly how much CME paid in Illinois income taxes based on that SEC statement.

“I’d say that sending you the 10-k was that guy’s way of giving you the middle finger,” Birdie said.

No—not my new best friend Michael Shore!

In short, the tax break stemmed from an unverifiable claim made by Terry Duffy in interview with Bloomberg. How’s that for reassuring?

Call it take-my-word-for-it accountability. To give it some perspective, imagine if you went to the state and said, “I can’t afford to pay this year’s college tuition for my son, so just give him a free ride.” And the state said, “Sure, why not? We’ll take your word for it!”

On December 16, Governor Quinn signed it into law.

Then, as I mentioned, Mayor Emanuel added his two cents.

I’m not even sure why the mayor felt compelled to weigh in, unless it’s to remind his friends at CME that he too had a hand in getting them the big tax break—so don’t forget him at campaign contribution time.

Oh, wait—I just figured it out. Smart guy, that mayor of ours.

Back to his statement: “This tax reform legislation will protect thousands of jobs in Chicago and keep the CME Group where it belongs, here in the city.”

Here’s the thing—as pretty much everyone in the options business knows, the industry is cutting jobs—not adding them—as it moves away from floor to electronic trading.

At last count, CME employed 1,750 people in Chicago. I know this because that’s how many jobs the company said it had here in 2010, when the city offered CME $15 million in TIF funds to keep those jobs in town—as opposed to moving them to Elkhart.

By the way, CME didn’t sign that TIF deal, as generous as it may have seemed, probably because it required them to stay in town and keep those 1,750 employees on the payroll. And if the company had agreed to that, it would have lost the move-to-Indiana threat used to strongarm the state into handing over hundreds of millions of dollars in tax breaks.

You don’t have to be a brilliant CME trader to know that hundreds of millions of dollars with no strings attached is a better deal than $15 million with strings attached.

So you might say that the city’s CME TIF deal was better than the state’s CME tax break.

And people claim I never say anything nice about TIFs . . .

By the way, I don’t blame CME for playing hardball. They’re not in business to help pay for stuff like public education. They’re in business to make money, and if they can make more money by pruning their payroll and lowering their tax bill, that’s what they’re going to do.

On the other hand, Governor Quinn, speaker Madigan, senate president Cullerton, and Mayor Emanuel are supposed to be guardians of the public purse. Ha ha ha . . .

All right, fellas—I’ll give you a way to undo the damage you’ve done. Slap a tax on all transactions made or brokered through CME and use the money to pay for the schools.

If they don’t like it, too bad. Let them move to London like AON, speaking of local companies who are looking out for number one. Another story for another day.