Since the Illinois income tax hike took effect in January 2011, one large corporation after another has taken the state hostage for a hefty ransom of tax breaks. Caterpillar Inc. led the pack, stating the extra costs would drive it to relocate its headquarters from Peoria to a more competitive state, or whichever had the highest bidding price. Motorola Mobility, Sears Holding Corp. and Navistar Inc. lined up next, with hands stretched out to rake in the cash, and Illinois lawmakers obliged them. The most recent in this string of corporate highway robberies is CME Group Inc., the operator of the Chicago Mercantile Exchange and the Chicago Board of Trade, which has threatened to move its headquarters if its tax rate isn’t slashed.

The Merc is one of the world’s largest commodity derivatives exchanges, making it the largest financial institution in Chicago and a vital part of the city’s economy. Along with the Board of Trade, CME employs thousands with high paying jobs. Its exit would be a disaster for the Illinois economy, which has seen its unemployment rate rise to approximately 10 percent in the last year even as the national average stays steady at 9 percent. However, the state is in no position to be handing out money—even after the tax hike, Illinois’ budget is still in the red.

It’s poor policy to raise taxes, then turn around and give companies breaks because they threaten to leave, while working citizens still pay more. Yet CME has a legitimate argument: It pays 6 percent of all Illinois corporate taxes because of a tweak in the tax code in 2000 that favors manufacturers. When Caterpillar sells a tractor out of state, Illinois collects no taxes on that sale. But when CME processes a transaction out of state—which it does often because trading is now electronic—Illinois gets to tax it.

CME CEO Terrence Duffy asked Illinois lawmakers to reduce its tax burden to only 27.5 percent of processed transactions. This would cost the state $100 million per year in revenue, which it can hardly afford. Yet the alternative is no better; if CME leaves, 6 percent of Illinois’ corporate tax revenue is gone, along with the well-paying jobs and prestige of having the company headquartered here.

There is no perfect solution. By handing out more tax breaks, Illinois will continue to be blackmailed by the corporations that have headquarters here. But companies have every right to move out of state if it makes economic sense, especially in a tough economy. What Gov. Pat Quinn and state legislators need to do is fix the tax code. The 67 percent tax hike has obviously become detrimental to the economy and hasn’t fixed the budget either. Illinois politicians need to stop spending beyond their means and do something concrete to fix the budget without taxing everyone more.