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ILLINOIS TAX IMPLOSION

A funny thing happened on the road to Canadian-style health care in Illinois: Democratic Gov. Rod Blagojevich's tax increase to finance health care became the political rout of the year, says the Wall Street Journal.

The Democratic House in Springfield killed the proposed tax increase 107-0.

The "Blago tax" would have:

    * Levied a $7.6 billion "gross receipts tax" on Illinois businesses.
    * Forced most employers to offer health insurance or pay a 3 percent payroll tax.

As tax increases go, this was one of the worst, says the Journal:

    * A "gross receipts tax" is popular with politicians because it applies to every dollar of company revenue, not merely on profits, or on final sales the way a retail sales tax does.
    * But this means the tax tends to hit hardest those small and medium-sized businesses that have healthy sales volumes but narrow profit margins.
    * The tax is a huge revenue-raiser but can also be a job killer.

Blagojevich tried to soften this impact by creating an exemption for business with annual revenues of less than $5 million.  But even with that exemption, retailers would feel the squeeze from the higher cost of goods.  And because the tax applies to all business transactions, it creates what economists call a "pyramiding" effect that has a damaging overall economic impact, says the Journal.

    * The Tax Foundation estimated that Blagojevich's proposal would have been the largest state tax hike in the last decade, as a share of state general fund revenue -- at 27 percent nearly double the next closest, which was Nevada's 14 percent increase in 2004.
    * In per capita terms, the tax hike would average about $550 per Illinois resident.

Gross receipts tax a death threat to Illinois business

The gross receipts tax proposed by Gov. Blagojevich would be -- bottom line -- a death blow for business in Illinois.

Not many had heard of it when Cook County Assessor Jim Houlihan first proposed the gross receipts tax as a way of lowering property taxes.

Houlihan raised the idea at a luncheon meeting of property tax professionals last December, where few understood what it meant.

Since then, Blagojevich picked up on the issue and put it before the General Assembly. Now a lot of people are beginning to understand what it means.

Businessmen have looked into the bill, written to me, and explained that, if it were to pass, it would mean an exodus of business from Illinois, the loss of jobs, and much higher costs for you, the consumers, to pay.

The gross receipts tax means gross receipts from property, from the sale of electricity and electrical transmission and distribution services, from the sale of transportation services, from the sale of all other services -- including farmers, attorneys, real estate agents, gas stations, mechanics, restaurants, and more.

The governor claims the bill will lower your property taxes. What he doesn't say is that the additional taxes you'll pay for electricity, transportation, and every purchase of goods and services would cost you more than the difference in your real estate tax bill.

The governor claims that the gross receipts tax would be a tax on businesses and could not be separately billed or invoiced to another person.

It sounds good, but do you really think businesses wouldn't be forced to pass on to you the high toll of this bill, which would tax their "gross" income, not their "net"?

They'd either close their doors or move to another state or be forced to raise their prices.

It's not just big business that would be hurt. Small businesses would feel the burden of the proposed tax hardest of all. The gross receipts tax would cause them to stop plans to expand, buy new equipment or hire more people.

The gross receipts tax is being sold to us in slick television ads as a means with which to provide health care for all and better education for our children. But, without businesses providing jobs, our children would have to find employment out of Illinois.

Tell the governor and members of the General Assembly that, if they really want to save money, help education and fund health care, they ought to stop subsidizing their own health care, mismanaging our money and hiring chauffeurs, and put an end to the guaranteed pensions they've given to state workers -- regardless of the state of the economy. Even big business can't afford such pensions. How can the state?

Blagojevich has promised not to raise the income tax in Illinois. Instead, he wants to put a tax on the gross receipts of all businesses, big or small.

It's time to tell him to stop. And thankfully, the Illinois House of Representatives did just that last week when it voted on the governor's proposal. The tally was 107 votes against it and not a single vote for it.

The gross receipts tax is just that -- gross.

This just goes to show that the democrats answer to everything is to raise taxes.


Illinois has already lost a lot of businesses in the last 2 decades due to the taxes and various fees the democrats have imposed on them.