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Radogno: Dems should do the cig tax hike by themselves

Tuesday, Apr 24, 2012 - Posted by Rich Miller

* Senate Republican Leader Christine Radogno says the Democrats should just go it alone on a cigarette tax hike to help patch Medicaid’s gaping funding hole if that’s what they want to do

“The problem is that it is a revenue solution to a spending problem. We’re looking for money rather than looking at the spending side, and it’s that default position that has gotten us exactly into the mess we’re in,” Radogno told a City Club of Chicago audience.

Noting that Democrats, who control the General Assembly, last year passed a state income tax increase without any Republican support, Radogno said, “They can pass the cigarette tax increase on their own if that’s what they want to do.”

Sounds good. Let’s see the cuts.

* On a related topic, the SJ-R wants a closer look at what could be an overly rosy numbers scenario

Though we support the tax, we also recognize there’s room for debate. The administration estimates gross savings from enhancing enforcement of Medicaid eligibility rules to be $120 million. The Illinois Hospital Association believes the savings could be triple that — and up to $720 million with a federal match.

And if the state doesn’t realize that extra $480 million from enforcement savings? Another big budget hole is what. Still, the IHA’s numbers are definitely worth a hard look.

* Leader Radogno also reiterated her opposition to shifting the employer pension payment to Downstate and suburban school districts

“What we have to look at is the total (state) funding for education that goes in to the city of Chicago,” she said. “Chicago is treated differently in a number of areas, in fact, favorably in a number of (funding) areas relative to downstate and suburban schools, and those need to be addressed at the same time there’s any discussion about a shift in responsibility for pension costs.” […]

“The savings from the shift are not significant enough to derail it over this issue. It should be set aside.”

Also a good point about Chicago’s share of education funding, but that’s kinda apples and oranges since the funding is based on a specific formula. Also, the savings from a funding shift would be pretty darned big, particularly over time.

* Meanwhile, I’d never heard of this scam until today

At least five states (Florida, Georgia, Maine, Utah and West Virginia) have enacted laws that target “tax-zapper” software that essentially allows businesses to keep two sets of books, the Associated Press has reported.

By plugging a flash drive into cash registers, the software lets businesses under report taxable sales. The new state laws make it illegal to possess or install devices that falsify a cash register’s electronic records. Other states considering such measures include Oklahoma, Indiana, New York, Tennessee and Michigan, AP reported.

Richard Ainsworth, a Boston University tax law professor who has studied the issue, estimates that 30 percent of businesses that primarily rely on cash transactions are using tax zappers. In the restaurant industry alone in California, the loss from zappers was estimated at $2.8 billion three years ago and in New York $1.7 billion, Ainsworth says.

* Here’s how it works

During business hours, cashiers record the true sales and give customers accurate receipts. A log of real sales can also be stored electronically.

But after hours, a memory stick that contains the zapper is inserted to remove a given amount in sales from the day’s receipts, say, $500. For each altered transaction, the zapper will also re-total and recalculate the receipt. That changes the tax due and produces a second set of books.

Boston University tax law professor Richard Ainsworth, an authority on the issue, estimates that 30 percent of the predominantly cash businesses in the states are using tax zappers.

* The reason I heard about this today was that Rep. Jack Franks has introduced a bill to ban the zappers. From a press release…

Legislation barring the use of tax-cheating software was introduced by state Rep. Jack Franks (D-Marengo) to crack down on a practice of falsifying cash register electronic records by skimming receipts, thereby lowering sales taxes owed.

“The vast majority of Illinois businesses play by the rules and are put at a competitive disadvantage by this unlawful practice,” Franks said. “We have an obligation to stop those perpetrating tax fraud and harming honest businesses struggling to thrive in challenging economic times.” […]

“The notion that billions in state revenue could have been lost due to businesses cooking their books is unconscionable,” continued Franks. “Though it is already illegal to cheat on taxes, these devices have created an easy way for businesses to illegally lower their taxable income that is hard to track. We must act to ban the possession or installation of tax-zappers in Illinois.”

The bill is here.

       

25 Comments
  1. - lincoln's beard - Tuesday, Apr 24, 12 @ 11:06 am:

    Why should the IHA care how Medicaid expenditures are reduced? No matter how we do it, aren’t those dollars that aren’t going to hospitals anymore? I certainly wouldn’t accuse the IHA of being dishonest with their numbers, but I can see why they might prefer an uncertain and contingent reduction via “enforcement” to other measures which would certainly reduce spending.


  2. - WizzardOfOzzie - Tuesday, Apr 24, 12 @ 11:07 am:

    What??? Jack Franks has a good idea? Well, I guess there is a first time for everything.


  3. - Carl Nyberg - Tuesday, Apr 24, 12 @ 11:08 am:

    So what is the GOP solution to this spending problem?

    When people are poor, they get gov’t help for health care.

    Do the Republicans want to require employers to pay for health care for employees?

    The Republicans simply offer soundbites. And they take responsibility for nothing.


  4. - wordslinger - Tuesday, Apr 24, 12 @ 11:18 am:

    What would Sen. Radogno’s spending solution to the spending problem be? Since she brought it up, doesn’t she feel obligated to share?


  5. - supplysgt - Tuesday, Apr 24, 12 @ 11:18 am:

    Since we’re on the topic of health care - and soundbites - isn’t the health care subsidy that state employee’s get a benefit which “shall not be diminished or impaired” under the state constitution?

    Why isn’t anyone talking about this gaping hole in the Guv’s pension plan?


  6. - Rich Miller - Tuesday, Apr 24, 12 @ 11:24 am:

    supplysgt the health care benefit is not a pension system benefit.


  7. - Cincinnatus - Tuesday, Apr 24, 12 @ 11:29 am:

    Have we heard from the bi-partisan, bicameral Medicaid working group yet?


  8. - PublicServant - Tuesday, Apr 24, 12 @ 11:32 am:

    ===the health care benefit is not a pension system benefit.===

    Just a contract benefit that’s been in place for decades, and in which whose existance people relied during years of no raises and furloughs…


  9. - Cincinnatus - Tuesday, Apr 24, 12 @ 11:36 am:

    PS,

    The Illinois Constitution only protects Pension benefits as enforceable contracts.


  10. - PublicServant - Tuesday, Apr 24, 12 @ 11:42 am:

    Ever hear of Federal Contract Law Cincy?


  11. - Retired Non-Union Guy - Tuesday, Apr 24, 12 @ 11:49 am:

    The tax zapper trick is just a new twist on an old theme. Owners have always skimmed from predominantly cash businesses … and they didn’t need this tool to do it either. Many years ago and a state or two west, a friend bought a bar / strip club with a 3 AM license. All cash sales after 10 PM went in a cigar box; everything before 10 PM was accounted for. The income he did report was double what the previous owner claimed. Admittedly, today with the predominance of debit and credit cards, more records exist … but you don’t have to accept them.


  12. - Cincinnatus - Tuesday, Apr 24, 12 @ 11:51 am:

    Yes I have, PS. The Constitution specifically is limited to Pensions being the enforceable contract. That would mean that the healthcare benefit could be eliminated totally and still meet the Constitution. Other contractual work rules could also be changed or eliminated without breaking the Constitutional protection of a Pension.


  13. - Retired Non-Union Guy - Tuesday, Apr 24, 12 @ 11:52 am:

    supplsgt,

    The State has always said the health benefit could be changed but they also have never changed it since putting in place the “free w/20 yrs service”. While it may not have been intended to be protected under the pension clause, you could make (but may not win) a legal case that the longstanding existence of it could qualify it.


  14. - ChicagoR - Tuesday, Apr 24, 12 @ 12:00 pm:

    I’m so sick of “leaders” from either party who take no responsibility to sit down at a table and make compromises to fix shared problems. Telling the other party that they will make no compromises and that the other party must take all responsibility to pass any balanced plan is not leadership.


  15. - PublicServant - Tuesday, Apr 24, 12 @ 12:13 pm:

    Cincy, you seem to think I don’t get the fact that the pension clause is limited to pensions, which by the way makes Quinn’s suggestions unconstitutional. The threat of making current tier 1 employees pay a stipend for healthcare after they retire, unless they agree to pension changes is not a negotiation in that this GA can’t force future GAs to honor Pat’s suggested quid pro quo, so there is no consideration being given.

    You seem to be implying that only contract provisions protected by the constitution are enforceable. Are you saying that for those people to whom that benefit has accrued based on their previous years of work can just have it unilaterally taken away? Federal Contract Law, not the Illinois Constitution, is what makes that accrual enforceable.


  16. - reformer - Tuesday, Apr 24, 12 @ 12:22 pm:

    Radogno once again illustrates the consequences of one-party rule. The minority party has no responsibility to govern, so they act irresponsibly. The way the Dems did in 1995-96.

    If we had divided government, with, say a GOP governor, then we’d be back to the tradition of structured rollcalls to raise taxes — with both parties participating.


  17. - BuckStar - Tuesday, Apr 24, 12 @ 12:29 pm:

    How long is the press going to gibe Republican trumpter Radogo a pass? What cuts doies she want to make? What is she willing to close in her District?


  18. - Matt Dietrich - Tuesday, Apr 24, 12 @ 1:02 pm:

    To Lincoln’s Beard: Your observation is correct. On the fact sheet that contains the eligibility savings estimate, the IHA adds this note: “…taking this action will likely reduce hospital revenue by about $67 million to $202 million. This represents a very significant reduction for hospitals and should be considered their contribution to solving the budget problem.” Space constraints prevented me from including this in today’s SJ-R editorial.


  19. - Anonymous - Tuesday, Apr 24, 12 @ 3:28 pm:

    Maybe the GA has been using a pension payment zapper for several years.


  20. - Demoralized - Tuesday, Apr 24, 12 @ 3:33 pm:

    Once again the Republicans are happy to help out with solutions. And they wonder why they continue to remain in the minority . . .


  21. - bardo - Tuesday, Apr 24, 12 @ 4:14 pm:

    Good for Jack. In my opinion, the sharpest legislator Springfield has to offer… Although this one seems a no-brainer.


  22. - Gordie - Tuesday, Apr 24, 12 @ 5:27 pm:

    ==You seem to be implying that only contract provisions protected by the constitution are enforceable.==
    You seem to be implying that those are contractual rights. But under constitutional law (and Illinois law), they’re not.


  23. - mokenavince - Tuesday, Apr 24, 12 @ 6:26 pm:

    Radgono solution just say no.The Republicans have
    lost all reason. An idea has not run thru the Republicans minds in years. Just mail me my check
    and I’m happy.But don’t forget to send money so I can get Re Elected.


  24. - PublicServant - Tuesday, Apr 24, 12 @ 7:20 pm:

    Sure they are Gordie, and as such they’re protected by the US constitution’s Contract Clause in Article 1, Section 10, which states that “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ***ex post facto Law***, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

    The Contract Clause prohibits states from enacting any law that retroactively impairs contract rights.


  25. - Gordie - Wednesday, Apr 25, 12 @ 1:26 pm:

    ==The Contract Clause prohibits states from enacting any law that retroactively impairs contract rights.==
    First of all, this isn’t an ex post facto law issue. So why you keep highlighting that is beyond me. These aren’t criminal laws, so that clause doesn’t come into play. The contract clause does.

    And the SCOTUS and IL courts have consistently held that unless the statute allegedly creating the contract right expressly and unequivocally says that’s what it’s doing, it’s not a contract right. IL’s statute doesn’t, so it’s not.

    End of story.


Sorry, comments for this post are now closed.


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