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Winner or a loser?

Monday, Feb 26, 2007

My syndicated newspaper column takes a look at how the lobbying is shaping up against the governor’s still rumored but most likely a reality “gross receipts tax.” Business ain’t happy.

You probably can imagine the size, intensity and ferocity of the lobbying effort if the state’s largest corporations and its most powerful law firms and medical practices teamed up to fight this tax. A trial lawyer who earned hundreds of thousands of dollars in fees by winning a case would have to pay gross receipts taxes on all of that, even if the lawyer spent a fortune to move the case along over several years. Medical practices that invested a significant portion of their profits in new equipment or technology would receive no deductions. Giant corporations, which can move headquarters and plants at the drop of a hat, would see their tax bills rise in a big way.

Combine that with large businesses that traditionally operate at extremely low profit margins or whose razor-thin margins are tied to unpredictable commodity prices (like supermarkets, airlines and farmers), add in giant publishing companies with ever-growing fixed costs and declining ad sales (like the Tribune Co.), toss in companies that regularly invest large amounts of their annual revenues into infrastructure and technology (like utilities and hospitals), and that’s pretty much everybody with a lobbyist in Springfield.

Small businesses might be exempted from the tax, according to a State Journal-Register columnist, who reported about a poll several weeks ago that asked people about the gross receipts tax. The columnist claimed the poll mentioned that the tax might exempt the first million dollars of corporate revenue.

Exempting the smallest of businesses probably won’t lessen the Statehouse lobbying effort because the groups that work on their behalf in Springfield also have plenty of big business members. The Retail Merchants Association represents the mom and pop stores on Main Street as well as the big chains like Wal-Mart. The Press Association advocates for tiny newspapers in small towns all over Illinois along with the Tribune. The same goes for the Illinois State Chamber of Commerce, the Illinois Pharmacists Association and pretty much every other business group you can name.

There’s more about the push, including some of the governor’s tactics. Read the whole thing and discuss.

* On the other hand, Chicagoist thinks the gross receipts tax idea looks more likely than anything else…

Blagojevich quietly moved his combined State of the State and budget proposal address to March 7. And yesterday the Illinois Board of Education released it’s Fiscal Year 2008 budget (you can read the PDF here), and is asking for an additional $800 million over this year’s budget. You can bet that they wouldn’t be asking for that kind of increase without getting the blessing from the governor’s office first.

G-Rod must feel pretty confident that he will get his new tax plan this session, and be able to beat back the aforementioned power-brokers, without appearing to raise taxes on “regular people” and finding even more money for school children.

We don’t think that selling the lottery is going to happen; that idea will be dead in the water before it even hits the Statehouse. And we’re pretty sure Blago knows this. With so many power hitters lined up for reform, and the monetary pressure building, it may be easier to try to stick the tax bill to businesses than to institute real tax equity in Illinois. At least for now.


- Posted by Rich Miller        

  1. - Yellow Dog Democrat - Monday, Feb 26, 07 @ 7:49 am:

    Good luck to Blagojevich even finding a House sponsor for his proposal. It’s pretty tough to marshal support for a $9 billion tax increase to fund health care when the state’s health care providers are opposed to it.

    Jay Hoffman, Dan Reitz, and Sara Feigenholtz are the Governor’s strongest supporters in the Illinois House, but I can’t see any of them sponsoring a $9 billion tax increase. Sen. Carol Ronen might carry the bill in the Senate, but after her the list is pretty short.

    Obviously, the Governor has more support in the Senate, but even there Sen. President Emil Jones has said education, not health care, needs to be the priority this year. I’d be interested to hear who other bloggers think the Gov might rope into sponsoring this measure.

    Here’s what I think: the Governor knows this isn’t going to pass. This is another classic case of governance-by-press-release. Just like a couple of years ago, he’ll rail at tightly controlled press conferences about the need to close corporate loopholes to fund Popular Program X. Just like a couple years ago, it will whither on the vine.

  2. - Cassandra - Monday, Feb 26, 07 @ 8:23 am:

    From my average taxpayer chair, the practical alternatives to substantial cuts in state government (my choice, but unlikely) are the GRT, the property tax swap, or one of various gaming expansion proposals.

    Expanded gaming is regressive and sleazy. The tax swap will plunder the Cook and collar suburbs for the benefit of Chicago and Downstate. Suburban schools would lose money and control under HB750.
    Overpriced state government will have to wait for
    a real reformer/governor or a real economic crunch. If we can’t have an income tax surcharge on the rich in Illinois, GRT looks pretty good.

  3. - 105th Blues - Monday, Feb 26, 07 @ 8:47 am:

    Anyone else hear that flushing sound? There goes the state of Illinois economic climate right down the toilet along with your job which will be probably moved to Indiana, Kentucky, or Iowa where the companies won’t have an enormous new tax burden. I kinda liked living here too, thanks allot!

  4. - Doodles - Monday, Feb 26, 07 @ 9:08 am:

    Rather than an across-the-board GRT, why not a sales tax on services? If necessary, select services, e.g., health care, could be exempted or less, just like the sales tax on food and prescription drugs. The rate would not have to be the same as the sales tax on goods (6.25%?). Obviously, this would not provide as much revenue as an across-the-board GRT, but would help the reduce the State’s growing fiscal imbalance.

  5. - zatoichi - Monday, Feb 26, 07 @ 9:16 am:

    A tax is a tax. GRT or income tax, the state wants to take more money. I realize the Gov basically said “I will not raise income taxes” and can slip out of this on semantics. However, as part of the Chicagoist’s “regular people”, I can still see a tax even if it is in the form of retailers raising prices to cover the GRT. When there is nothing else to sell or borrow against the solution comes back to taxes. How about cutting spending and pork? However the GRT comes in time to balance off that living, minimum wage increase that can now afford the coming new higher prices.

  6. - Squideshi - Monday, Feb 26, 07 @ 9:29 am:

    If Blagojevich wants to be a leader, he needs to have a little courage. We rely far too much on the property tax, and everyone knows it. Blagojevich is simply not up to the challenge of making the change that needs to be made.

  7. - steve schnorf - Monday, Feb 26, 07 @ 9:52 am:

    I don’t believe 750 would cause suburban schools to lose money. I think you mean something other than what you said.

  8. - VanillaMan - Monday, Feb 26, 07 @ 9:53 am:

    More government means higher taxes.

    You voted the Democrats in because they promised you the moon.

    Now pay for it.

  9. - Snidely Whiplash - Monday, Feb 26, 07 @ 10:03 am:

    This tax would greatly wound business in Illinois, and likely kill most small independent retailers and storefront professionals, who would be hit hardest. Large corporations would either pass on the tax to consumers or move to more business-friendly climes.

    Think about it: a tax large enough to raise the state budget by about 30%??? That’s an enormous amount of money. Please, indict this guy already, before her ruins this state more than he already has!

  10. - Nature of Theater - Monday, Feb 26, 07 @ 10:18 am:

    I believe it’s a way for da gov and his posse to pay for their legal fees. He doesn’t mind sticking his hand in everyone’s pocket to accomplish that.
    By the way, where is the gov lately?
    Four more years of self-serving press releases, higher utility costs, higher taxes and BIG GOVERNMENT.
    Just wait till the spring and summer, when gasoline and diesel fuel prices will soar. And da gov will do nothing!
    One word for you gov, “REZKO”!

  11. - Limerick - Monday, Feb 26, 07 @ 10:52 am:

    The Governor needs GRT dough,
    But the votes will never show.
    Populist seed can’t be sown,
    With blood from a stone,
    So Blago has nowhere to go.

  12. - one of the 35 - Monday, Feb 26, 07 @ 11:01 am:

    That old adage, “politics makes strange bedfellows” will certainly apply here. Imagine the Trial Lawyer’s Association and the Illinois Chamber uniting to oppose this initiative.

  13. - biz lobby - Monday, Feb 26, 07 @ 11:17 am:

    My concern is not so much who’ll pay this tax but who or what groups/industry will be exempted from it. There are those of us who have armies of lobbyists, both in-house and contractual, in Springfield. Even if you do find someone to sponsor this, you’re going to have to exempt those people because they’d be able to kill it in a heartbeat. Lawyers first come to mind. You can exempt a lot of pople and still bring in a big chunk of new revenue.

    Newspapers will most likely get an exemption because I’m pretty sure you cannot tax the sales of newsprint or ink used for newsprint. That’s why they currently have a sales tax exemption and probably why the Tribune came out in favor of this already. I’m no constitutional lawyer - and if any of you are out there I would love to hear from you - but fairly sure there’s a supreme court decision out there saying you can’t tax newsprint or ink for newsprint. I suppose it’s a 1st amendment issue.

  14. - Team America, World Police - Monday, Feb 26, 07 @ 11:29 am:

    Chicagoist had it backwards. The extra $800 million is not a request because they think they are a shoo-in to get it because the GRT will pass, it’s a justification for Blago to be able to say he’s doing the GRT for the schools (and universal healthcare) who need that much dough, and this is the only way to get it.

  15. - i d - Monday, Feb 26, 07 @ 11:35 am:

    Governor proposes; house and senate disposes. Equal blame for all. I’ll make sure that my vote counts.

  16. - Cassandra - Monday, Feb 26, 07 @ 11:46 am:


    I live in a Cook suburb which has some of the highest property taxes in the state, for a variety of reasons, including a lack of large shopping malls and other revenue-generating entities.

    The income taxes would go up under 750 but the property tax relief would not be sufficient to
    avoid a net tax increase for most homeowners here. That was Diane Rado’s (Trib) conclusion a couple of years ago when 750 was being looked at seriously by legislators. It still holds, today.

    In addition, local school officials have not been able to state with any certainty how our school systems’ state school funding would fare under
    750. Some apparently believe that we would get less money than we would if the status quo remained and the state gave modest annual increases as they have been doing.

    To me, higher overall taxes and likelihood of flat or fewer state funds is, yes, losing money.
    Not to mention the loss of control…income tax monies are generic, not school specific. What if the legislators decide to give most of the new monies to CPS? Could anybody stop them?

  17. - Loyal Alum '65 - Monday, Feb 26, 07 @ 12:05 pm:

    Perhaps this will force everyone to agree on a revenue source that will painless..increased gambling positions and activitation of a tenth license with the governor saying that this was his “only legislative option.” Visitors to Illinois would be the chief fundraisers for our economy if the casino were built at Rosemont. New conventions and the Olympics “would come to Chicago where a casino ,managed by a reputable entertainment organization would operate it.#

  18. - RMW Stanford - Monday, Feb 26, 07 @ 12:27 pm:

    GRT would be bad for everyone the state, business, the public, the rich and the poor. It pretty well established how it bad for business, but it bad for the public too. A GRT would mean higher prices for pretty much every good and service in the state, with the sales tax part of the tax is paid by the business and part by the consumer, but do to the embedded nature of a GRT and the effect that would have on the cost of raw materials, inputs and business supplies, more of the cost of the GRT will show up in the price of goods and service. Not only will this be an added cost to the consumer, it will be a extremely regressive tax that will fall more heavily on the poor and middle class. If you think Illinois manufacturing industry is bad shape, this would just make it worse.

  19. - steve schnorf - Monday, Feb 26, 07 @ 1:32 pm:

    Cassandra, that’s what I thought you meant: net loss for the district’s taxpayers, not specifically a loss of revenue to the district.

    You are absolutely correct, at least as far as more affluent districts are concerned. However, if we are going to do anything about school funding inequities, not to mention structural imbalance, someone is going to have to pay more.

    I don’t think it makes sense that the “more” come from less affluent districts.

  20. - steve schnorf - Monday, Feb 26, 07 @ 1:49 pm:

    Sorry for back-to-back posts, but I reiterate that I believe that anything, including discussion of a GRT, that fosters focused attention on this state’s budgetary problem, is good. Perhaps finally the pressure will force disparate groups to the table to agree on a solution.

    It troubles me that all we have heard from many powerful concerns for years is what we shouldn’t do. Don’t raise income taxes. Don’t raise sales taxes. Don’t broaden the sales tax base. Don’t raise property taxes. Don’t raise fees. And, by the way, don’t expand gambling. I think the drift coming out of the Governor’s office at least tells people who is going to get gored if they don’t come up with a better solution.

  21. - Cassandra - Monday, Feb 26, 07 @ 2:20 pm:


    If the goal is to get the affluent to pay more, why don’t our representatives come out and say it and then follow up with a change to a truly progressive income tax.

    750 is a convoluted way to get to truly progressive taxation and along the way penalizes the many suburban dwellers who aren’t particularly affluent but whose tax burden will rise as a result of their decision to live in particular suburbs.

    And communities who choose to tax themselves heavily for education will be penalized for this behavior in favor of those communities with similar real income levels who choose not to tax themselves as highly and let the state fund a higher percentage of school costs.

  22. - Squideshi - Monday, Feb 26, 07 @ 2:20 pm:

    I’m tired of people complaining about taxes in Illinois. Illinois, by FAR, has the lowest tax burden in the Midwest. Illinois is a low spending state, ranking 42nd nationally. In terms of personal income, Illinois ranks only 48th in state AND local tax burden.

    In addition, Illinois government is VERY efficient. The state spends only 4.4% on Administation. Show me a for-profit corporation with overhead that low! Illinois is a low headcount state too, ranking 50th in public employees per capita!

  23. - Down in Egypt - Monday, Feb 26, 07 @ 3:52 pm:

    The state needs to be very careful in how much it damages the state’s business climate.

    The minimum wage hikes have already been a contributing factor in the closings of three area fast food restaurants since the first of the year.

    I’m sure it’s hurt others too, but small businesses don’t get noticed nearly as much as a barricaded drive-thru on a busy street.

  24. - sam - Monday, Feb 26, 07 @ 3:59 pm:

    People know I like the prospect of the Health Care plan, so take this as coming from someone who would like to see health care move forward…

    Per the Crain’s article - “37 of the Fortune 100 companies that do business in Illinois paid no income taxes in 2004″.

    That’s billions in revenue those companies made off of Illinois people, but they didn’t contribute to the state the way Illinois companies did.

    How do you spread out the burden - away from the legitimate small, medium and big businesses in Illinois that pay their fair share? How do you make those freeloaders pay their fair share?

    One proposal is the GRT - it makes sure those people don’t get off scot-free because they have good tax attorneys.

    Another is sales tax on services (but that is a tax on the consumer, not on the company).

    How do you do it? What is the most fair structure?

  25. - steve schnorf - Monday, Feb 26, 07 @ 5:20 pm:

    I agree you you re the progressive income tax, but I believe one of the biggest reasons that isn’t pursued more is the fact that a constitutional amendment would be required.

  26. - Bill - Monday, Feb 26, 07 @ 6:37 pm:

    cassie and Steve,
    Let’s just leave the constitution alone, shall we. The GRT hurts the least number of people and does the most good. The only problem I would have is that it does not earmark the “loot”.. leaving it up to the gov and legislature to decide where to spend it. Given their collective track record on school funding I would be worried without a dedicated revenue stream for P-16 education and a commitment to property tax reform.

  27. - Rich Miller - Monday, Feb 26, 07 @ 6:43 pm:

    Wow, yet another clear-eyed Rod-related post from Bill. Will wonders never cease?

  28. - Bill - Monday, Feb 26, 07 @ 6:45 pm:

    sometimes I just can’t help myself.

  29. - Jerry - Monday, Feb 26, 07 @ 6:52 pm:

    Steve Schnorf -
    What do we need to do to amend the State Constitution?

    I think that it would not be unreasonable to boost taxes for individuals earning over 100k to 6% (that is, for the people not paying attention, all $$$ earned over $100k are taxed at 6%, the 1st 100k is taxed at 3%), or married couples at $200k, with per child tax credits and the like.

    Or, perhaps, we could come up with a sort of “AMT” for corporations to ensure that they don’t find ways around paying state income taxes. Seeing as how 37 Fortune 100 companies are avoiding paying taxes in Illinois.

    I don’t think the gross receipts tax is a very good idea, and I think that expanded gambling is a terrible idea, especially if it were in Chicago, where it would cost the city far, far more than it ever earned.

    Has anyone looked into the feasibility of a VAT (value-added tax)?

  30. - steve schnorf - Monday, Feb 26, 07 @ 7:57 pm:

    Without re-reading my Illinois Constitution, I think the easiest way is by joint resolution of the GA, followed by ratification at the next general election(60% of those voting on the question “yes” or 50% of the total ballots cast in the general election voting “yes”?)

    I think it can also be put on the ballot by petition (300,000 signatures?), and it can be done at a Constitutional Convention, again subject to voter ratification.

  31. - RMW Stanford - Monday, Feb 26, 07 @ 8:29 pm:

    “another is sales tax on services (but that is a tax on the consumer, not on the company”

    A GRT will end being a tax on the consumer too, since the consumer will pay for it in the form of higher prices. Ultimately business don’t pay taxes, people do.

  32. - JohnR - Monday, Feb 26, 07 @ 9:35 pm:

    No, RMW… businesses do pay taxes. They pay taxes for the privilege of making money off the people of this state. And they pay government for allowing them the resources (people and infrastructure) to make that money.

    Businesses aren’t forced to do businesses. They want to make money. And plenty want to make money off of customers in Illinois.

  33. - Long Time Reader; First Time Poster - Monday, Feb 26, 07 @ 10:23 pm:

    If I read another article where someone claims that business doesn’t pay for its fair share of government I think I’ll scream. When the Governor makes his pitch he conveniently fails to mention how the state charges businesses a multitude of fees, and don’t forget about property taxes on commercial property as compared to residential!

  34. - Long Time Reader; First Time Poster - Monday, Feb 26, 07 @ 10:25 pm:

    Oh yeah….will someone ask the Governor next time he is in Springfield (hahahahahahha) if he plans to charge this tax to the movie industry and those companies that provide the service of assisting those in labor with their bargaining rights (unions)?

  35. - demgrrl - Monday, Feb 26, 07 @ 10:50 pm:

    If I have to read one more story about poor big businesses having to start paying their fair share quoting so-called “leaders” in the biz community — whose paychecks are cut by the big boys — I’m going to scream. Every small biz owner in this state should be tearing up their biz chamber memebership cards because those guys aren’t looking out for them — if they were, they’d be embracing a plan like the grt.

    Individuals also pay property taxes, consumer fees (mostly levied on consumers by service BIZS) as well as income and sales tax, so the big bizs whining and moaning about “state biz fees” should fall on deaf ears. But the real problem is that I’m paying more income taxes to the state than 37 of the most profitable bizs in the nation doing business in Illinois. That is outrageous and unaccetable. this is why the gov’s plan is going to pass.

    btw LTR, illinois is one of the lowest fee states in the nation (just check with danny hynes’ office), so perhaps the gov and GA should actually be taking another look at those too?

  36. - Yellow Dog Democrat - Tuesday, Feb 27, 07 @ 6:52 am:

    Steve, Cassandra, et al –

    Please be very careful about discussing what HB/SB 750 will or will not do, based on old readings of the bill or old analyses.

    That bill looks absolutely nothing like it did last month, and certainly last year.

  37. - steve schnorf - Tuesday, Feb 27, 07 @ 9:38 am:

    Thanks for letting me know. I guess I better get a copy.

Sorry, comments for this post are now closed.

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