Yesterday, I told you that the rumored “gross receipts” tax on corporations was the most underreported story of the month. Well, today the State Journal-Register has a story and the Chicago Tribune editorialized in favor of it.

* SJ-R…

Illinois businesses are gearing up to fight what they believe will be an effort by Gov. Rod Blagojevich to raise billions of dollars for state coffers by taxing their gross receipts.

While agreeing they have no concrete information to go on, business organizations said they can’t wait until the rumor becomes reality before responding.

“It is so bad (of an idea), even if it is only a possibility, we have to be on top of it,” said Todd Maisch of the Illinois Chamber of Commerce. “We can’t wait until we are certain. Everything we are hearing points to that direction.”

Business groups believe Blagojevich might call for a gross- receipts tax when he delivers his budget message to the legislature March 7. Becky Carroll, spokeswoman for Blagojevich’s budget office, declined to comment Thursday.

* Tribune…

Here’s the best idea. […]

A 1 percent tax on gross receipts in Illinois–goods, services, the works–would raise more than $13 billion a year, according to a study for Houlihan’s office by Alma, Wis., consulting firm Program Analysis Inc. Illinois then could repeal the 5 percent state portion of the sales tax, which now gives Springfield $7.5 billion per year, and kill the $2 billion corporate income tax. The state would have revenue for a $3 billion education fund, plus about $500 million that could be directed to other needs or for other tax relief.

The breadth of its base would make the gross receipts tax a stable, growing source of money. Washington, Hawaii, Delaware, Ohio and Texas have extensive gross receipts taxes. Because it’s easy to compute and collect, many other states apply such a tax only to utilities or other specific industries. Illinois taxes its casinos on gross receipts minus winnings paid out to gamblers.

The downside: Because it touches every business in a production cycle, a gross receipts tax pyramids as, for example, a forester’s walnut tree becomes a sawmill’s lumber, which becomes a furniture-maker’s table, which becomes a store’s retail sale. Imposing a 1 percent tax at each step makes items manufactured in Illinois less competitive elsewhere–and, for that matter, could tempt Illinois manufacturers to buy cheaper components in other states.

That said, zeroing out the state sales tax would instantly make Illinois a more attractive place for consumers to buy their retail goods. Killing the corporate income tax would be another bonus for many (granted, not all) Illinois companies. And while a gross receipts tax appears to fall on businesses, you can argue that it’s factored into their prices and thus borne instead by the final purchasers.

Again, we don’t even know yet whether the governor will actually propose this idea. But now that the Trib has editorialized in favor of it, the “plan” is certain to generate more news coverage.

Discuss below.