44 Comments - sam - Tuesday, Mar 6, 07 @ 10:06 am: Ok - $6 billion in new revenues from the Gross Receipts Tax. Health Care plan is expected to cost $2.1 billion. There’s a big difference there. If money really is going to education, that could be huge. - He Makes Ryan look like a saint - Tuesday, Mar 6, 07 @ 10:27 am: Wow, what a suprise, Emil siding with the governor on a major Tax hike. Any outsorcing of state government is not good. It takes the controll away from the taxpayers and elected officials. - Bill - Tuesday, Mar 6, 07 @ 10:35 am: hmrllas, “Emil” is not only siding with the Governor but with a majority of all Illinoisans who favor increasing taxes to fund education and health care. The GRT is the most equitable and least regressive of any tax proposed. As far as the lottery is concerned, I’m sure a private company can operate it more efficiently and at a greater profit than the state ever could. Lease it while it is still worth something. - He Makes Ryan look like a saint - Tuesday, Mar 6, 07 @ 10:47 am: Bill, GTR will send business scrambling out of the state, how do we find the lost revenue when that happens? - Bill - Tuesday, Mar 6, 07 @ 11:19 am: Relax. Business is not going to start scrambling out of the state. We get the same old stuff from the Chamber,IMA, and the rest of the gang every time revenue enhancement is discussed. They won’t leave. They never have and they never will. Even with the GRT Illinois reamins a great state to do business in. They gotten off cheap in the taxation dept. long enough. It is time for “business” to pony up their fair share. - Tom - Tuesday, Mar 6, 07 @ 11:24 am: The best part about making businesses pay is that only rich fat cat businessmen are affected. They would never pass increased costs on to consumers, would they? - RMW Stanford - Tuesday, Mar 6, 07 @ 11:44 am: As it already been mention of course of most of the cost will be passed on to the consumer and a GRT will be very regressive. If you tax goods at each level of production and based on the entire value of the good, you will not only get a price increase as the end companies that sell to the consumer but they will also added in the higher cost of raw materials into the final cost that the consumers pay. It will have the same effect as a regressive tax would have, since it will lead to increase and consumers will ended up paying more, the people that will be the most effected and see there purchasing power fall by the most are those that are in the low income groups and spend most or not all of their income on goods and services. Along with that even if it doesn’t send companies running out of the state, it will make it harder for Illinois to attract new business, possibly make business that have low profit margins unprofitable and since will cut down on profit margins and revenues that means companies will have less money to spend on expanding, which means fewer new jobs and slower economic growth. - Bill - Tuesday, Mar 6, 07 @ 11:54 am: It also might mean that companies will have less money to spend on multi-million dollar salary and benefit packages for their management team and that the companies who economize and are run efficiently will be able to offer goods and services at less cost to consumers than their bloated competitors. Businesses that don’t economize and in turn try to pass off their higher costs to consumers will be forced to change or cease operations. Businesses that deal food, etc. will likely receive an exepmtion as will small businesses with revenue below a certain level. It is not the tax that will be regressive. It will be greedy corporations and their multi-millionaire executives who up until now have paid little or no taxes. - Rich Miller - Tuesday, Mar 6, 07 @ 12:04 pm: Bill, then why not just tax executive compensation packages? - RMW Stanford - Tuesday, Mar 6, 07 @ 12:12 pm: The amount of money that companies pay out to their executives is usual a very small percentage of there revenues and most likely far smaller than this tax would amount to. I will bet that many if not most of the business effected don’t have rich greedy fat cats running them. Revenue is not the same as profits, you can have companies that have relatively small revenue streams but large profits, like you can have companies that have huge revenues streams but have small profits because they operate in low profit margin industries. Since this tax is on revenues not profits its ignores that and even if you expect small revenue you could still make some unprofitable. When it comes to business staying in business and making operating decision, profit not revenue is what matters. You seem to think that just cutting salaries would some how be able to make up for the loss that business or “economizing” is going to be able to make up for the loss that business would suffer from this tax and that they wont pass the cost on the consumer. That not going to happen, a tax like this would raise the cost not just of goods and services but of raw material and intermediate goods and a large portion of that is most certainly going to be passed on to the consumer. Companies just cant cut cost there are some many places that they can trim. The tax will definably have regressive effects since any price increase this leads, and your naive if you think it wont increase price, will have a disproportionate effect on low income consumer who spend all or most of their income on goods and service as opposed to the higher income classes that save some of there income. With economizing, how do you think companies will economize? They are going to buy raw material, intermediate, goods and capital goods out of the side so that they can avoid any higher cost and they will look to use support business support services that are outside of the state. Look if you think that the benefits of the Governors proposals will out weight the economic cost, that fine make that argument. Don’t try and be dishonest argue that this isn’t a tax increase that will effect the general public and that it wont have negative economic effects. - DOWNSTATE - Tuesday, Mar 6, 07 @ 12:33 pm: The real question is who will move to a state that appreciates people who creates jobs.Would you believe some states are friendly to corporations. - VanillaMan - Tuesday, Mar 6, 07 @ 12:35 pm: This state voted in the tax raisers and the government expanders. Let democracy rule. Butcher those gold-egg-laying geese. Drive the others away. Until voters start to understand that they are only robbing themselves each time they vote in a Democrat, let the idiots run the show. - Anonymous - Tuesday, Mar 6, 07 @ 12:37 pm: I wonder how this GRT would effect a company like Boeing? Though they do not have much in the way of production facilities in Illinois they are headquartered here. How long will they stay if Blago wants 3% of their revenue? - Tom - Tuesday, Mar 6, 07 @ 12:41 pm: Voters in November’s election had their say. Illinoisans have endorsed large government programs and an increase in the size of the welfare state. I disagree with this but I’m realistic enough to realize the debate is over. Now we have to pay for these new programs. In the real world the GRT will be passed on to consumers as executives are going to get their share. In the process we will drive up the cost of goods produced in Illinois. A 3% payroll tax will discourage companies from adding employees. The best “revenue enhancement” option is an increase in the income tax. The idea is political dynamite but either raising the flat rate, adding a progressive element, or some combination is the fairest way to pay for these expensive programs. - Cassandra - Tuesday, Mar 6, 07 @ 12:53 pm: Well, if it’s a GRT instead of a progressive state income tax with a surcharge on the rich, we have only ourselves to blame. There has never been any support for this in Illinois, so pols don’t even try. Blago didn’t come up with these tax proposals on his own, somebody on his staff did. Let’s hope they will be made available to answer questions. Here are mine. How much more money will the GRT generate over and above what the corporate income tax generates now. If the lottery is sold, and the monies used for employee pension payments, how much lottery money previously used for state school funding will have to be made up by the GRT (reducing therefore the net impact of the GRT) Will pre-GRT state school spending amounts be reduced or will GRT revenues for schools be in addition to current state school spending. All of the above address how much additional money will be coming into the schools as a result of above, which is the most important number, not promises of billions here and billions there. Other questions would include the criteria which will be used for state school funding disbursal and whether property tax relief will be a part of the school plan and precisely how property tax relief would be effected. The last thing we want is for the GRT to have the actual impact of vastly increasing the amount of unobligated state revenues for Blago and Emil to play in. If that happens, corruption will reign, greedy state contractors will have money showered upon them, and DHS, DCFS and other porky agencies will be awash in politically connected “chauffeurs.” - Bill - Tuesday, Mar 6, 07 @ 12:57 pm: Dishonest? I didn’t say it wasn’t a tax increase. I did say that it is less regressive and more equitable than increasing the sales or income tax. The governor and President Jones agree. Are they also being dishonest? The doomsday scenario projected by the Chamber and IMA is the same one they trot out whenever revenue enhancement is discussed. The market will rule as it always does and if companies pass along too much of the cost of the tax, their product or service will not sell and there will always be a competitor who will sell it cheaper. Will it cost the consumer? Sure. It may very well force some economies on their part as well. Providing health care and education to the citizens of our state is worth a little sacrafice on everyone’s part. Business should be forced to pay their fair share. That is not happening now when 27 of the 40 largest companies in Illinois pay NO copporate income tax. They won’t escape the GRT. - Skirmisher - Tuesday, Mar 6, 07 @ 1:08 pm: Over 30 years ago I listened to my brother-in-law, a successful local businessman, argue eloquently that a gross receipts tax was by far the most equitable and effective form of taxation available to the state, and one that ultimately would be necessary to finance the full range of state obligations. I am a conservative sort of person, but I never forgot his arguments for this form of tax in place of income and property tax and so for once I like an initiative from this governor. I do agree, however, that his health care proposal is simply too complex and still falls short of the goals of universal coverage and tightly contained costs. - Bill - Tuesday, Mar 6, 07 @ 1:13 pm: Cassie, Even without a swap, large increases in per pupil state funding would eliminate the need for the property tax increases that are routinely passed along by school districts. It could even lead to rebates in some property rich districts. Lottery money never increased ed funding despite what was promised. The big lottery lie taught us all a lesson in civics and the way gov’t worked at the time. - Joe - Tuesday, Mar 6, 07 @ 1:17 pm: Universal coverage sounds great, but it will not make health care more affordable. Hospitals and insurance companies are making a fortune, paying outrageous amounts to their top executives, and charging everyone too much. Example, while Blago has talked about the high cost of drugs for years, some hospitals that receive state money mark up their actual costs of drugs by over 1,700% (MacNeal Hospital in Berwyn). Any reform that does not address what hospitals charge for services will eventually bankrupt the state. Not-for-profit The University of Chicago Hospitals made over $100 million in profits last year, after spending millions on collection agencies. If everyone is insured, the money they save on collection agencies will just go to their bottom line, or into the pockets of their executives. - Gene Parmesan - Tuesday, Mar 6, 07 @ 2:14 pm: “Businesses that deal food, etc. will likely receive an exepmtion as will small businesses with revenue below a certain level.”- Bill Now everybody get in line and make those checks out to Rod R. Blagojevich if you want to be exempted. What’s the point of a GRT if you don’t want to hit everyone with it. If they really cared about going after CEO compensation or these 27 businesses, a GRT is hardly an effective means. Bill, I notice you never did get around to answering Rich’s question regarding the CEO compensation. - Illinois Contractor - Tuesday, Mar 6, 07 @ 2:45 pm: Our construction firm does work around the state and the nation. We are based in Downstate Illinois. Just this morning a $1,000,000 project was put on hold by the owner because he’s rethinking any additions to his business because of the proposed revenue tax. Our board has already discussed moving our corporation to either Indiana or Missouri. The savings in avoiding the revenue tax on just one out-of-state job more than pays for the hassle. I’m involved in six other businesses. Today, I gave authority to set up the newest business in Missouri. This is a first for me. Every business I ever created was started here in Illinois. Although I’m more than 100 miles from Missouri, it will be cheaper to simply start up there. - Dollar USA - Tuesday, Mar 6, 07 @ 3:14 pm: Bill - Please provide the names of the 27 corps not paying income tax. - longing for spring... - Tuesday, Mar 6, 07 @ 3:19 pm: I am not so sure how I feel about the concept of a gross receipts tax in general, and I don’t know exactly what the current plan is so I am a little hesitant. But a couple old college friends of mine have worked up some analysis, and put together some good suggestions on ways to offset, or mitigate, the downsides of a gross receipts tax. It is a good read. I thought I would share it here. They are pretty wonky (pun intended) but break it down pretty well. Take a look at what their recommendations for structuring a GRT: www.wonkish.com - Bill - Tuesday, Mar 6, 07 @ 3:41 pm: Actaully, it is 37 out of the top 100 companies. Check out Crain’s for the names. - steve schnorf - Tuesday, Mar 6, 07 @ 3:50 pm: The Governor intends (finally) to put a fairly comprehensive proposal out to deal with education funding, unfunded pension liabilities, and structural deficit. We may or may not agree with either the revenus or spending side of his proposal, but it will be a start. Let the interest groups who disagree make their counter-proposals. I hope some of those counter-proposals involve property tax relief. For those who believe less, or nothing, should be done, tell us how and where they would cut back the spending, and what they would do instead about pensions, especially. I fear all we’ll see is garbage. - RMW Stanford - Tuesday, Mar 6, 07 @ 5:01 pm: The market will rule as it always does and if companies pass along too much of the cost of the tax, their product or service will not sell and there will always be a competitor who will sell it cheaper. The problem is that you are treating taxes like there are some kind of outside thing, not a cost of doing of business, which they are and increase in that cost has the same effect as an increase in labor, capital or raw materials. If you raise the tax rates you increase the cost of doing business for all companies and assuming that they are operating efficiently, which is a good assumption for most industries and beside if they are not then no reason to think they would after the tax is put in place, the only way they can sell a good for a substantially lower price than the other companies is to cut into their profit margin and no company is going to want to do to much of that. The market will set a new price that is going to be higher than the old one and with a lot of goods the consumer will ended up paying for most of the tax increase. Your not just going to have companies lower prices in order to sell more goods if it reduces their profit margins. A GRT would be much less regressive than an increase in the sales taxes. Business take the sales tax into account when they price their goods and the total cost of the sales tax is split between the business, in the former of them sell goods at a lower price, and the consumer. The GRT would have the same effect and the split would most likely be about the same. A GRT is certainly more regressive than an income tax as people that spend the majority of there income, people in lower income groups, would see more there income as percentage eaten up by the higher prices than those in higher income groups that save some of their income. What is equal about taxing to companies that have the same revenues but vastly different profit margins because of the industry they are at the same rate? The dishonest part is when support of the GRT talk about making business pay their “fair share” but fail mention that in the end the consumer picks up a large portion of the cost of the tax. They are purposely not giving information that they know would hurt the chance of it being supported. - leigh - Tuesday, Mar 6, 07 @ 5:25 pm: Bill I am curious, has it ever occurred to you, the governor or any of the other rocket scientists who want to continually stick it to business that you need employers to have employees? How many are going to layoff workers and look to relocate out of state? Indiana, Iowa, Wisconsin all great states who actually want business in their states. And don’t kid yourself into believing this is not going to have a direct affect on consumers. Were not paying King tax and spends bills, were passing them on. - DRB - Tuesday, Mar 6, 07 @ 5:43 pm: Let us remember an important fact here - businesses do not pay any taxes. Taxes are passed along to consumers in the cost of the product/service. - A Citizen - Tuesday, Mar 6, 07 @ 5:43 pm: GRT 6.1 BILLION + 16 BILLION borrowed = INSANITY ! That is a total of $22 Billion Dollars. Putting it all in Blago’s hands and the other politicos is CRIMINAL INSANITY. My God people WAKE UP. That’s all new money. It’s on top of (not replacing) the other revenue sources. No elimination of the property tax, no total overhaul of the entire taxing system in Illinois no elimination of debt. This is not a bandaid approach, this puts the state in a full body cast. - Tessa - Tuesday, Mar 6, 07 @ 6:06 pm: I just know I’m scared for whatever the Gov is going to propose on Wednesday and I hope I get to see the whole thing, or listen to it anyway. But I fear the chopping block he’s going to make of legitimate state services provided for those in need of full time medical/residential care. - Disgusted - Tuesday, Mar 6, 07 @ 6:33 pm: New wrinkle today. Guv’s staff scurring around, stuffing huge amounts of propaganda for the health care plan into boxes, which are to go out via OVERNIGHT DELIVERY and these are heavy packages, folks. He’s sending them to “advocates” who will spread the glad tidings. Program isn’t even announced or in the works yet and already the cost is climbing. - Cheapskate - Tuesday, Mar 6, 07 @ 6:43 pm: The only way to save yourselves from being a victim of the GRT is to stop buying things you don’t need. I’m on a mission to be debt free by the time I retire and I’ve curtailed my shopping (other than food, utilities, etc.) to birthday gifts and Christmas. Everything else is on a dire need basis. We will get this tax passed on to us by business owners and the more we buy the more we’ll have to pay. - steve schnorf - Tuesday, Mar 6, 07 @ 7:31 pm: Actually, I think the POB idea for the pensions makes good sense, just as the earlier $10B did. Granted, it turns “soft” debt into “hard” debt, but a big piece of our problem on pensions has been our willingness to treat the contributions and debt as “soft”. The whole key to this one will be what is actually done with the money. I don’t have a clue on the lottery deal. I think a key to remember is that the current lottery contribution to education will have to be netted out of the new money. For those of you who don’t like the Governor’s pension proposal, I challenge you or any other reader to come up with a suggestion of your own on the pension debt: not some bs, but something that would actually be within the realm of possibility to accomplish, and that would really work mathematically. I have been telling people for 2 years that, within the current paradigm, there IS no solution to the pension problem. Surprise me. - zatoichi - Tuesday, Mar 6, 07 @ 8:11 pm: When did $16B on bonds mean new extra money? It is very comforting to know you can pay 8.5% interest on bond(borrowed) money and think you save huge dollars because you can borrow other money at a lower interest rate to pay the bond off. Pay off your loan with another loan. Is Justin DeJong a graduate of the Ponzi School of Finance or simply spend time working for VISA? - Papa Legba - Tuesday, Mar 6, 07 @ 9:23 pm: Spending problem or revenue problem? Who cares? Lets just borrow more money and POOF! no more deficit. It just boggles the mind. See what happens when an ignorant electorate keeps returning the same clowns to office? I predict that Illinois will be the first state placed into receivership due to our excessive borrowing and draconian taxation of the business community. - Papa Legba - Tuesday, Mar 6, 07 @ 9:37 pm: schnorf, 1) Fire all employees who became SPSA’a and PSA’a in the past 5 years. While you’re at it check out the status of some of those “interns”. 2) Can Blago’s expensive non-functional Socialist programs. Your choice on which ones to eliminate. 3) Eliminate DCEO. That could save a couple of billion per year. 4) Adhere to the Constitution and create a real BALANCED budget. - steve schnorf - Tuesday, Mar 6, 07 @ 10:41 pm: Well, wizards, I said reasonably doable. So, Papa, you think that a Democratic GA is going to abolish KidCare, etc. I have shocking news for you; a Republican GA wouldn’t abolish most of those “Socialistic” programs. And, just so you all make some effort to do the math, The INTEREST alone on the pension unfunded liability is about $3.4B per year. That’s with no new liability incurred. Downsizing the workforce by a few thosand jobs isn’t going to change the interest an iota. It would be helpful if commenters had SOME idea what they were talking about. I’m waiting for someone next to suggest wishing on the evening star. - Mickey Mouse - Tuesday, Mar 6, 07 @ 11:29 pm: Mr. Schnorf: Donald, Goofy and me believe in those wishes, don’t sell them short. If I was doing the pension solution, I would start by doing what we always tell the kids do do when they visit us here: TELL THE TRUTH. Mr. Justin shoots their plan right in the caboose before it’s even announced with that ridiculous rejoinder about “saving money.” Next, the State should structure its POB deal like every other POB deal except its own. Issue the bonds, give the proceeds to the pensions, and pay off the bonds. Debit, credit, that’s it. No phoney baloney “arbitrage” schemes that have the pensions getting the cash in the left hand and having it yanked from the right from their regular contributions to cover the State’s debt service. Either pay up or don’t do it. My Disney 401(k) also says that this may not be the greatest time to be running to Wall Street with fistfulls of cash to invest. (No pockets, remember.) Dreams of a Magic Kingdom of double digit returns year after year might not come true. I don’t play the lottery, but I think 75 years is a long time to lease anything. Heck, I’m not even that old. Seems to me that a big state like Illinois should be able to take care of all its sick people and send all its kids to good schools without putting taxes on companies that aren’t making any money. (I hear folks say that we pay too much taxes at Disney.) Mr. Schnorf, I hope you liked my ideas. Your friend, Mickey - Disgusted - Wednesday, Mar 7, 07 @ 6:26 am: Mr. Schnorf: A good start would be honesty and consideration. Stop bulldozing your way through everything with threats. Stop borrowing money to pay for what your should be paying through general revenues. Stop taking from special funds and leaving them high and dry. Stop proposing pie-in-the-sky programs that never come to fruition after you spend millions on advertising and using state employees time away from their regular jobs to promote your schemes. Be a realist and run the business of the state like you should be running your home - PAY YOUR BILLS. Stop robbing Peter to pay Paul. Stop putting your friends in highly overpaid jobs and work with the people you have. Stop associating with shady characters who put a pall over all your good intentions. Stop using state funds for your own personal benefit - i.e. disguising campaign literature as informational mailing to the tune of millions in time and money. Check your ego at the door and stop spending this state into bankruptcy so you can look magnanimous to the great unwashed. Govern and stop campaigning. Be a statesman, not a politician. In other words, be a man and do the right thing. - Bill - Wednesday, Mar 7, 07 @ 7:51 am: “…work with the people you have…” You must mean the holdover republican patronage employees who got us into this mess in the first place. Give it a rest. - steve schnorf - Wednesday, Mar 7, 07 @ 1:16 pm: Now, Bill. You know why we’re here, and neither party has a monopoly on blame. Lots of nice generalizations above. Tell me again how they free up $3.4B for pension debt interest, in addition to money to pay down the balance AND cover new contributions that are necessary. - Bill - Wednesday, Mar 7, 07 @ 2:53 pm: OK Steve. Let’s try to eliminate most of the unfunded liability and then there will be no need to pay 3.4 billion in interest. Can we agree that the unfunded liability is about 42 billion? Lets lease or sell the lottery for about $10 billion. I know that there was a lot of opposition for selling an asset for operating expenses but this entire $10 bil would be deposited directly into the funds.It would be a one time payoff of debt, like selling your summer home to pay off your Visa bill. Then let’s issue about 20 million in Pension obligation bonds. This won’t be as good a deal as last time however the plans usually make more than the cost by about a point or two. This time leave KJ out of it and let a good honest democrat do the deal. OK that’s 30 bil..re-amortize the rest of it at a decent rate,sit back, let the plan adinistrators do their usual excellent job and,viola!We’re at around 80% of actuarial liability funded. I’ve heard the soft debt-hard debt argument but with all of the extra revenue from GRT that should not be a problem. If it is there is always the toll roads. While this may seem simplistic to a guy like you, I think it will work. If the state had taken my advice and floated 20 bil instead of 10 bil last time they would be in much better shape today. (that assumes that they wouldn’t skim any for GRF like they did in 03). - steve schnorf - Wednesday, Mar 7, 07 @ 3:04 pm: Well, we would still have to pay interest, but most of it at a lower rate…probably save us around $300M per year. - Bill - Wednesday, Mar 7, 07 @ 6:04 pm: Don’t forget the 8-10 % earnings on investments that the funds consistiently earn. 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