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Over-reading the tea leaves?

Wednesday, Jul 29, 2015

* From the July 27th edition of Crain’s

Companies ranging from auto dealers to television broadcasters are gearing up to fight a tax on advertising even before Gov. Bruce Rauner formally proposes one.

Statewide organizations representing businesses as varied as billboard owners, real estate firms and newspapers are launching a pre-emptive strike against part of Rauner’s campaign proposal to generate more than $600 million in annual revenue for the state by expanding the sales tax to some services. An ad tax would produce nearly $38 million a year in tax dollars, according to the proposal.

The tax is at odds with the Rauner administration’s attempts to improve the business climate in the state, the business groups say. Illinois would be just the third state in the nation to apply a sales tax or its equivalent to ad sales.

With the Republican governor and Democratic leaders in the General Assembly locked in a stalemate over the budget, lobbying against the tax now seems like an act of supreme optimism that a deal might be reached. Moreover, Rauner hasn’t even put forward a detailed tax plan to take advantage of the booming service economy.

Yet the tax aspects of any deal could come together quickly, political experts say.

* But why start the project in June? Crain’s followed up today

“We had never heard anything to substantiate that it was on, that it was off,” said Dennis DeRossett, executive director of Illinois Press Association, which represents about 500 daily and weekly newspapers.

Nonetheless, in June the coalition launched a website attacking Rauner’s proposal, followed by editorials in newspapers that belong to the Springfield-based group.

The website and some of the editorials described the proposal as a nearly 10 percent levy, factoring in both the state-imposed 6.25 percent share of the sales tax as well as the local portion. (In Chicago, the sales tax is 9.25 percent, but is set to rise one percentage point on Jan. 1.)

On June 19, Rauner Press Secretary Catherine Kelly called DeRossett to complain that it wasn’t a 10 percent tax, but a 6.25 percent tax, he said.

Kelly “was adamant that they wanted to get that corrected,” he said.

But the call had an unintended consequence.

“That sort of told us that it was part of the package being considered,” he said.

For the original Crain’s report, Kelly declined to comment, except to say in an email that the proposal “is from the campaign and the administration has not proposed any new taxes at this time.” She did not return messages requesting comment for this story.

Um, OK.

Anybody who has ever dealt with the Rauner press shop knows those folks are about as nitpicky a bunch as you could ever possibly imagine.

So I could definitely see “ck” or Lance reaching out about a mistake like that, particularly when it conflicts with the governor’s perceived anti-tax stance.

I don’t believe a service tax is in play until they get to a capital bill. I suppose it could be part of the budget, but I don’t see how it could be because it would take so long to implement.

But, whatever. It’s their money.

* Also, for the record, I am officially neutral on an advertising tax. I doubt it would hurt my sales and if the cash is used for a capital plan then so much the better.

And while I’d love to see a sales tax imposed on campaign advertising, I can understand why the struggling newspaper industry would be freaked out about this. Then again, newspapers are already exempt from sales taxes on their newsprint, ink and printing machinery. Plus, lots of papers publish those lucrative and mandatory “official notices.”

- Posted by Rich Miller        

  1. - Anon. - Wednesday, Jul 29, 15 @ 1:06 pm:

    ==Plus, lots of papers publish those lucrative and mandatory “official notices.”==

    It just struck me that notices published in newspayers don’t reach as many people as they should, and probably should be replaced with notices on CapFax so that they reach the people who matter.

  2. - Wordslinger - Wednesday, Jul 29, 15 @ 1:07 pm:

    I wish a “fight” over $38 million in new taxes was significant.

  3. - Cornbelter - Wednesday, Jul 29, 15 @ 1:10 pm:

    Big overreach from the IPA, I am not sure that I would want to draw attention to the fact that the industry is not getting taxed just before a point when taxes will be raised. But I am sure they are PR professionals who carefully thought this out and it is not a ploy to generate membership dues.

  4. - Juvenal - Wednesday, Jul 29, 15 @ 1:15 pm:

    As I recall, the Rauner tax would apply to all advertising and communications consultants, not just the newspapers and broadcasters who provide the final ad space.

    If I recall, the only part of the advertising/communications industry exempted was billboard companies. Hmm, I wonder why?

  5. - AC - Wednesday, Jul 29, 15 @ 1:16 pm:

    Moving back to a 5% income tax seems like it would be much easier to implement for businesses than a services tax, so I can understand the attempt to proactively oppose the services tax.

  6. - DuPage - Wednesday, Jul 29, 15 @ 1:17 pm:

    A subtle threat to newspaper editors to keep in line.

  7. - Liberty - Wednesday, Jul 29, 15 @ 1:21 pm:

    Rauner said a lot of things he didn’t appear to mean.

    Just extend the sales tax to all consumer services. Forget taxing business.

  8. - VanillaMan - Wednesday, Jul 29, 15 @ 1:23 pm:

    Once again, we are seeing how a marketing mentality fails completely to understand the process of government.

    There has been such an acceptance of government running like a business there are few listening about how it really does.

    Sheer ignorance on an expensive scale, yet these same people think they can run governments?

  9. - hisgirlfriday - Wednesday, Jul 29, 15 @ 1:28 pm:

    instead of a 38 million dollar ad tax on businesses that actually employ people and do positive things in this state how about rauner reduces his political ad budget by 38 million and redirects it to the state treasury

    how would a sales tax on campaign ads not wind up being a state restriction on political speech?

  10. - Keyser Soze - Wednesday, Jul 29, 15 @ 1:28 pm:

    As preemptive strikes go, this one is really preemptive. And, probably not a good idea given the current state of the newspaper business.

  11. - Chicago Cynic - Wednesday, Jul 29, 15 @ 1:34 pm:

    I’ll bet you could get a carve-out from the tax.

    “Advertising is defined to mean all digital or print advertising except for any entity run by exceptionally knowledgeable but scruffy males who consume mass quantities of alcohol in pursuit of stories and who are located within a 10 mile radius of the Illinois state capitol.”

    I think that could work. No?

  12. - anon. - Wednesday, Jul 29, 15 @ 1:47 pm:

    I’m all for this as it is long past due. We should also tax legal and consulting fees and bond underwriting fees.

  13. - Modern Love - Wednesday, Jul 29, 15 @ 1:50 pm:

    All Official Notices should be sent to a newly created State “Office of Information” and then published online in an easiliy searchable manner and the data sold to other websites focusing on notice. Putting notices in newspapers and not online does not provide notice to anyone but instead hides actions from the public. This is a simple reform that would be very good on many levels.

  14. - Michelle Flaherty - Wednesday, Jul 29, 15 @ 1:54 pm:

    Funny how all these papers run editorials spurred on by a lobbying group — their lobbying group. It’s good government when it’s their special interest.

  15. - Slide - Wednesday, Jul 29, 15 @ 2:11 pm:

    ~~~ and then published online in an easiliy searchable manner and the data sold to other websites focusing on notice. ~~~
    It’s ‘official gov’t information.’ Once you’ve posted it, it’s in the public domain. It can’t be sold — who’d be dumb enough to buy it??

  16. - Just Observing - Wednesday, Jul 29, 15 @ 2:36 pm:

    I think a lot of people aren’t realizing this is a tax on all advertising, not just newspaper ads, and the tax is paid by Illinois businesses, many of which are struggling to bring in business as it is.

  17. - walker - Wednesday, Jul 29, 15 @ 3:01 pm:

    Our economy is growing in services, while other elements are struggling.

    We are going to have to face this reality sooner or later when it comes to tax policy.

  18. - SAP - Wednesday, Jul 29, 15 @ 4:00 pm:

    == I think a lot of people aren’t realizing this is a tax on all advertising, not just newspaper ads, and the tax is paid by Illinois businesses, many of which are struggling to bring in business as it is. == Exactly. If this was enacted, $1 would buy $0.90 worth of advertising (or $0.9375, depending on who you believe). Less bang for the advertising buck would mean fewer sales.

  19. - Wordslinger - Wednesday, Jul 29, 15 @ 4:07 pm:

    SAP, advertising is a very flexible industry when it comes to pricing, believe me.

    Masters of creative accounting, as well.

  20. - walker - Wednesday, Jul 29, 15 @ 5:54 pm:

    Campaign communications is our fastest growing industry in Illinois.

  21. - DuPage Dave - Wednesday, Jul 29, 15 @ 6:08 pm:

    Illinois needs a common sense service tax. We will never have a graduated income tax, so let’s find services where users can afford to pay the tax. I think advertising in general is a good start. Lots of consultant-type services are ripe for the picking.

  22. - Langhorne - Wednesday, Jul 29, 15 @ 6:26 pm:

    Maybe they need an advertising campaign, in opposition to a tax on advertising.

  23. - Antoinette - Friday, Jul 31, 15 @ 6:20 am:

    Hello, just wanted to tell you, I lovwd this article. It was practical.
    Keep on posting!

Sorry, comments for this post are now closed.

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