Capitol Fax.com - Your Illinois News Radar » *** UPDATED x4 *** Service tax, “opportunity tax” introduced

*** UPDATED x4 *** Service tax, “opportunity tax” introduced

Tuesday, Jan 24, 2017 - Posted by Rich Miller

* Things can change in a nanosecond on days like these, but a new service tax is expected to be unveiled before the Senate Revenue Committee meets today at 3 o’clock.

In recent days, I was told that the new tax would be somewhat limited and kinda like Wisconsin’s tax. Click here for that state’s list of taxable services. Candidate Bruce Rauner proposed a limited service tax back in the day.

I’m not sure what will be in the Illinois tax at this moment. But when/if it does surface, the amendment will likely be at this link.

No vote is scheduled on this and other tax hikes at that 3 o’clock hearing. As explained below, it’s gonna be testimony only.

* So, to recap, the sugary drinks tax is being removed from the package, the income tax will be set at 4.99 percent, a corporate tax exemption on certain dividend income that was targeted for repeal likely remains intact and a service tax could become part of the mix.

And it’s doubtful that we’ll see floor votes this week…

Republican Leader Christine Radogno said she’s unsure if a series of votes will come at all this week, citing concerns from lawmakers who are worried about the size and scope of the evolving package. The plan calls for everything from raising the income tax to overhauling how schools are funded.

“It’s gigantic, there’s a lot of moving parts, we are still amending it,” Radogno said Tuesday. “I, who have been living and breathing it for two months, am still having a hard time getting my head around certain pieces. So obviously, we want to respect people who have to cast a vote, that they are comfortable.”

* As always, keep track of everything by monitoring our live coverage post below.

*** UPDATE 1 *** The Senate bill could include what’s called an “opportunity tax.” It’s essentially a tax on employers based on their payroll. It’s supposedly a low tax that could raise big bucks because there are so many employers here. It has been estimated by one business group to raise $500 million a year and it’s sort of a “nod” to Speaker Madigan’s proposal to make all corporations pay a tax. ADDING: I’m now hearing this could raise $750 million a year at the level set in the legislation.

*** UPDATE 2 *** The amendment is now public. Click here. A quick reading shows a service tax on storage, amusements, repair and maintenance, landscaping, laundry and drycleaning,

*** UPDATE 3 *** And here’s that “opportunity tax” language…

(a) Beginning on July 1, 2017, a tax is hereby imposed upon each qualified business for the privilege of doing business in the State.

(b) The tax under subsection (a) shall be imposed in the following amounts:

(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then then annual tax is $225;

(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then the annual tax is $750;

(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then the annual tax is $3,750;

(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then the annual tax is $7,500; and

(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax is$15,000.

Apparently, there are about 100,000 businesses in Illinois with a payroll of less than $100,000.

And, yes, the personal income tax rate will indeed be set at 4.99 percent. The corporate rate will be set at 7 percent.

*** UPDATE 4 *** The proposal also repeals the franchise tax, which is a tax hated by the Illinois Policy Institute…

Illinois’ corporate franchise tax makes no sense. It is convoluted and economically harmful, and should be repealed. Even the term “franchise tax” is misleading and outdated, as it is not a tax on the franchise locations of a larger business, such as a chain of Burger Kings. Rather, it is a tax on entrepreneurs and investments in Illinois for the privilege of doing business here.

70 Comments

- Dan Johnson - Tuesday, Jan 24, 17 @ 1:14 pm:
Kudos to Senators for legislating and taking on the hardest issues all at once. I imagine their staffs haven’t had a break since the election.

(Can’t we tax retirement income over $50K as well…..)

- Mr. Right - Tuesday, Jan 24, 17 @ 1:19 pm:
A bill that shoehorns services into the existing sales tax is probably unconstitutional. See Fiorito v. Jones.

- Ed - Tuesday, Jan 24, 17 @ 1:25 pm:
This definitely should be part of the turnaround agenda. What a way to improve the business climate.

- Rich Miller - Tuesday, Jan 24, 17 @ 1:25 pm:
===See Fiorito v. Jones===

That’s a 1968 case, so it’s before the new Constitution. http://law.justia.com/cases/illinois/supreme-court/1968/41099-5.html

Also, we don’t know yet how the bill is written.

- PJ - Tuesday, Jan 24, 17 @ 1:27 pm:
Dan Johnson -

Taxing high retirement income (it would probably be more like over 75k) is good public policy, but it’s a non starter for a lot of Republicans.

- Rich Miller - Tuesday, Jan 24, 17 @ 1:28 pm:
===it’s a non starter for a lot of Republicans===

And Democrats.

- illnoised - Tuesday, Jan 24, 17 @ 1:30 pm:
Another regressive tax (harms the lower and middle class citizens) because legislators are afraid of doing the right thing: progressive income tax or surtax on higher incomes or taxing retirement income above a certain level ($70k?).

- blue dog dem - Tuesday, Jan 24, 17 @ 1:31 pm:
So disappointing. I wish the Republicans would spend as much time scrutinizing state spending as they are increasing revenue. Who do they think they are, the Democratic Party?

- Sue - Tuesday, Jan 24, 17 @ 1:31 pm:
More school money for Chicago can only come from suburban and downstate school districts. If Thai is the funding overhaul- good luck with that

- 47th Ward - Tuesday, Jan 24, 17 @ 1:33 pm:
===harms the lower and middle class citizens===

Yeah, I saw that boat slip tax and now I’m wondering if I’ll be able to afford both that and higher country club dues. What will become of the yachts of the poor and middle class? We’ll be forced to practice our chipping and putting in the parks.

When oh when will someone stand up for working people?

- Rich Miller - Tuesday, Jan 24, 17 @ 1:35 pm:
47th, lots of working people have boat slips. Don’t kid yourself.

- 47th Ward - Tuesday, Jan 24, 17 @ 1:41 pm:
===Don’t kid yourself.===

I’m not kidding myself, and I know this service tax will be regressive, but it is about time we modernized our tax structure to face the reality of our economy. A haircut tax is going to hurt, maybe put some small barbers out of business.

But if this helps Illinois pay for things like, oh, I don’t know, let me just pick one, higher education? Then sign me up.

To the extent we can spread the burden around to as many potential taxpayers as possible, we’re doing our state a favor. For too long we’ve wanted high quality services at bargain basement prices. It’s time to pay the freight.

- A guy - Tuesday, Jan 24, 17 @ 1:47 pm:
47, you have Bon Jovi hair, don’t you?

- Rich Miller - Tuesday, Jan 24, 17 @ 1:47 pm:
It’s starting to feel like May 31st. lol

- illinoised - Tuesday, Jan 24, 17 @ 1:49 pm:
=spread the burden around=

The fair way to do that is a progressive income tax or surtax on high incomes or income tax on high retirement incomes, not a service tax.

- Gruntled University Employee - Tuesday, Jan 24, 17 @ 1:49 pm:
==It’s time to pay the freight. ==

Amen to that.

- wondering - Tuesday, Jan 24, 17 @ 1:53 pm:
regressive vs progressive: service tax vs graduated income tax

- Dan Johnson - Tuesday, Jan 24, 17 @ 1:53 pm:
Yeah, I know it’s considered a non-starter, but man, how many retirees are actually pulling down more than $75K/year and would really object to paying 5% of what they pull down on top of that?

I wish I had a standard deduction of $75,000 on my federal and state income taxes.

- OMG - Tuesday, Jan 24, 17 @ 1:55 pm:
Higher taxes on payroll = less employers have to pay their employees.

Madigan accuses Rauner of wanting to hurt middle class wages but that would do exactly that!

- Arsenal - Tuesday, Jan 24, 17 @ 1:59 pm:
==Higher taxes on payroll = less employers have to pay their employees.==

It’s not like they’re all plowing every cent back into salary and benefits in the first place.

- blue dog dem - Tuesday, Jan 24, 17 @ 2:00 pm:
47th. We spend to much on higher ed.

- wordslinger - Tuesday, Jan 24, 17 @ 2:01 pm:
Are these changes to add votes in the Senate or to gain votes in the House and support from Rauner?

- Arsenal - Tuesday, Jan 24, 17 @ 2:02 pm:
==A quick reading shows a service tax on storage, amusements, repair and maintenance, landscaping, laundry and drycleaning==

In determining how much this raises, be sure to include the stimulative effect to the Democratic Attack Ad industry.

- walker - Tuesday, Jan 24, 17 @ 2:07 pm:
==It’s starting to feel like May 31st. lol==

Good!

I have always thought that the first things done in any session should be directly budget/appropriations-related. Especially true now. That’s where I would have gone big on any changes to House rules.

Let the thousands of other bills wait, until we agree on the big numbers. Use the Rules committee as originally designed, to allow non-budget bills out only on an “emergency” basis, or to move the budget agreements along.

- Ahoy! - Tuesday, Jan 24, 17 @ 2:11 pm:
Another incentive for a business to move out of state and/or keep payroll down, which I would think we would want to incentive the the opposite (more businesses, higher payroll).

- Gruntled University Employee - Tuesday, Jan 24, 17 @ 2:13 pm:
==Madigan accuses Rauner of wanting to hurt middle class wages but that would do exactly that! ==

The last time I checked, Madigan hadn’t weighed in on any of this.

- whetstone - Tuesday, Jan 24, 17 @ 2:14 pm:
==legislators are afraid of doing the right thing: progressive income tax==

It would also require changing the state constitution, so the barrier is very high.

- 47th Ward - Tuesday, Jan 24, 17 @ 2:16 pm:
===We spend to much on higher ed.===

LOL!

- Swift - Tuesday, Jan 24, 17 @ 2:18 pm:
Perhaps bigger news…the stripper tax is being rescinded by the same amendment and “live adult entertainment” is being lumped in with baseball, dog shows, and ballet among others under the category of “amusements”.

- NaperThrill - Tuesday, Jan 24, 17 @ 2:22 pm:
I’m not sure how this anything but shuffling around a bunch of different tax hikes. No real reforms, or cuts. Just deciding who’s going to pay for the current system.

- blue dog dem - Tuesday, Jan 24, 17 @ 2:25 pm:
In 2009, the old widget factory had a payroll of $1,217,000. Ended the year with an operating loss of $63,000. Mrs Blue and myself did not take an income. So we get the priveledge of paying an extra $7500 to keep 17 people employed. Wow! That’s creative way of keeping businesses around. No wonder we need a DCEO and tax credits.

- Tron - Tuesday, Jan 24, 17 @ 2:30 pm:
==Just deciding who’s going to pay for the current system.==

Just paying for the current system would be a start. Right now, the bill backlog and pension hole are huge.

- Anon221 - Tuesday, Jan 24, 17 @ 2:37 pm:
Cookie, Cookie… which bill has the cookie now???

https://www.youtube.com/watch?v=eDelGqj7UGQ

- RNUG - Tuesday, Jan 24, 17 @ 2:47 pm:
== That’s a 1968 case, so it’s before the new Constitution. ==

It may still serve as case law. The IL SC considered decisions before 1970 on the pension issues.

- Anon221 - Tuesday, Jan 24, 17 @ 2:48 pm:
On the “opportunity tax”, those Farm Bureau members might want to really take a close look at that. I just skimmed it, but it doesn’t look like it would exempt LLC, partnerships, etc. So, if you have family that qualify as “actively engaged in”, you just might fall under this new tax.

Background:
https://www.fsa.usda.gov/programs-and-services/payment-eligibility/actively_engaged/index

- In 630 - Tuesday, Jan 24, 17 @ 2:50 pm:
So when I call my State Sen and Rep, will they get the point if I just urge support for “the budget deal” or would a little more specificity help?

- RNUG - Tuesday, Jan 24, 17 @ 2:55 pm:
If challenged, odds are that any kind of income tax surcharge targeting a specific group or income level will eventually be ruled unconstitutional given the flat tax provision adopted in 1970.

But if nobody challenges it, there is a presumption that anything adopted by the GA is constitutional.

The smart thing would be to adopt the proposed increased flat tax rate plus other taxes needed to balance things that sunset if a graduated income tax is adopted in the future. Then pass a graduated tax amendment to be presented to the public in 2018 and let the taxpayers decide if they prefer this hodgepodge or a progressive income tax.

- The Captain - Tuesday, Jan 24, 17 @ 3:03 pm:
There wasn’t a better way to word it than “for the privilege of doing business …”? Really? Somebody reviewed this language, contemplated the various ways opponents might object and thought to themselves “nope, this language is air-tight, there’s no way anyone could oppose this, send it to LRB and get it filed”?

- Texas Red - Tuesday, Jan 24, 17 @ 3:05 pm:
This will be good for “The Crossroads of America” not the “Land of Lincoln”

- Truthteller - Tuesday, Jan 24, 17 @ 3:05 pm:
Will Rauner’s checkbook buy Republican votes for tax hikes that they have insisted for more than a decade are unnecessary?
Let’s hope so.

- Robert the 1st - Tuesday, Jan 24, 17 @ 3:06 pm:
Tax things you want less of like soda, cigarettes, alcohol… oh and in IL; employers.

- ChicagoVinny - Tuesday, Jan 24, 17 @ 3:07 pm:
As SB owner the “opportunity tax” is annoying but not large enough to materially affect my hiring or compensation decisions. Let’s not blow this out of proportion.

- Keyser Soze - Tuesday, Jan 24, 17 @ 3:14 pm:
People are already fleeing Illinois.

- Chicago_Downstater - Tuesday, Jan 24, 17 @ 3:16 pm:
Well this must be a solid compromise because apparently no one in the comments is happy…

But seriously, so far I’m impressed with the tough decisions the State Senate has been making.

- A guy - Tuesday, Jan 24, 17 @ 3:18 pm:
==There wasn’t a better way to word it than “for the privilege of doing business …”? Really?===

It sounds lousy to be sure, but it appears that it’s carrying over language from previous legislation. It’s been a while since it’s been such a privilege to do business in Illinois.

- blue collar - Tuesday, Jan 24, 17 @ 3:22 pm:
I have a small LLC that does not employ anyone. I am the only “employee”. I currently pay 250/yr to IL for the LLC. Are they going to add another 225 to that? I’ll close shop first, its really not worth it.

- Robert the 1st - Tuesday, Jan 24, 17 @ 3:22 pm:
=for the privilege of doing business in the State=

I like it. Shows how IL Democrats truly feel.

- Whatever - Tuesday, Jan 24, 17 @ 3:23 pm:
Captain @ 3:03 pm ==There wasn’t a better way to word it than “for the privilege of doing business …”? Really?==

Check out how many of the existing tax statutes have that language. It’s really a holdover from the 1870 constitution, which provided relatively limited taxing powers to the General Assembly, but included the power to tax “privileges,” so many taxes were imposed on the “privilege” of engaging in the taxable activity.

- Whatever - Tuesday, Jan 24, 17 @ 3:24 pm:
Robert the 1st @ 3:22 - wrong again.

- Rich Miller - Tuesday, Jan 24, 17 @ 3:27 pm:
===Shows how IL Democrats truly feel===

And supported by GOP Leader Radogno.

- Robert the 1st - Tuesday, Jan 24, 17 @ 3:27 pm:
On this very blog over the years we consistently have the “don’t let the door hit you on the…” comments on any article about business fleeing.

- 47th Ward - Tuesday, Jan 24, 17 @ 3:28 pm:
Among the privileges are access to roads and a court system to settle disputes. Public education used to be thought of as a public good too, once.

- Winnin' - Tuesday, Jan 24, 17 @ 3:28 pm:
Will Madigan eventually surface his millionaire’s tax? Probably not good to see gone that. He’s been talking about it for three sessions.

- Winnin' - Tuesday, Jan 24, 17 @ 3:29 pm:
“Not good to ignore that”.
Dang auto spell.

- CapnCrunch - Tuesday, Jan 24, 17 @ 3:30 pm:
“Taxing high retirement income (it would probably be more like over 75k) is good public policy, but it’s a non starter for a lot of Republicans.”

It’s also likely a non starter for a lot of SURS and TRS retirees. In FY 2016 about 1 in 4 TRS and 1 in 7 SURS retirees had pensions of $72,000 or more.

- Yiddishcowboy - Tuesday, Jan 24, 17 @ 3:31 pm:
@Blue Collar. I don’t know what income your LLC brings in, but it seems you are tripping over a dollar to pick up a dime. Surely what you gross offsets the additional tax. I’m not a small business owner,so I could be wrong with my thinking, but….

- Anonymous - Tuesday, Jan 24, 17 @ 3:32 pm:
@blue_collar, based on Update #4, I think your $250 is the franchise tax. So for you this is a $25 tax cut. Don’t spend it all in one place!

- Robert the Bruce - Tuesday, Jan 24, 17 @ 3:39 pm:
The “opportunity tax” is the worst kind of employer tax: if you want to provide incentives for job creation, you don’t tax employers based on how large their payroll is.

- Blue dog dem - Tuesday, Jan 24, 17 @ 3:42 pm:
47th. My property tax (and yours) , covers those things.

- 47th Ward - Tuesday, Jan 24, 17 @ 3:56 pm:
===My property tax (and yours) , covers those things===

Not all of them Dog.

- OldIllini - Tuesday, Jan 24, 17 @ 3:57 pm:
==Apparently, there are about 100,000 businesses in Illinois with a payroll of less than $100,000.==
==the personal income tax rate will indeed be set at 4.99 percent==

For the same revenue, they could raise the personal income tax rate to 4.999 and eliminate the $225 tax on the 100,000 small businesses, plus save a lot of processing costs.

- The Captain - Tuesday, Jan 24, 17 @ 4:03 pm:
@ A Guy

I think you’re right about it being a holdover from previous language. Thanks.

- A guy - Tuesday, Jan 24, 17 @ 4:16 pm:
Aye, Cap’n! Thanks for the kind words.

- Small town taxpayer - Tuesday, Jan 24, 17 @ 4:48 pm:
===More school money for Chicago can only come from suburban and downstate school districts.===

With the lowest property tax rate in all of Cook County, I think that many suburban Cook County tax payers would object to this statement. In many suburban areas of the county the property tax rate for schools (K-12) alone is equal to or even higher than the total property tax rate in Chicago.

For example, the combined property tax rate in Chicago for 2016 for all units of government was 6.867%. In Niles the property tax rate for K-12 schools alone (district 67 plus district 219) was 7.443%.

- Anon - Tuesday, Jan 24, 17 @ 4:51 pm:
“I lowered your taxes!”

From 5.00% to 4.99%. It’s a comedy, right?

- Anonymous - Tuesday, Jan 24, 17 @ 6:32 pm:
==It’s not like they’re all plowing every cent back into salary and benefits in the first place.==

So we should then further discourage them to do so? Briliant.

- Matt P. - Tuesday, Jan 24, 17 @ 6:39 pm:
Why don’t we tax retirement income over $60,000?

Oh, because one party panders to unions and both pander to old people.

- Libertas - Tuesday, Jan 24, 17 @ 6:51 pm:
Our company provides services to the State of Illinois and lost money in 2014 and 2015 - primarily due to lack of work resulting from the lack of a state budget. Under the new “opportunity tax” proposal we would have paid (lost) an additional $7,500 per year for the opportunity to keep giving our employees a paycheck while they are idle due to the state’s inability to pass a budget! Thanks Illinois!

- Tom K. - Tuesday, Jan 24, 17 @ 10:55 pm:
Republican support in the House will be all about the ratio of the annual dollar value of cuts vs. new revenue. Unless it’s close to 50/50, the only way the House would pass this is with almost all D votes, which would create ammunition for 2018; so, it would die in the House. With an even ratio? Then it’s all up to Rauner.

- Piece of Work - Wednesday, Jan 25, 17 @ 7:04 am:
A tax for the privilege of doing business in the state of Illinois????

Good grief!! You can tell the members of the legislature just love small businesses.

Sorry, comments for this post are now closed.