A quick look at the revenue angle
Wednesday, Jan 25, 2017 - Posted by Rich Miller
* A few people have sent me the Illinois Chamber’s list of the Senate’s revenue-related proposals with questions of their own…
* Removal of the soda tax and is replaced by the Business Opportunity Tax Act. This tax is a tax imposed on businesses based on the number of Illinois employees of the business.
* Raises corporate income tax rate to 7% and personal income tax rate to 4.99%.
* Establishes the following service taxes; storage services, amusements, repair and maintenance services, landscaping services, and laundry and dry-cleaning services.
* Establish a tax on cable television services and direct broadcast satellite services.
* Decouples from the Domestic Production Activities Deduction.
* Eliminates the unitary business noncombination rule.
* Makes the research and development credit permanent.
* Redefines manufacturing to include graphic arts production and includes items formerly included in the manufacturers purchase credit in the manufacturing machinery and equipment exemption.
* Provides that False Claims Act cases may not be brought with respect to any taxes imposed, collected, or administered by the State of Illinois.
* Repeals the Adult Entertainment Tax effective January 1, 2018.
* Modifies pollution control facilities valuation under the Property Tax Code.
The Chicagoland Chamber made the same mistake as the Illinois Chamber by referring to the “Opportunity Tax” as a “head tax.” As we discussed yesterday, the tax isn’t based on the number of employees, but rather on the amount of a company’s annual payroll.
And while it’s true that the Adult Entertainment Tax (often referred to as the “pole tax” when it passed) is repealed, those strip clubs are now covered under the new service tax on “amusement” businesses. And the sexual violence programs funded under that previous tax will still receive funding from the service tax.
* Even after using the Google, I still don’t understand some of the other stuff in the bill, but it looks like business got some wins with its losses.
Any help out there?
By the way, the full legislation as most recently amended is here.
- Jaded - Wednesday, Jan 25, 17 @ 10:16 am:
Full employment bill for accountants.
- Anonymous - Wednesday, Jan 25, 17 @ 10:16 am:
Constitutional amendments to allow progressive income tax and get rid of pension protection. Abolish the corporate tax altogether and massive spending cuts.
- Rich Miller - Wednesday, Jan 25, 17 @ 10:18 am:
Constitutional amendments can’t be passed for two more years. Live in the real world, please. We need a budget now.
- Sue - Wednesday, Jan 25, 17 @ 10:24 am:
Econ 101 if you tax something more you get less. The payroll tax will further the State’s destination into the toilet.
- Liandro - Wednesday, Jan 25, 17 @ 10:38 am:
Sue’s got a point. Taxing employers more for hiring seems like a rather foolish way to approach this. You’re essentially punishing them for hitting new tiers of payroll, and incentivizing them to cut labor costs (hours).
And it’s not happening in a vacuum. Sales taxes are jumping up, local property taxes have been far outpacing GDP/inflation, etc. Sigh.
- Anon221 - Wednesday, Jan 25, 17 @ 10:43 am:
What is a Pollution Control Facility: http://www.ipcb.state.il.us/abouttheboard/CitizensGuidetotheBoard.asp?Section=Facility
How it applies to Livestock Facilities (especially CAFOs):
http://www.epa.illinois.gov/topics/agriculture/livestock-management/index
And there is are dollars for building these:
https://www.nrcs.usda.gov/wps/portal/nrcs/main/il/programs/financial/eqip/ (Go down the page to the Illinois EQIP Funding Pools and Ranking Documents and click on Confined Livestock & Manure Management. Some are really big bucks.
Some of the controversies surrounding tax abatement or taxpayer funded programs for CAFOs include sufficient oversight that what was paid for is actually producing any benefits other than superficial appearances, and divergence of dollars from other projects which may produce a more long term, quantifiable benefit to the surrounding communities. Tax abatements for projects that don’t actually produce any measurable benefits, end up depressing local revenues which could be used to offset damages to roads, bridges, and other infrastructure that CAFOs can place a great strain on.
- Last Bull Moose - Wednesday, Jan 25, 17 @ 10:45 am:
Replacing the Soda Tax with the Business Opportunity Tax is a bad trade. We want sugar to be more expensive and labor to be cheaper. This goes the wrong way.
- Chicago J - Wednesday, Jan 25, 17 @ 10:47 am:
They should put the soda tax back in! It’s a choice tax- people only have to pay if they drink high-sugar beverages.
- Romeo - Wednesday, Jan 25, 17 @ 10:48 am:
I seriously wonder what our backlog would be today if we had just kept it at 5%. Sitting at $11.1 billion as of yesterday.
While I was glad that Illinois fulfilled its promise of ending the “temporary” income tax hike, a lot of this pain and devastation could/should have been avoided.
- Bad deal - Wednesday, Jan 25, 17 @ 10:54 am:
This “opportunity” tax sure seems to be a bad deal for small and family businesses but very manageable for large corporations. Would love to see the average payroll for mom and pop restaurants that are in many communities. The owners aren’t getting rich, but they are employing a lot of folks.
- Laundryguy - Wednesday, Jan 25, 17 @ 10:55 am:
Are they really going to tax poor people when they go to the laundromat and wash their clothes?
- justacitizen - Wednesday, Jan 25, 17 @ 11:05 am:
4.99% personal income tax rate will be a nightmare to administer. I hope Revenue increases its error tolerances.
Also, services are going to be double-taxed. Right now services either pay tax on the tangible property used in their service or pay a service occupation tax. When the service tax is instituted, most servicemen/women will continue to pay tax to their suppliers on the cost of the tangible property used in their services, and then collect/transmit tax on the full selling price.
- SAP - Wednesday, Jan 25, 17 @ 11:09 am:
Not opposed to the opportunity tax in principle, but currently too bottom heavy. Should be reduced on lower end and add some higher tiers.
- Birdseed - Wednesday, Jan 25, 17 @ 11:10 am:
=== 4.99% personal income tax rate will be a nightmare to administer.===
Why?
- Birdseed - Wednesday, Jan 25, 17 @ 11:12 am:
I think the Opportunity Tax should be based on graduated percentages, rather than rigid, hard number tiers.
- B' - Wednesday, Jan 25, 17 @ 11:14 am:
=Establish a tax on cable television services and direct broadcast satellite services= My cable bill is already through the roof for stuff I don’t need and now another tax! The Beatles song “Tax Man” is more than appropriate for this state….
- Anonymous - Wednesday, Jan 25, 17 @ 11:15 am:
Heard the folks on the morning radio show lamenting the fact that taxes will be going up. I heard no mention of why they think that is or what alternative choice could be made. Not sure if the lack of knowledge of the two hosts was due to the state of media coverage or just their unwillingness to follow what is available.
- Anonymous - Wednesday, Jan 25, 17 @ 11:19 am:
Confusing. Isn’t the Adult Entertainment Tax, the pole tax, and the head tax the same thing?
- SAP - Wednesday, Jan 25, 17 @ 11:22 am:
Adult Entertainment Tax = Pole Tax. Head Tax does not exist.
- Illinois Native - Wednesday, Jan 25, 17 @ 11:23 am:
The proposed tax on amusements will be a negative for the not-for-profit arts in Illinois. The arts groups will need to increase prices or absorb the cost from their already slim budgets. They will also have an unfunded mandate for tax collection that they are often unequipped to handle.
- Sue - Wednesday, Jan 25, 17 @ 11:38 am:
The opportunity tax is just raising the tax rate to 6 percent or 5.99. What a bunch of dishonest jerks. If you go with this stupid proposal why not just be honest and raise rates to 6. By the way- if this is structured as a tax on payroll- highly compensated partners at law firms and investment firms paid on a K 1 partnership return won’t pay it. I guess the legislature is looking to protect lawyers or they are too dumb to see the problem
- JoeMaddon - Wednesday, Jan 25, 17 @ 12:27 pm:
**=== 4.99% personal income tax rate will be a nightmare to administer.===
Why?**
I guess some people do their tax calculations in their head?
- FairGuy - Wednesday, Jan 25, 17 @ 1:27 pm:
County Fairs and schools aren’t exempt from the amusement tax are they? Most local events sell tickets in even dollar amounts. It’s not like we can realistically stand at the gate and charge $5.25 to get in to a fair, or kids ball game. And it’s not enough to justify raising to the next even dollar… so this ends up as a tax on the organization. A big one for some.
- Anonymous - Wednesday, Jan 25, 17 @ 2:10 pm:
County Fairs and schools aren’t exempt from the amusement tax are they?
Here are the amusement tax exemptions.
Corporations, societies, associations, foundations, or institutions organized and operated exclusively for charitable, religious or educational purposes that have been issued an active tax exemption number by the Department under Section 1g of the Retailers’ Occupation Tax Act.
The federal government and its instrumentalities that have been issued an active tax exemption number by the Department under Section 1g of the Retailers’ Occupation Tax Act.
Government bodies that have been issued an active tax exemption number by the Department under Section 1g of the Retailers’ Occupation Tax Act.
I would assume schools and fairs are tax exempt.
- X-prof - Wednesday, Jan 25, 17 @ 2:25 pm:
===And it’s not happening in a vacuum. Sales taxes are jumping up, local property taxes have been far outpacing GDP/inflation, etc. Sigh.===
There’s an easy fix for this Liandro. Sales and property taxes have been increasing sharply because the state has underweighted the flat income tax relative to the categories you mention, and because it has too little revenue overall. As a result, the state has not been meeting its obligation (for example) to share the cost of public education with local government, and this has forced local government to compensate with higher property and sales taxes. This arrangement asks the wealthiest to contribute about 5 cents on the dollar in overall state and local taxes while the average tax payer contributes about 10 cents on the dollar. Low-income taxpayers are the biggest victims; they pay about 13 cents on the dollar. Given that the top 1% enjoys 25% of the state’s total personal income, undertaxing this group by 50% is equivalent to a 12.5% reduction in the state’s total personal income. We can’t afford that give-away. Underfunding pensions is one (fake) way we managed to get by in the past. That game is over.
The easy fix is to raise the flat income tax well above 5% and use part of the new revenue to cut, not just freeze, sales and property tax. Another part would go to paying down bills and pension debt over time.
This “fix” would make the state’s revenue system somewhat less regressive, but ultimately, we need constitutional change and a shift to a graduated income tax.
What about spending cuts? Not so much to be gained there as some people think. But sure, let’s do judicious cuts where possible.
Will this fix happen? Probably not, unless middle class taxpayers wake up to how they are forced to subsidize the ultra wealthy. The Dems and the press don’t do what they should/could on that score.
- Reader - Wednesday, Jan 25, 17 @ 2:25 pm:
Anonymous @ 2:10 -
Those exemptions apply to “purchasers,” not providers, so schools that sold basketball tickets would still be on the hook, right?
- Anonymous @ 2:10 - Wednesday, Jan 25, 17 @ 2:38 pm:
You are right, those are for purchasers.
I’m pretty sure that the intent was not to tax schools and County Fairs. It may be in the definition of what a provider is that would exclude schools and fairs. I will have to go back and look closer.
- Piece of Work - Wednesday, Jan 25, 17 @ 2:41 pm:
I wonder how much Florida would tax my business for the privilege of operating there?
- qualified someone nobody sent - Wednesday, Jan 25, 17 @ 3:04 pm:
X-prof 100% correct. Illinois is a low income tax State and a high sales tax and property tax state. Therefore, State coffers are filled in an extremely regressive way and Education is funded just as regressively. As a result, the quality of your public schools depends 100% on your zip code. The less money you make in Illinois means a lifetime of subsidizing more affluent residents lifestyles and more importantly, keeps these areas poor because the education received there doesn’t provide the necessary skills to escape the continuous cycle of poverty.
- FairGuy - Wednesday, Jan 25, 17 @ 3:49 pm:
In the definition of providers I don’t see any exclusions for Fairs, schools, NFP’s etc. Also stumbled upon Article 15 which is the repair tax. I guess I missed that it looks like all auto repair, electrical, HVAC or any other kind of repair labor is subject to the tax. Right? Is it only to fix existing things or to build new things? If I put a new roof on my house am I taxed on the labor, but if I build a new house I’m not? Or do I need to read further in the 400 pages?
- Bonnie - Wednesday, Jan 25, 17 @ 4:35 pm:
What about TRS and CTPF? What does it say about teacher pension changes?
- Anonymous @ 2:10 - Wednesday, Jan 25, 17 @ 5:56 pm:
Fairguy:
I think you are correct, there doesn’t appear to be any exemption for schools or fairs. In discussions I have had with other people running up to this, I was under the impression that these kinds of groups would be excluded but maybe not.
- FairGuy - Wednesday, Jan 25, 17 @ 6:29 pm:
I don’t see where a Municipality or Park District is an excluded provider either. So all revenue a city gets from a municipal golf course, swimming pool, lake, camping areas etc… either start adding tax to the kiddo’s swimming pool admission, or take 5% out of the revenue the facility generates and send it back to the State.
- RNUG - Wednesday, Jan 25, 17 @ 10:43 pm:
== What about TRS and CTPF? What does it say about teacher pension changes? ==
See SB-11.