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Payroll tax out, food and medicine tax in… for now

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The mammoth budget blueprint under consideration in the Illinois Senate changed shape yet again Tuesday, with lawmakers floating the idea of applying a higher state sales tax to food and drugs.

The change allows backers to shelve a proposed “opportunity tax” that would charge companies for the “privilege” of doing business in the state. That ran into opposition from business groups. But the broad nature of the sales tax expansion is likely to spawn arguments that it hits hardest those least able to afford the increase.

Some background: the state sales tax on most goods is 6.25 percent. The rate, however, is just 1 percent for many food, drugs and medical supplies — think stuff bought at the grocery store. It’s higher in places where local governments can impose their own taxes. In Cook County, for example, shoppers pay an additional 1.25 percent tax to the Regional Transportation Authority for a 2.25 percent total rate.

Here’s how the Senate plan would work: The overall sales tax rate of 6.25 percent would drop to 5.75 percent, but it would be applied to a broader range of goods including food, drugs and medical supplies. Cutting the overall sales tax by half a percentage point would drop the total sales tax in Chicago to 9.75 percent. In addition, services would be taxed at 5.75 percent, including car repairs, landscaping, laundry, and cable and satellite.

* SJ-R…

Extending the sales tax to some services such as landscaping, laundry, and cable and satellite television remains in the bill. […]

Trotter, though, said, “This is continually changing.”

Sen. Heather Steans, D-Chicago, said the trade-off is a lower tax rate that applies to a broader base. […]

Sen. Pam Althoff, R-McHenry, a member of the Republican leadership team, said there was “great reserve and concern” about the business opportunity tax, which would impose a new tax based on the size of a company’s payroll.

“Obviously, this is a mathematical problem. If you take away one, you’ve got to come up with something else so both sides are equal,” Althoff said.

posted by Rich Miller
Wednesday, Feb 8, 17 @ 10:19 am

Comments

Food and medicine tax hits those who can least afford it, and will not pass!

Comment by Anonymous Wednesday, Feb 8, 17 @ 10:25 am
Taxing medicine & food seems regressive. These are things people buy because they have no choice.

Comment by Kevin Highland Wednesday, Feb 8, 17 @ 10:25 am
What is done in other states for medical supplies-

http://www.salestaxsupport.com/blogs/industry/medical-industry-tax/which-states-tax-medical-devices/

Current IL tax code- http://tax.illinois.gov/legalinformation/regs/part130/130-311.pdf

Question- How will this effect Medicare and Medicaid reimbursements, and additional costs to residents of nursing homes?

Comment by Anon221 Wednesday, Feb 8, 17 @ 10:33 am
Food and medicine? Desparate!!

Comment by winners and losers Wednesday, Feb 8, 17 @ 10:35 am
Can’t you guys think of a more regressive tax than food and medicine? There is still air and water waiting to be taxed.

Seriously, just raise the dang income tax. At least income taxes can be easily deducted from federal taxes. Increasing both sucks because you can only claim one or the other. So not only are you hurting the poor, but you aren’t doing the middle class any favors.

Comment by A Jack Wednesday, Feb 8, 17 @ 10:37 am
Seems like some attack ad producers could have a lot of fun with this one.

Comment by Arsenal Wednesday, Feb 8, 17 @ 10:38 am
Pass it today while the media is focused on Chris Kennedy. Just get it done already.

Comment by Fax Machine Wednesday, Feb 8, 17 @ 10:39 am
Sounds like trading off higher taxes on richer people, i.e. those backed by the business lobby, for higher taxes on poorer people, i.e. those backed by no lobby.

Comment by IRLJ Wednesday, Feb 8, 17 @ 10:41 am
Who cooked up this scheme? I live in Champaign, and my food and medicine tax is 1%. Increase it by 475%, and I guarantee you I will be giving $$ to the primary and general opponents of every member of the Legislature who votes for this.

And I’m not interested in hearing that food stamp recipients are exempted from this. It absolutely wallops the near-poor, who make just enough to not qualify for benefits, but would be forced on the rolls within a month or two of a job loss or other catastrophe.

Are folks putting this out to make a proposal to raise the food and medicine tax to 3-3.5% seem reasonable? (Still not good…)

My sister lived in Tennessee for a while. This is the sort of crap they pull in the old Confederate States. Did they get this proposal from Donna Arduin?

Comment by Lynn S. Wednesday, Feb 8, 17 @ 10:41 am
So on top of an increase in Illinois’ regressive flat income tax, our political masters-some of them, anyway, would increase the tax on food and medicine by over 500 percent.

Comment by Cassandra Wednesday, Feb 8, 17 @ 10:41 am
===those backed by no lobby===

Meh. There’s IRMA and the petroleum marketers for two. I’m sure there’ll be more.

Comment by Rich Miller Wednesday, Feb 8, 17 @ 10:42 am
I’ve got a great idea! put a breathometer on everyone, and charge them for every breath they take!

Comment by notbuyingit Wednesday, Feb 8, 17 @ 10:42 am
At least they came to their senses on the “opportunity tax” for the privilege of doing biz in Illinois.

Comment by PoW Wednesday, Feb 8, 17 @ 10:45 am
Here’s a novel idea: how about a progressive income tax and then we don’t have to nickel and dime the poor?

Comment by Ratso Rizzo Wednesday, Feb 8, 17 @ 10:47 am
Last night, against my better judgement, I listened in to a phone in Town Meeting from Sen. McCarter and tried to ask a question but was not put through by his screeners.

To my point, the entire hour was spent bashing the Grand Bargain and any kind of proposals to increase revenue. With only one or two exceptions, all questions involved the budget, finance and taxes. And true to form he responded with his very predictable trite answers.

YET, one bit of good news - he will not run for reelection when his current term expires. Does this mean another primary challenge to Cong. Shimkus?

Comment by illini Wednesday, Feb 8, 17 @ 10:48 am
===Here’s a novel idea: how about a progressive income tax===

Do you think we can wait two more years to get some revenue? Do you think it could pass both chambers with three-fifths and then be approved?

If you answered yes to all three, then fine. But you’re daft if you did.

Comment by Rich Miller Wednesday, Feb 8, 17 @ 10:49 am
My sister lived in Tennessee from about 2007-2011, and 5% is the food and medicine tax rate there. This is the sort of crap they do in the old Confederate States.

This is a 475% increase, perfectly calibrated to hit the near-poor who don’t qualify for food stamps or a medical card.

Did they get this idea from Donna Arduin?

Comment by Lynn S. Wednesday, Feb 8, 17 @ 10:49 am
Illini, you shoulda watched the basketball game instead of listening to McCarter.

Comment by Arthur Andersen Wednesday, Feb 8, 17 @ 10:52 am
=== Increase it by 475%, and I guarantee you I will be giving $$ to the primary and general opponents of every member of the Legislature who votes for this. ===

No you won’t.

Comment by Just Observing Wednesday, Feb 8, 17 @ 10:52 am
===If you answered yes to all three, then fine. But you’re daft if you did===

Reality is reality. I understand the pressing need for a budget. I’m just tired of the poor getting the short end of the stick. And even though it won’t get a 3/5 vote, it IS the right thing to do and would solve most of our budget problems.

Comment by Ratso Rizzo Wednesday, Feb 8, 17 @ 10:52 am
Sorry for the quasi-double posts. I thought my first one had not gone through.

Comment by Lynn S. Wednesday, Feb 8, 17 @ 10:53 am
Taxing food and meds is regressive and if dems vote that through there will be a lot of electoral trouble, especially because that tax hits their base hardest.

It’s baffling to me that the opportunity tax would get dropped in favor of this. $255 for a payroll of $100,000 or less? Will business ready fold over $255? And the top tax rate is $15k on payrolls over $1.5 million? Those don’t even rise to the level of rounding errors. Eliminating that in favor of increasing food and med costs for everyone down to the lowest income group is shameful

Comment by Joe Bidenopolous Wednesday, Feb 8, 17 @ 10:54 am
And besides, I suspect if you lower state sales taxes, cities will see it as an opportunity to raise their sales taxes. It is a no-win situation for the lower and middle class.

And when are we going to see a proposed amendment to the Constitution for a graduated income tax? That millionaire tax idea is exceedingly popular, so get to it.

Comment by A Jack Wednesday, Feb 8, 17 @ 10:54 am
==This is the sort of crap they do in the old Confederate States==

Huh, I didn’t realize States like California (7.5), Minnesota (6.875), Washington (6.5), Massachusetts (6.25), and Ohio (5.75), among others are “Old Confederate States”

http://www.taxadmin.org/assets/docs/Research/Rates/sales.pdf

Comment by Anonymous Wednesday, Feb 8, 17 @ 10:57 am
Why, oh why, would any legislator want to take action on anything budget-related before Rauner introduces his unbalanced budget?
For if there is something or someone in Rauner’s crosshairs on Budget Day, experience tells us that he will surely be dissful.

Comment by Winnin' Wednesday, Feb 8, 17 @ 10:58 am
Joe B, I don’t think that most people even realize there’s no sales tax on food and meds.

Also, you conveniently left out the middle of that opportunity tax. A company with a $500,000 annual payroll would have to fork over $7500 a year. It doesn’t take too many employees to get to that sort of payroll. Like about a dozen workers making $20 an hour. Or 29 full time minimum wage employees.

Comment by Rich Miller Wednesday, Feb 8, 17 @ 10:59 am
Could this be a strategy to get the vocal voters to propose a larger income tax increase instead?

Comment by Peters Post Wednesday, Feb 8, 17 @ 11:01 am
Do people realize that much of the State budget goes to help the poor and disadvantaged. The benefits are distributed in a regressive way.

Most of the food bill today is not for food but for food preparation. Look at what is in your cart. Very little is just food.

And the bulk of medicine is paid through insurance.

When it comes to taxes, we need to use Pat Quinn’s phrase; “Everybody’s in and nobody’s out.”

Comment by Last Bull Moose Wednesday, Feb 8, 17 @ 11:02 am
@ArthurAnderson - you are absolutely correct, but I was trying to do both at the same time.

Comment by illini Wednesday, Feb 8, 17 @ 11:04 am
@ Just Observer–

My beloved son has graduated college, and it’s amazing how much $$ I have, now that I’m not writing 2 tuition checks each year.

I didn’t say I’d be writing large checks, but a beloved friend has long described me as “a little girl with a big mouth”. And I could do FB and Twitter campaigns, where I highlight a different race each day regarding any legislator who thinks this is a” budget solution “.

I’m not opposed to raising the income tax rate. I am opposed to increasing the misery of my fellow citizens.

Comment by Lynn S. Wednesday, Feb 8, 17 @ 11:08 am
==Joe B, I don’t think that most people even realize there’s no sales tax on food and meds.==

http://tax.illinois.gov/LocalGovernment/Overview/HowDisbursed/taxratesbreakdown.pdf

Doesn’t the 1% sales tax on qualifying food & drugs go to the state? Plus, I believe that home-rule municipalities can add a little bit more. Romeoville adds an additional 0.75%

This proposal to raise the food tax is just ridiculous. In Minnesota, they have a progressive income tax, NO sales tax on food/clothing, AND a $1+ billion surplus.

Comment by Romeo Wednesday, Feb 8, 17 @ 11:08 am
===go to the state?===

Goes to the municipals.

Comment by Rich Miller Wednesday, Feb 8, 17 @ 11:10 am
I would prefer that we raise the income tax (doesn’t have to be progressive), and eliminate the state portion of the sales tax entirely. I’m tired of paying twice (once I get paid, and again when I buy something).
Sure would encourage people to cross state lines into Illinois to buy something, thereby helping the local economy.

Comment by thoughts matter Wednesday, Feb 8, 17 @ 11:21 am
Rich, I don’t know how the grocery stores in Springfield are, but over here in Champaign-Urbana, the sales tax rates are broken out at the bottom of grocery receipts.

And while I do agree that an increasing amount of food dollars are spent on prepared meals, some of us are trying to be good and do more home cooking. (Restaurants have noticed some declining sales.)

I haven’t gone through other states tax tables, how confident are we that California taxes groceries and medicine at 7.5? That’s higher than Alabama (5%), and seems very un-California-ish.

Comment by Lynn S. Wednesday, Feb 8, 17 @ 11:21 am
Illini - I saw McCarter was calling, I answered, and then thought if he’d take my question(s).

I then hung up the phone….

I think he has every intention of running against Shimkus, or trying to pull a Prenzler in St, Clair County.

Comment by Highland IL Wednesday, Feb 8, 17 @ 11:21 am
Don’t forget that food stamp purchases are tax exempt by federal law, so this is not as regressive as it looks. The 1.4% will have to pay tax on their caviar at While Foods now, though.

Comment by Notsosure Wednesday, Feb 8, 17 @ 11:22 am
I’m sure Gov. Rauner is cheering on the efforts of the Senate to do the heavy lifting with no help from him.

And I’m sure Gov. Rauner’s bought-and-paid-for Proft/IPI/Chamber attack dogs will continue to kick the stuff out of every move the Senate makes.

Comment by wordslinger Wednesday, Feb 8, 17 @ 11:36 am
==My sister lived in Tennessee from about 2007-2011, and 5% is the food and medicine tax rate there.==

Tennessee does not have a state income tax.

Comment by City Zen Wednesday, Feb 8, 17 @ 11:36 am
Did Sen. Althoff really mean to suggest dropping a business tax and adding a food/medicine tax means “both sides are equal”? That’s some alternative math. Gotta wonder if that quote needed more context…

Comment by Threepwood Wednesday, Feb 8, 17 @ 11:36 am
A much more fair way of increasing income would be to calculate state income tax based on Line 22 of the Federal tax form (Gross Income) rather than Line 43 (Taxable income). In a word, eliminate adjustments and deductions, which mostly favor the well-to-do. And include retirement income, at least at some level. Sales tax on life’s necessities seems pretty regressive.

Comment by Skirmisher Wednesday, Feb 8, 17 @ 11:37 am
==In Minnesota, they have a progressive income tax, NO sales tax on food/clothing, AND a $1+ billion surplus.==

Minnesota taxes retirement income.

Comment by City Zen Wednesday, Feb 8, 17 @ 11:39 am
Good, the payroll tax was the worst idea ever.

Comment by Ron Wednesday, Feb 8, 17 @ 11:39 am
I have yet to see any of the supporters of the grand bargain present a spread sheet of the revenues vs expenditures in the bills. Moreover, there is current no SB 1 filed to replace the shell bill for education reform so that increased expenditure is not yet fixed. All we have is the GOMB analysis of the last grand bargain proposal which was billions out of balance. But now President Cullerton and Sen Radogno want to push this all through this week yet again. I have great concern for the human service providers, but also that our state does not blow up.

Comment by Rod Wednesday, Feb 8, 17 @ 11:50 am
Didnt the millionaires tax referendum pass overwhelmly?

Comment by Foster brooks Wednesday, Feb 8, 17 @ 11:54 am
Millionaire tax is obviously unconstitutional.

Comment by Anonymous Wednesday, Feb 8, 17 @ 11:59 am
“Obviously, this is a mathematical problem.” It’s really not. The math involved is easy. It’s a moral problem and a political problem–finding the fairest solution and implementing it.

I remember when people thought that perhaps Sen. Biss’s mathematical talents could solve the pension problem, but these are not technical problems. There’s no shortage of mathematical talent in this state. Political courage, and the willingness to do the right thing even at some sacrifice–that’s another story.

Comment by UIC Guy Wednesday, Feb 8, 17 @ 12:04 pm
Raising taxes on the necessities such as food and medicine, while lowering sales taxes on things like TV’s, Rolex watches, and the like certainly seems like it would favor the rich.

Perhaps a wiser political approach would be finding new sources of revenue such as marijuana.

Comment by A Jack Wednesday, Feb 8, 17 @ 12:18 pm
@- Anonymous - Wednesday, Feb 8, 17 @ 11:59 am:
–Millionaire tax is obviously unconstitutional.

Um, yeah — that was the whole point of the referendum, to make it constitutional. Try again.

Comment by Hieronymus Wednesday, Feb 8, 17 @ 12:22 pm
Both sides are right and wrong.

The State needs revenue NOW, so that requires raising the flat income tax and whatever else can be cobbled together enough to meet the State’s needs and still get the votes to pass. That’s more politics than math.

BUT we should ALSO be including a sunset provision on the proposed taxes tied to the passage of a progressive income tax. And a progressive income tax constitutional amendment being passed by the GA should be part of the Grand Bargain.

Comment by RNUG Wednesday, Feb 8, 17 @ 12:26 pm
I hope they aren’t holding off a vote for a millionaire tax amendment until closer the 2018 election. It would be a good stick to beat the no voters over the head with, especially after they vote to raise taxes on the middle class and poor.

Comment by A Jack Wednesday, Feb 8, 17 @ 12:31 pm
@Highland - I told the screener that my question involved funding Higher Ed and the willful destruction of social services agencies. Stayed on the phone for another 55 minutes, and guess what - my question was not put through. Was I surprised - not in the least.

Comment by illini Wednesday, Feb 8, 17 @ 12:31 pm
Yea! Another tax on the poor and middle class. How about sales tax on farm equipment,seed, fertilizer. How about a small increase on property tax on farmland and buildings. Then that property tsx freeze id t do bad.

Comment by blue dog dem Wednesday, Feb 8, 17 @ 12:36 pm
I don’t like food and medicine tax either but if it breaks the impasse okay. But folks don’t think that the poor are covered by food stamps. It’s Supplimental Nutritional Aid Program. Supplimental! 194 a month is a Supplimental. It’s not meant to be your whole food budget. So yeah it’s going to hit them hard. But if we don’t slow the collapse we will fail.
I also hate what they are going to do to the poor teachers. Solidarity sisters and brothers. I fear for us all

Comment by Honeybear Wednesday, Feb 8, 17 @ 12:44 pm
The payroll tax was the worst tax idea, given a goal of job creation.

But expanding sales tax to include food and medicine is regressive.

I thought Rauner’s original plan when he ran for governor included taxing law firms and professional services. Might be a better approach.

Comment by Robert the Bruce Wednesday, Feb 8, 17 @ 1:00 pm
Anonymous - Wednesday, Feb 8, 17 @ 10:57 am:

==This is the sort of crap they do in the old Confederate States==

Huh, I didn’t realize States like California (7.5), Minnesota (6.875), Washington (6.5), Massachusetts (6.25), and Ohio (5.75), among others are “Old Confederate States”

http://www.taxadmin.org/assets/docs/Research/Rates/sales.pdf

I don’t think you are reading your chart correctly. It says that most of the states fully-exempt groceries and drugs from sales taxes (an asterisk means exempt). See also http://blog.taxjar.com/states-grocery-items-tax-exempt/

There are only about 6 states that fully these types of things.

Comment by House of Lyons Wednesday, Feb 8, 17 @ 1:05 pm
Sorry for the typo, there are only 6 states that fully tax these types of things.

Comment by House of Lyons Wednesday, Feb 8, 17 @ 1:06 pm
===Minnesota taxes retirement income.===

And your point is….? Minnesota faced a $6.2 billion deficit when their Governor came into office in 2011. http://www.huffingtonpost.com/carl-gibson/mark-dayton-minnesota-economy_b_6737786.html

Comment by Romeo Wednesday, Feb 8, 17 @ 1:35 pm
@Romeo - Minnesota certainly didn’t get out of that hole by exempting the fastest growing segment of the population from taxation, now did they? If you want Minnesota results, you need Minnesota tax rules. That would be about 6% on all retirees. Good luck with that.

Comment by City Zen Wednesday, Feb 8, 17 @ 1:55 pm
==Taxing medicine & food seems regressive.==

Taxing meals at McDonalds, but not filet mignon and lobster at the grocery store, is regressive, and that’s what our system is now. Wouldn’t care to speculate on medicine, but I suspect that taxing over-the-counter drugs while exempting prescription drugs, as we do now, might be more regressive than people seem to think.

It is never as simple as the soundbites would have you believe.

Comment by Whatever Wednesday, Feb 8, 17 @ 5:28 pm
Tax. Tax. Tax. Tax this. Tax that. Tax the other guy. Sales tax. Sin tax. Property tax. Progressive tax. Tax retirement. Tax services. Tax medicine. Tax food.

Spending cuts……….?

Comment by Blue dog dem Wednesday, Feb 8, 17 @ 8:24 pm
@- Last Bull Moose - Wednesday, Feb 8, 17 @ 11:02 am:

Do people realize that much of the State budget goes to help the poor and disadvantaged. The benefits are distributed in a regressive way.

Universal Basic Income (UBI), baby. Loved by many libertarians, and a really fascinating proposition that, if done in a certain manner, could really decrease the size of government, too.

Comment by Lynn S. Thursday, Feb 9, 17 @ 1:35 am
@- A Jack - Wednesday, Feb 8, 17 @ 12:18 pm:

Raising taxes on the necessities such as food and medicine, while lowering sales taxes on things like TV’s, Rolex watches, and the like certainly seems like it would favor the rich.

Perhaps a wiser political approach would be finding new sources of revenue such as marijuana.============

I know some folks who would be THRILLED to tax marijuana, but they want to give all the proceeds to the schools.

Comment by Lynn S. Thursday, Feb 9, 17 @ 1:48 am
@- Whatever - Wednesday, Feb 8, 17 @ 5:28 pm:

==Taxing medicine & food seems regressive.==

Taxing meals at McDonalds, but not filet mignon and lobster at the grocery store, is regressive, and that’s what our system is now. —————-

But under this proposal, if I went to the grocery store and bought ground beef and potatoes to make burgers and fries, I would pay 5%, rather than the 1% I pay now. How is this (475% increase) a good thing? And the cattlemen’s association wants an explanation of how you are assigning tax rates to particular cuts of meat…

———-Wouldn’t care to speculate on medicine, but I suspect that taxing over-the-counter drugs while exempting prescription drugs, as we do now, might be more regressive than people seem to think. ——-

Quite possibly true. Do you know any grad students in economics who would be interested in exploring these questions?

Comment by Lynn S. Thursday, Feb 9, 17 @ 2:01 am

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