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Homebuilding contractors warn against service tax proposal

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* SJ-R

An organization representing homebuilding contractors said Tuesday that a proposal in the Illinois Senate’s “grand bargain” that would apply the sales tax to home repairs, among other services, would cost the state hundreds of jobs.

The sponsor of the legislation, however, said extension of the tax to certain services is necessary to get the state out of its financial hole.

The bill would apply a 6.25 percent sales tax to home repairs, landscaping, dry cleaning and the use of storage units.

According to the Home Builders Association of Illinois, imposition of the tax would discourage home owners from having work done, causing a $47 million decline in home repair and maintenance work, 521 fewer Illinois jobs and nearly $8 million less in local and state tax revenue.

We need every, single job we can get in this state and I don’t want to seem harsh or dismissive, but the lack of a fully funded state budget has cost Illinois a whole lot more than 521 jobs - if, indeed, those home repair jobs will actually disappear. That’s a pretty darned precise estimate.

Again, when you lose your own job the unemployment rate is 100 percent. I’ve been there. I don’t wish that desperation on anybody. But something has got to give here and it would be helpful if the Home Builders Association could come up with their own ideas.

posted by Rich Miller
Wednesday, May 3, 17 @ 10:55 am

Comments

  1. “That’s a pretty darned precise estimate.”

    Meh. On the first campaign I worked on (as in paid, not volunteer), I was advised by a pretty experienced operative to never report back a number that ends in zero because its less believable. If the actual number is 520, either add one or subtract one so that it looks more precise.

    Comment by Juice Wednesday, May 3, 17 @ 11:01 am

  2. Sales tax on Ag equipment. We need a Dem gubernatorial candidate to show some courage.

    Comment by blue dog dem Wednesday, May 3, 17 @ 11:04 am

  3. I just don’t understand why certain industries think they should be excused from sales tax.

    You can convince me on food and drugs- the impact on poor families for these necessities is a prohibitive factor.

    But, barbers and lawyers and every other service or industry that is exempt? Seems like there is a bit of entitlement.

    I get that nobody wants their service or product to be taxed, but if everyone is taxed the “playing field” is level.

    Plus this makes us more like Wisconsin (Yay!!) and wasn’t that the Rauner plan? /s

    Comment by JS Mill Wednesday, May 3, 17 @ 11:07 am

  4. A tax on home repairs would indeed further discourage home owners from having work done by legitimate contractors and possibly lead them to attempt repairs on their own that they may have no clue how to complete with any hint of workmanship or worse yet not have repairs done at all. It’s not as if HGTV hasn’t already turned average Joe homeowner into a master carpenter. An additional tax on home repairs surely won’t improve the existing housing stock.

    Comment by TheGoodLieutenant Wednesday, May 3, 17 @ 11:11 am

  5. ===I get that nobody wants their service or product to be taxed, but if everyone is taxed the “playing field” is level.===

    Building materials are already taxed. This is essentially a tax labor.

    Comment by TheGoodLieutenant Wednesday, May 3, 17 @ 11:16 am

  6. Sorry, I don’t buy it. A 6.25% sales tax isn’t going to stop me from hiring a plumber, electrician, or other repair person when needed. We try to DIY or get friends to help if at possible anyways so while I might grumble about an additional tax, I’d just suck it up and pay it.

    Comment by Homeowner Wednesday, May 3, 17 @ 11:18 am

  7. Geez, Rauner should contract with the whiz kids at HBA for projections on his Turnaround Agenda. They know how to crunch the numbers.

    His crew at GOMB plus the Superstars obviously aren’t up to it. Can’t find the state calculator, I guess.

    Comment by wordslinger Wednesday, May 3, 17 @ 11:19 am

  8. I’ve been wanting to build a house for years and I just bought a lot in Iowa less regulations and cheaper taxes . What were you saying about Illinois

    Comment by Yep that guy again Wednesday, May 3, 17 @ 11:27 am

  9. =Building materials are already taxed. This is essentially a tax labor. =

    Contractors and businesses do not pay taxes on materials if they have a resale number. They would pass that tax onto the customer. They should be taxing the customer on the material already.

    A contractor that isn’t “legitimate” probably won’t have a tax number and will pay tax on the item when he purchases the supplies.

    I am 100% ok with a tax on the labor in addition to the material.

    Comment by JS Mill Wednesday, May 3, 17 @ 11:31 am

  10. Sure, potentially suboptimal tax policy would be preferable to not having a budget, but that doesn’t necessarily make it good. The fear of going above a 5% income tax seems to be what is driving the desire to make Illinois tax collection more complicated. I suspect a lot of small business people providing home repairs would rather pay more on their income​ tax than to deal with calculating and collecting yet another tax, even if their total tax we’re higher under a higher income tax.

    Comment by AC Wednesday, May 3, 17 @ 11:33 am

  11. How to boost the underground economy for home repairs - pay cash under the table. It’ll be a boom for hiring the retiree down the street to run his lawn tractor over your lawn or hiring the guy recommended by your neighbor to shingle your roof.

    Comment by Aldyth Wednesday, May 3, 17 @ 11:39 am

  12. @AC- for me at least, I think we need to expand the tax base. As it stands, Illinois only taxes about 1/3 of the economy that could be subject to a sales tax.

    I know it isn’t popular, and I do not want to pay more taxes per se, but something is needed to generate revenue to support critical services and pay the huge debt that has accrued over 90 years.

    Comment by JS Mill Wednesday, May 3, 17 @ 11:41 am

  13. Actually, since home repair cannot he outsourced to another state, it’s an ideal industry to which to extend the sales tax. On the margins I suppose some repairs will be deferred (although not indefinitely) and maybe some repairs will be done by the owner. But honestly, the incentives to do-it-yourself are already there. If you know how to do it, you most likely will do it. If you don’t know how to do it, it’s hard to see how 6.25% will deter you from hiring someone.

    Comment by the Other Anonymous Wednesday, May 3, 17 @ 11:42 am

  14. So people are going to cancel a $10,000 kitchen remodel over $675? I find that hard to believe. They might scale down the size of their new fridge or appliances but I don’t think they are going to cancel projects. It’s such a small amount of tax.

    Comment by Paul Wednesday, May 3, 17 @ 11:43 am

  15. ===cancel a $10,000 kitchen remodel over $675?===

    It won’t even be that. As noted by another commenter, this is a tax on labor performed.

    Comment by Rich Miller Wednesday, May 3, 17 @ 11:57 am

  16. “Sorry, I don’t buy it. A 6.25% sales tax isn’t going to stop me from hiring a plumber, electrician, or other repair person when needed.” - But it may affect you when you decide to do upgrades that are maybe not needed but because of the added cost it may prohibit you from having that work done. When labor is one of the highest components of a job a 6.25% increase can be quite a jolt.

    Comment by Arock Wednesday, May 3, 17 @ 11:57 am

  17. i doubt somone will drop repair work to save 6%. but the money get spent in IL so those tax dollars may go to hiring a new social service worker who the. pay for home tepairs since they are working and thus increases work

    Comment by Ghost Wednesday, May 3, 17 @ 11:59 am

  18. A sales tax on any good or service will depress consumption. Basic economics.

    But that’s a weak argument against.

    And I agree the exemption for farm equipment needs to go. Any law or regulation that favors one industry over another distorts the free market, which is the Republicans’ mantra.

    Comment by Sir Reel Wednesday, May 3, 17 @ 12:02 pm

  19. So the beef is that the sponsors pick out certain services to add a sales tax on. Why? Divide and conquer is easier get bills passed. If anyone cares to look at the CoGFA web site, they would see a nifty report on service taxes dated Jan 2017. In it you would read what a broad-based service tax would look like and the potential for revenue. Very enlightening. How about lowering the overall sales tax rate of 6.25% to 3% then apply to all services and retail. But whether its incentive programs or taxes, I oppose our elected representatives picking and choosing winners and losers.

    Comment by Julian's Melange Wednesday, May 3, 17 @ 12:26 pm

  20. ===Contractors and businesses do not pay taxes on materials if they have a resale number. They would pass that tax onto the customer. They should be taxing the customer on the material already.===

    Contractors aren’t exempt from sales taxes on materials unless they have a Building Materials Exemption Certificate issued by IDOR. The tax exemption is only applicable to projects in enterprise zones or high impact business locations.

    And yes a contractor would be foolish not to include the material taxes in the bid proposal.

    Comment by TheGoodLieutenant Wednesday, May 3, 17 @ 12:30 pm

  21. JS Mill - I understand the argument about the tax base, it may even be better overall policy. It’s just a personal preference, I’d rather have a relatively high, ideally progressive, income tax than to be nickled and dimed here and there. I suspect it’d add some complexity to running a home repair business. At least there isn’t serious consideration being given to personal property taxes and vehicle registration fees of hundreds of dollars per year, like in some states.

    Comment by AC Wednesday, May 3, 17 @ 12:31 pm

  22. === A sales tax on any good or service will depress consumption. Basic economics. ===

    Yes, yes, yes. It’s always the argument that another $500 on $10,000 or another x percent won’t deter people. Yes, it does.

    That may not be a reason not to adopt the tax, but let’s not pretend that it won’t have an affect.

    Comment by Just Observing Wednesday, May 3, 17 @ 12:32 pm

  23. I’m noticing that anything NOT an income tax has really got support from several of the Raunerite shills…funny that.

    Comment by PublicServant Wednesday, May 3, 17 @ 12:36 pm

  24. Well, if they chose not to do repairs because of a little tax, they probably will be stupid enough to try to do the work themselves. Then they will *have* to call someone to fix their mistake and charge them more. Therefore, this could increase jobs and taxes! LOL

    Comment by Just Sayin' Wednesday, May 3, 17 @ 12:44 pm

  25. @AC- well put!

    Comment by JS Mill Wednesday, May 3, 17 @ 12:57 pm

  26. While I don’t think a sales tax will deter people from doing a home reno, it will probably have them compensate in other ways, meaning lower sales tax revenue from other sources.

    But the times are a changing, and a service-based economy needs a modernized tax structure. But if the concern is services tend to cost more than your typical Gap purchase, why not have a lower rate like 3%?

    Comment by City Zen Wednesday, May 3, 17 @ 12:58 pm

  27. - PublicServant - Wednesday, May 3, 17 @ 12:36 pm:

    The more a tax disproportionately hurts the middle class and poor the more likely the wealthy, represented by Rauner, will embrace it.
    I’m for a progressive income tax..

    Comment by Mouthy Wednesday, May 3, 17 @ 12:59 pm

  28. Is it safe to assume counties and municipalities will add their share too?

    Comment by City Zen Wednesday, May 3, 17 @ 1:00 pm

  29. You’re on it Mouthy.

    Comment by PublicServant Wednesday, May 3, 17 @ 1:08 pm

  30. ==I’m for a progressive income tax..==

    If it doesn’t include retirement income equally, it’s not progressive.

    Comment by City Zen Wednesday, May 3, 17 @ 1:30 pm

  31. “==I’m for a progressive income tax..==

    If it doesn’t include retirement income equally, it’s not progressive.”

    Sure, you tell them…

    Comment by Anonymous Wednesday, May 3, 17 @ 1:48 pm

  32. - Anonymous - Wednesday, May 3, 17 @ 1:48 pm:
    OOPS, was me

    Comment by Mouthy Wednesday, May 3, 17 @ 1:49 pm

  33. Mouthy - Keep the engine running…

    Comment by City Zen Wednesday, May 3, 17 @ 1:57 pm

  34. @yep that guy again– enjoy those Iowa income tax rates, 8% for $42k, 9% over $63k.

    Comment by Illinois O'Malley Wednesday, May 3, 17 @ 1:58 pm

  35. I know several small contractors who are very much against this. They make money on some jobs, and some jobs they don’t. As it is now, if they make money on a job, the state gets income tax on what they make. Under this new proposal, the state makes money even if the contractor loses money on the job.

    Comment by DuPage Wednesday, May 3, 17 @ 2:03 pm

  36. Just advertise as “free labor” and markup materials. problem solved.

    Comment by diy Wednesday, May 3, 17 @ 2:21 pm

  37. This tax is on ANY repair or improvement, including vandalism, storm damage, floods, etc. This allows State and Local government to make money off people’s bad luck.

    Tornado hits your house? Too bad. Pay me. Illinois River fills your front room? Too bad. Pay me. Johnny the juvenile delinquent tags your garage? Too bad. Pay me.

    Comment by Suburbanon Wednesday, May 3, 17 @ 2:43 pm

  38. - Yep that guy again - Wednesday, May 3, 17 @ 11:27 am:
    You may want to put the “For Sale” sign on your house before it needs any work. Like a most other states, Iowa has taxed services for years.

    Also those of you who say you’ll go across state lines where you’re dry cleaning, yacht service, and haircuts aren’t taxed, be ready for a road trip because neighboring states tax most of these things.

    Arguably Illinois puts itself at a competitive disadvantage than other states by not collecting enough taxes to pay its outstanding bills.

    Comment by State of Denial Wednesday, May 3, 17 @ 2:46 pm

  39. “Well, if they chose not to do repairs because of a little tax” - it is not a little tax and will increase over the years as the State needs more and more of your money. Then when you compound it with all the other services they are looking to tax and more will be added down the road and include the income tax increase you are talking some real money. Just like a 2% increase in income tax doesn’t sound like much but was actually a 67% increase and you add it up over the years and the State has taken quite a bit of your money.

    Comment by Arock Wednesday, May 3, 17 @ 2:51 pm

  40. == Just like a 2% increase in income tax doesn’t sound like much but was actually a 67% increase and you add it up over the years and the State has taken quite a bit of your money.==

    Don’t forget to apply 7% compounded interest lost over those years.

    Comment by City Zen Wednesday, May 3, 17 @ 3:07 pm

  41. It is foolish and short sighted to think increasing taxes does not impact buying habits. When the state income tax increased from 3% to 5%, it took $1000 out of the pocket of someone earning $50K. People won’t go out to eat as much and if other taxes are included, such as lawn service, more and more people will put down their own fertilizer or bargain like heck to have the small business owner drop their price.

    Wait until the state income tax goes up in the next year or two to 5-6%. People’s buying habits will change dramatically. It isn’t just one tax that is the killer, it is tax after tax after increasing tax that pummels the economy.

    Comment by Anonymous Wednesday, May 3, 17 @ 4:19 pm

  42. ==that pummels the economy==

    You want to know what else does that? Not having a budget and not paying your bills.

    Comment by Demoralized Wednesday, May 3, 17 @ 4:56 pm

  43. And apparently Demoralized that is the only thing you pulled from my post. All you care about is taxpayers funding your salary and pension and insurance.

    Comment by Anonymous Wednesday, May 3, 17 @ 6:11 pm

  44. Anon

    Um where did you get that from? Apparently you’re having a conversation with yourself because nowhere ever have I said that. When you want to address what I wrote and not what you made up let me know.

    Comment by Demoralized Wednesday, May 3, 17 @ 8:18 pm

  45. Oh and by the way tell me where what I said is wrong. I will help you out. It’s not

    Comment by Demoralized Wednesday, May 3, 17 @ 8:20 pm

  46. Also you can bite me

    Comment by Demoralized Wednesday, May 3, 17 @ 8:21 pm

  47. Texas is looking better and better. No income tax, low sales tax, jobs, good schools and cheap homes. Come on down before taxes go UP again in Chicago.

    Comment by Atsuishin Wednesday, May 3, 17 @ 11:24 pm

  48. “causing a $47 million decline in home repair and maintenance work, 521 fewer Illinois jobs”

    I don’t believe it.

    How many people can form an accurate estimate of what a repair will cost, before they call a contractor.
    And if you could, and you were only off by 6.25%, you’d consider yourself pretty good at estimating.
    Either way, you’d only opt out of making the repair, if there was no way you could come up with the money (in which case that 6.25% is probably not the reason), or it was an optional remodel not a necessary repair (in which case again that 6.25% isn’t going to be a deal breaker).

    Comment by PDJT Thursday, May 4, 17 @ 8:38 am

  49. A repair service tax, on top of the extreme property taxes, sales tax, gasoline tax…

    Nothing like socking it to Illinois residents.

    Sad.

    Comment by Anonymous Thursday, May 4, 17 @ 8:45 am

  50. anon8:45, nah not if you are like Demoralized. It’s your duty to pony up more and more to make sure his lifestyle, now and in the future, is lavish.

    Taxes will keep going up and up and up!!

    Comment by Anonymous Thursday, May 4, 17 @ 9:19 am

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