The Capitol Fax Blog » Here we go… *** Updated x1 ***

Tuesday, Mar 20, 2007

* Remember my Sun-Times column about the governor using black ministers to help sell his tax hikes and budget expansions? Well, it has begun [from a press advisory]…

Governor Rod R. Blagojevich on Tuesday, March 20, will receive the support of dozens of African American ministers who will meet with him at the First Church of Deliverance to endorse his FY2008 budget proposal, Invest in Illinois Families.

The ministers will also urge their congregations to join them in calling on members of the Illinois General Assembly to approve the Governorâ€™s proposed budget, which will expand access to healthcare to all Illinoisans, make a historic investment in public education and ask big businesses to pay their fair share in state taxes.

* I’d like to have been a fly on the wall at this sit-down. But at least they’re talking. From Stella’s column…

Mayor Daley and Gov. Rod “Tax ‘Em High” Blagojevich dined together at the onesixty blue on West Randolph last Thursday evening.

* Subscribers saw more details about the governor’s response to this story, but Crain’s had a good roundup about what the business-backed Tax Foundation had to say yesterday…

Gov. Rod Blagojevichâ€™s proposed $7-billion tax on business would dwarf the biggest tax increases enacted in other states over the past decade, a new study says.

The new taxes, including a $6-billion gross-receipts tax and a $1-billion payroll tax, would consume almost 1.3% of the stateâ€™s economic output, nearly three times more than a tax increase enacted by Indiana in 2003, according to the Tax Foundation, a conservative-leaning nonprofit think tank in Washington, D.C.

Gov. Blagojevichâ€™s tax proposal would increase state revenue by nearly 27%, almost twice the 14% increase in revenue Nevada saw from a hike that state enacted in 2004. Four of the top 10 state tax hikes in the past decade increased revenues by only single-digit percentages.

â€œIf the governor successfully enacts his gross-receipts tax plan, it is clear that taxpayers in the Land of Lincoln will be on the hook for the largest state tax increase of the decade,â€ the study concludes.

* More details of that study can be found at this link.

* Crain’s also had this…

The Blagojevich administration on Monday advanced a new reason why its proposed $6.3-billion tax on businessesâ€™ gross receipts would be good for Illinois: â€œNot one nickelâ€ would be spent on bureaucracy.

Speaking to the City Club of Chicago, Illinois Chief Operating Officer John Filan promised that all proceeds of the controversial levy proposal would be passed on to local schools, used to extend health insurance to the uninsured, funneled into infrastructure bonds and the like.

â€œNot one nickel of the new revenue is going within state government,â€ Mr. Filan said, adding, when questioned later, that while some additional administrators might need to be hired, the state would reduce its headcount elsewhere to compensate.

* And here’s a roundup of other budget stories and columns…

* Finance expert says new tax will face changes

* State chamber official blasts governor’s new tax

* Kadner: House committee to vote on school tax swap plan

* Momentum for Gov. Blagojevich’s FY2008 budget proposal continues to build [press release]

* Don’t bet on lottery to bail out state’s pension debt

*** UPDATE *** From a follow-up press release…

Close to 200 African Americans ministers support the Governorâ€™s plan. Besides the dozens congregated at First Church of Deliverance, ministers in Peoria, Decatur, East St. Louis and other regions across the state will issue statements endorsing the Governorâ€™s proposals. The ministers and their congregations will send postcards to members of the Illinois General Assembly urging them to support the Governorâ€™s plan.

- posted by Rich Miller

20 Comments

- Cassandra - Tuesday, Mar 20, 07 @ 8:46 am:
How dumb does Filan think we are. Real dumb, apparently, Typical of the Blago “brain trust.”
We’re all financial innocents and Blago can put anything over on us.

It may well be true that proceeds from the GRT will not go to the “state bureaucracy.” But money is fungible. The addition of billions annually to the state treasury will provide all kinds of opportunities to free up existing general revenues for whatever the guv and cronies want, including Emil’s Earmarks, lavish raises for state employees, lots more patronage employees at the upper end of the salary scale, more squiffy yet lucrative contracts for political contributors, and so on.

Our legislators must be salivating.

- demgrrl - Tuesday, Mar 20, 07 @ 8:54 am:
the tax foundation is bought and paid for by corporations like exxon and mobil. they’ll do everything they can to help big business hold on to their billions. why any one would be on their side, while we’re all being gouged, is beyond me.

if the state is going to spend all the grt money on health care and education, I’m all for it. everyone needs to move beyond their dislike for the gov if they really want to make a change. if not, we’ll all still be talking about the inequities in our school system and how our health care premiums are skyrocketing because the uninsured still need to get health care thru the emergency room.

- VanillaMan - Tuesday, Mar 20, 07 @ 9:13 am:
This is simple. You raise the cost of doing business in one state - you force businesses to close and relocate to the other state. Any GM worth their pay will relocate when necessary. To do otherwise would mean a pink slip.

This is reality. If it doesn’t fit into Blagojevich’s dream world, he is the loser and so area we.

Having great reasons to raise the cost of doing business makes political sense, but not common sense. It doesn’t matter what you will spend the money on. When you bleed businesses out of Illinois, you are dead.

Blaming businesses or claiming they are evil cabals intent on destroying the world and enslaving workers on little hampster wheels is not only wrong, it doesn’t matter a fig. You don’t have to like businesses, just the ones you depend upon to keep you little world afloat.

Blaming a non-profit tax organization that explains why your little world is cracked as part of an evil cabal is not only wrong, it is stupid.

Blagojevich can tax all he wants and spend it anyway he wants. But the moment he overtaxes, it is all over. At what point do you people get a clue?

- RMW Stanford - Tuesday, Mar 20, 07 @ 9:41 am:
“The new taxes, including a $6-billion gross-receipts tax and a $1-billion payroll tax, would consume almost 1.3% of the stateâ€™s economic output, nearly three times more than a tax increase enacted by Indiana in 2003, according to the Tax Foundation, a conservative-leaning nonprofit think tank in Washington, D.C”

Indirectly it would consumer even more, even if no businesses left the state, taxes always carry with them a large economic deadweight loss. So the actual amount of the state economic output that will be lost will be 60%-100% higher.

- If It Walks Like a Duck... - Tuesday, Mar 20, 07 @ 12:30 pm:
How many black ministers are in the Gov’s Ravenswood neighborhood? With a census of 3.98% blacks, I’d say not many.

- Bill - Tuesday, Mar 20, 07 @ 1:04 pm:
When Rod sings Precious Lord, God listens. You better watch out Vanilla man. Greed is a sin! Health care and pre-school for all!

- GettingJonesed - Tuesday, Mar 20, 07 @ 1:19 pm:
Wonder is the ministers know they will be paying the payroll tax for the insurance?

- VanillaMan - Tuesday, Mar 20, 07 @ 3:12 pm:
When Rod sings “Precious Lord”, God listens - true, and so do the Feds with their wired witnesses around him.

Black ministers are encouraging their congregations to contact their representatives to support Blagojevich. How many representatives with black consituencies HAVEN’T supported Blagojevich?

They are already in his corner. Where are the converts?

- leigh - Tuesday, Mar 20, 07 @ 3:51 pm:
How come only black ministers are supporting Blago? And how can they stand next to a man who supports abortion?

- Roadkill - Tuesday, Mar 20, 07 @ 4:56 pm:
After reading the gov’s press release, I wouldn’t be surprised if he also walks on water! No wonder all of those preachers are lined up behind him.

They should be careful though about getting involved in support of political issues or they may end up with the IRS calling to question the legitimacy of their not-for-profit status.

I also think they may end up with more than a few church members questioning their interpretation of “God’s will” in this matter. I know I would if my pastor took a stand in favor of this bold grab for greenbacks.

- Bill - Tuesday, Mar 20, 07 @ 5:20 pm:
VM,
There you go playing the indictment card again. It didn’t work before the election and it won’t work now.
When all else fails allude to imaginary wrong doing and name calling.
It is the average working person’s turn now. Its time for big business to pay their fair share for a change.

- leigh - Tuesday, Mar 20, 07 @ 5:21 pm:
Bill it is not “big business” the gov is attacking ALL business.

- Bill - Tuesday, Mar 20, 07 @ 5:32 pm:
No leigh he is not. Businesses with less than $1million would be exepmt. so would all exports from Illinois. So would insurance companies and many others. So, to an extent, would manufacturers, who would pay only .5% of reciepts in tax.
You probably already know this but details like this are what the Chamber , IMA, and other front groups don’t want the public to know. They would rather try to frighten them with threats of job loss and utter catastrophe if they are forced to pay their fair share.
Five othere states have implemented this same kind of tax and are thriving economically.

- Just the facts - Tuesday, Mar 20, 07 @ 6:27 pm:
“Five other states have implemented this same kind of tax and are thriving economically.” I would be interested in some discussion by Bill of the empircal basis of this claim.

The most recent state to implement a Gross Receipts tax is the State of Ohio. I’ve heard Ohio described in a number of ways, but “thriving economically” is not one of the descriptions of Ohio with which I am familiar. As I understand it, Ohio is a state that ranks right up their with Illinois on the list of states that have suffered large numbers of losses of skilled manufacturing jobs in recent years. (Now in anticipatin of a rejoinder by Bill - I am not ascribing those jobs losses to the Ohio Commercial Activities Tax, the job losses were there before the tax and they will remain after the tax). As I recall, another recent state that adopted a gross receipts tax was Kentucky. I don’t believe Kentucky has been known to be particularly vibrant, economically. Bill may cite Texas as a state that is doing well economically and has adopted a gross receipts tax. Well, just as Ohio was doing poorly before the CAT, Texas was doing well before the adoption of the Texas Margin Tax. Texas went to their gross receipts tax because of an aversion to a regular income tax, and the problems associated with their franchise tax. Finally, we come to the State of Washington which enacted their version of a gross receipts tax the B & O tax back during the great depression. It is a wonderfully arcane tax that is beloved by tax attorneys and accountants. It has a multitude of rates and a multitude of exceptions. Off the top of my head I’m not sure which state would be the fifth state on Bill’s list, but I am sure he will tell me.

- Bill - Tuesday, Mar 20, 07 @ 7:04 pm:
Vermont is the fifth state. Indiana also instituted a GRT and it has since repealed it in favor of many other more regressive taxes which I am sure will thwart the growth of business and force existing businesses to move to Illinois to avoid them and to take advantage of our busdiness friendly enviroment fostered by Gov. Blagojevich. They will rue the day that they gave up the GRT. You have made my point. In Washington and Texas the GRT did not harm business and it could be argued that they are thriving. Both states have matched or exceeded the national growth rate in both personal income and gross state product. In Ohio, the Business Roundtable said,”Unlike the old business taxes, this new tax(the GRT)does not penalize job creation and investment, and also encourages participation in the global marketplace.” Time will tell I suppose. I hope that Illinois will have the foresight to institute this fair,progressive tax to fund the vital services our citizens deserve.

- Just the Facts - Tuesday, Mar 20, 07 @ 8:38 pm:
Ohio coupled the enactment of the CAT tax with the repeal of the personal property tax on businesses and I believe the repeal of the corporate income tax. My understanding of the Governor’s plan is that at this time there is no plan to repeal the personal property tax replacement income tax - the Illinois tax on corporations and pass-through entities that replaced the personal property tax in 1979. In addition, although there have been some vague representations that the corporate income tax would repealed at some point, I don’t believe that the Governor has committed to repeal the corporate income tax. As a result, I would submit that there are some factual differences between Illinois and Ohio which may account for the position of the Business Roundtable in Ohio.

As to Indiana, I will be charitable and construe your comments as sarcasm. The Indiana grt was imposed in addition to the regular income tax and created additional layers of complexity that were stripped away by the repeal of the tax and the reform of the remaining corporate income tax.

As to Texas, their tax has been in effect for about a year as I recall and was not the replacement for a corporate income tax, but rather the rather goofy Texas franchise tax which was riddled with exceptions.

As to Washington, while Washington did give us Courtney Love, and Nirvana and Starbucks, I’m not sure that adopting their arcane tax system is a path that we should follow. Although they are an example of how business can adapt to any goofy system of taxation.

- The Truth - Tuesday, Mar 20, 07 @ 8:45 pm:
Bill:

The Texas gross receipts tax only went into effect on January 1 of this year, and the first returns aren’t even due until May of 2008:

http://www.wjh-cpa.com/faqs_and_tips/margin_tax_faq.html#when

Vermont does not have a general gross receipts tax.

Your Washington argument is meaningless because they do not have a state income tax, which mitigates the damage of the gross receipts tax.

Similarly, in Ohio the GRT was imposed in a package of overall tax cuts, which again will mitigate the negative impact of the gross receipts tax. Furthermore, that tax has only been in effect since 2005 and is not yet fully implemented, so we won’t really know the damage it is causing for a few more years.

Any more pearls of wisdom for the folks here?

- In the Sticks - Tuesday, Mar 20, 07 @ 9:22 pm:
I would have more faith in Rod doing the Lord’s work if his tax return reflected the practice among the faithful of tithing. His charitable donations on an income of $300,000 are only about 1 1/2%. He is not charitable with his own money.

- Disgusted - Tuesday, Mar 20, 07 @ 9:59 pm:
If this Great Regressive Tax passes the legislature, there is only one solution to keep from paying the pass-through which will surely come from companies we do business with - buy as little as possible, online from low or no tax states and with free delivery. Beat the bastards at their own game.

- The Truth - Wednesday, Mar 21, 07 @ 8:50 am:
Disgusted:

Out of state vendors making sales into Illinois would still have to pay the gross receipts tax on their Illinois sales and they would still pass that tax on to the consumer in the form of higher prices.

However, out of state vendors would not have the tax pyramided into their sales because all their inputs would not be subject to the Illinois gross receipts tax.

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