* The Illinois State Medical Society came out against the gross receipts tax yesterday.
llinois’ foremost doctors group gave a thumbs-down Thursday to Gov. Rod Blagojevich’s sweeping health care reform plan and the new statewide corporate tax that he would use to pay for it.
The Illinois State Medical Society, a politically powerful association of 13,000 physicians statewide, said it still supported the idea of universal health care, just not the governor’s plan.
* More…
“I’m operating under the assumption that the gross-receipts tax isn’t going to pass, at least in its present form,” said Charles Wheeler, director of the public-affairs reporting program at the University of Illinois at Springfield.
The medical society’s criticisms are significant, he said, because the group apparently weighed the new money that doctors could receive under Illinois Covered against other details of the plan.
“I don’t know if it’s the last nail in the coffin,” he said. “From my perspective, the coffin lid was nailed shut some time ago.”
* Judy Baar Topinka claimed the tax proposal was “hideous.”
“This is just the biggest tax plan that’s ever been proposed, the biggest spending plan. He knows that the state is in hock; it’s in debt; it has no money,” she said in Chicago Thursday…
* Declaring the governor’s gross receipts tax “dead on arrival,” the Sun-Times editorial board suggests looking at a tax swap instead…
There is an alternative, but it will require the governor to reverse his opposition to raising the sales and income taxes. The governor is trying to avoid hitting up “working families” but he won’t admit the obvious — taxes imposed on businesses are passed on to working families anyway. He also says businesses aren’t paying their “fair share” of the income tax, ignoring the fact that businesses pay a host of other taxes.
One approach we have long advocated is contained in Senate Bill 750, which would generate more than $9 billion by extending the sales tax to certain services and by raising the individual income tax rate to 5 percent from 3 percent and the corporate rate to 8 percent from 4.8 percent. A huge chunk of that money — $3.6 billion — would be returned to taxpayers in the form of property tax relief or tax credits, with the rest going to education.
* But budget honcho John Filan declares the corporate income tax system “broken” in an op-ed.
Consider that in 2004, average individual tax filers paid $1,500 in taxes, while 12,500 of the largest corporations in Illinois with billions in annual revenue paid an average of $151 in corporate income tax. This simple statistic shows astounding inequity in our tax system that cannot continue.
Dozens of corporate loopholes for big businesses have increased the burden on individual taxpayers and small businesses. The governor’s proposed gross receipts tax is tailor-made to fix this inequity and exempts 85 percent of businesses in Illinois, in addition to exemptions for exports, retail food and prescription drugs.
What Filan isn’t telling you is that corporate tax receipts since 2004 have been way up.
* Meanwhile, the Center on Budget and Policy Priorities, a liberal think tank, says the GRT isn’t a bad idea, but believes changes must be made…
One potential problem with a GRT is its impact on high-volume, low-profit margin businesses, for which the tax can represent a high percentage of potential profits. Another potential problem is that a GRT favors businesses that conduct most operations in-house over businesses that purchase intermediate goods and services from other firms, since the tax is imposed each time a business purchases inputs from an outside firm. (This latter problem is called “pyramiding.â€)
Illinois can address both of these problems, however, by allowing businesses to subtract the cost of goods purchased from other companies from the gross receipts subject to the tax. Texas and Kentucky allow a similar, although broader deduction. If the cost of purchased inputs were deductible, a retail discount clothing store — an example of a high-volume, low-margin operation — would pay GRT not on its total receipts, but on its receipts minus the amount it paid the wholesaler for the clothes it sold. This would eliminate the disadvantage that such a store would have under a GRT compared to a boutique clothing store with much fewer sales but a high profit on each sale.
Similarly, the ability to subtract the cost of purchased inputs would eliminate most pyramiding, since the taxes paid during the intermediate stage of production would be included in the purchasing business’s cost of purchased inputs and thus would not be taxed again. Modifying the GRT in this way would help level the playing field between companies that purchase goods and services from other companies and “vertically integrated†companies that include multiple stages of production and have in-house staff to provide legal, accounting, and other services.
The CBPP claims the change would reduce GRT revenues by 30-40 percent, but includes some other ideas to make up that shortfall. Go read the whole thing.
Thoughts?