Well, what we’ve been worrying about has just arrived: the Governor’s tax and spend plan for the next budget. Look for a record tax increase, higher spending, and entitlements that will cost the state billions for generations. A General Receipts Tax of 1.8% for service businesses as well as a GRT of 0.5% for manufacturers will hit business in Illinois for over 6 BILLION per year. By far, this is the largest tax increase in Illinois history.
While it is said to be just on “business”, this will naturally be passed along to the consumers of our state. Look for prices of virtually everything to rise. Items that are handled several times before retail will feel the compound effects of the Service GRT as each business along the way will be passing that additional cost onto the next layer.
In addition to the GRT, there’s a new 3% payroll tax on certain businesses to pay for Blagojevich’s plan for health care in Illinois.
All in all, this is a terrible plan for Illinois business. Here are more details from the Blagojevich camp:
Illinois State Budget
Governor’s PowerPoint presentation
Mike Nobis, a small business owner from downstate Quincy, NFIB/IL Leadership Council Chairman and a member of the NFIB National Board, sent the following note regarding the tax and budget proposals:
· Would be the largest tax increase in Illinois history
- $6 Billion tax increase largest ever – by far
- 1.8% GRT for service industry
- .5% GRT for all other industries
- $1 million GRT exemption for small business (NOT $1 million profit)
- Exempts food and drugs (at point of sale but does not eliminate cost of pyramiding through production of such products)
- Exempts exports
- GRT will eventually replace corporate income tax
· Will increase prices for Illinois consumers
Higher prices for gas, haircuts, and other goods and services
· Will cost Illinois jobs
Will increase the price of Illinois products and services making Illinois products and Illinois companies less competitive
· Breaks Blagojevich’s promise not to raise taxes
Would be the largest tax increase in Illinois history
$6 Billion tax increase proposal is more than six times larger than Illinois’ largest tax increase ever.
- Most of the states that have tried this gross receipts tax have eliminated it (MI, KY, NJ) or are phasing it out.
Will increase prices for Illinois consumers
The Governor’s tax scheme will drive up prices on consumer goods.
- Consumers will pay higher prices for most products including gasoline and haircuts to dry cleaning and an oil change.
Will cost Illinois jobs
Major tax increase on all sales and services will make Illinois products and services less competitive. Even businesses that do not make a profit would be forced to pay this tax and many will close their doors.
- Products made in Illinois would be taxed at each stage of production, making Illinois products more expensive to produce and higher in price.
- That would put Illinois products, and the jobs that produce them, at risk to lower cost competition.
- Jobs along state border lines will move across the border as prices rise in Illinois.
Breaks Blagojevich’s promise not to raise taxes
“I'm not going to raise taxes on the hardworking people of Illinois," Blagojevich said. "I won't do it. I don't believe in it. I think it's the wrong thing to do.” - State Journal Register, 2-20-06
This tax will clearly increase taxes forcing Illinois residents to pay higher prices.
>>>>>
I guess that we’re now really going to find out the price of last November’s election losses. We will need to get our voices together in order to have any potential impact on this potential legislation. Look for updates from NFIB as soon as I get them. I am quite certain that we will be having at least one Fox Valley AAC meeting to address the new taxes as well as the budget.
