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A Taxing Day in Springfield

By Kevin Robinson in News on Mar 8, 2007 2:50PM

2007_3_quarter.jpgThe big news yesterday was Rod Blagojevich's tax proposals. Coming as part of his combined State of the State and budget address to the General Assembly yesterday, Blago is proposing the largest tax hike in state history. Along with raising taxes (which he said he wouldn't do during his re-election campaign), he is also planning to increase spending by 9.5%, to a record $60.1 billion; $7 billion of that would come from the new gross receipts tax, requiring companies to pay a 0.5% tax on the sale of goods and a 1.8 percent tax on services. Businesses that take in less than $1 million a year would be exempted, as would non-profits, exports, and food and drugs. It is important to note the exemption of exports: this would exempt some of Illinois' larger employers, including Caterpillar and Ford, at least on the product that is leaving the state. Texas and Ohio have already enacted similar taxes, the effect being a relatively low tax on everything, rather than a large tax on a small segment of the economy, such as corporate profits. No new money is alloted to the Regional Transportation Authority, leaving lawmakers to scramble to make up the bailout needed to shore up much-needed capital spending projects.

Blagojevich's proposals are based on four themes that he is calling "investing in Illinois' families": education, health care and pensions, and tax fairness, requiring more of the tax burden be placed on Illinois business relative to the amount paid by individuals. Blagojevich is making much of the billions of dollars earmarked for education, including the $1.5 billion earmarked for school construction around the state. Besides the gross receipts tax and a limited payroll tax (to be charged to businesses that don't offer health care to their employees), he is proposing leasing the state lottery out to a private vendor and selling bonds, essentially borrowing $16 billion to shore up the shaky state pension system.

Senate President Emil Jones has already indicated that he will support the proposal, although House Speaker Mike Madigan has reserved judgment, telling the Chicago Tribune "if there ever was a day to wait for the fine print, this is it." James Meeks (I - Chicago) told the Daily Herald, "More money is good, it's hard to squabble over that," but qualified that statement by saying "reform has to include property tax relief." Meeks still intends to move forward with his original SB 750, which would raise the state income tax to 5%, reduce property taxes by about 25%, apply a sales taxes to professional services, and give a tax credit to poor and middle-income taxpayers, offsetting the cost of the sales tax hike. Business is already organizing to oppose the governor's plan, and we suspect that after yesterday's speech, they will be practically begging the General Assembly to pass SB 750, which they have opposed in the past.

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