Proposed gross receipts tax a nightmare to Illinois businesses
As Gov. Rod Blagojevich's scheme to enact the largest tax increase in Illinois history continues to gain opposition statewide, I continue to receive more e-mails, phone calls and letters from business owners and managers worried about these proposed tax increases than any other issue has generated in my six years with the Illinois Chamber of Commerce.
We've finally seen an actual proposed bill, but the details and governor's bus tour campaign have failed to create public support. In one of the largest broad-based grassroot turnouts in recent memory, more than 600 business owners rallied on the steps of the Capitol in Springfield on April 18.
Dozens of newspaper editors and local chambers have considered the proposed policy and publicly rejected it in editorials and resolutions.
The governor's proposed gross receipts tax would raise prices on virtually all goods and services purchased by Illinois consumers. It would also place an enormous added tax on employers, large and small, who would be forced to pay the tax whether their companies are profitable or not. The proposal would significantly raise the cost of doing business in Illinois.
The governor's aggressive anti-business rhetoric and pursuit of costly new taxes have already placed a chill on economic activity in the state. Existing employers are freezing plans for job growth or new development, and economic development officials are reporting instances where potential newcomers to Illinois have reconsidered. Employers feel threatened and are uncertain about their future in Illinois. The added expenses of a gross receipts tax and 3 percent payroll tax will make employers less competitive. Jobs are at risk.
The public is not as gullible as the governor thinks. We know the cost of government is the burden of individuals, no matter how much the governor would like to hide it by forcing businesses to raise the price of goods and services.
State legislators understand a vote for the gross receipts tax would be a vote to raise consumer prices for everyone, including seniors and low-income families, while taking money from employers that could be used to invest in new jobs, equipment and facilities, and provide salary increases to deserving workers or pay other business expenses.
Unfortunately, Illinois is in this fiscal crisis in large part because Gov. Blagojevich has failed to exercise fiscal discipline. Instead of reigning in state spending, in four years the Blagojevich Administration has increased the state budget by $3.4 billion that's 30 percent more than Gov. George Ryan increased state spending during his four years in office.
The governor would be wise to follow the example of families and employers throughout this state who understand the most fundamental rule of budgeting: don't spend money you don't have.
Gov. Blagojevich's spin machine predictably misleads the public by arguing the tax is aimed at big business and that businesses aren't paying their fair share of taxes. Those arguments are false.
First, the National Federation of Independent Business estimates the average Illinois business with 20 or more employees will be forced to pay the tax. Twenty employees hardly constitute a big business. Small business entrepreneurs who aspire to successfully grow and prosper in Illinois know the governor's new taxes will affect their bottom lines and possibly mean the difference between success and failure.
Second, Illinois employers already pay more than their fair share in taxes. An Ernst & Young study found that last year, Illinois employers paid $29.1 billion in state and local taxes or nearly half (49.8 percent) of the taxes collected in the state. That's 10 percent higher than the national average. It is also considerably higher than businesses pay in any of the neighboring Midwestern states.
With the Blagojevich tax increases, the Illinois Chamber estimates employers would pay 55 percent of the tax burden. That is an open invitation to layoff workers, close the doors or move out of state. In border areas, it's easy to move across the state line. For technologically advanced businesses, it is just as easy to move around the world. Why would the governor give anyone an excuse to re-evaluate their future business relationship with Illinois?
For many in Illinois, working hard to build or sustain a business is the American Dream. Imposing a stealth tax to fuel more spending by a state government that has not yet earned our trust is not a dream. It's a nightmare.
At the Illinois Chamber of Commerce, we encourage the governor and state lawmakers to pursue policies that will help grow jobs, attract investment and create prosperity. Unfortunately, Gov. Blagojevich's massive tax increase plan and verbal assault on employers moves Illinois in the wrong direction.
Doug Whitley is president and CEO of the Illinois Chamber of Commerce. He can be reached at 312-983-7100 or email@example.com.