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Although experts contend that no single governor or
General Assembly is to blame for Illinois’ ongoing fiscal
crisis, it wasn’t until Gov. Rod Blagojevich laid out his plan
this year for a gross-receipts tax that the problem came into sharp focus.
The controversy — and PR battle —
continued this week. On Wednesday, the Campaign for Better Health Care and
other organizations picketed a meeting of a GRT foe, the Illinois State
Chamber of Commerce, in Springfield. Part of the proceeds from the GRT
would help pay for universal health insurance. The Chamber also
participated in a Lobby Day on Wednesday to oppose the plan During a daylong conference on Monday, sponsored by
Southern Illinois University, the governor’s budget officials
defended the GRT, which Blagojevich anticipates will raise about $8 billion
annually in new dollars, and business organizations ripped the plan as a
tax increase. According to the Center for Tax and Budget
Accountability, Illinois isn’t bringing in enough tax revenue to meet
its unfunded pension obligation or keep pace with the rising costs of
education and human-service programs such as Medicaid. R. Eden Martin, president of the Commercial Club of
Chicago’s civic committee, concedes that even if cuts are made
additional revenue will be needed. However, his group opposes a tax
increase that isn’t accompanied by reforms. Of all the ideas that have been floated, which include
increases in personal and corporate income taxes, as well as the state
sales tax, economist and former state legislator Doug Kane, who’s
been advising the governor, says that the GRT is the most fair. The GRT would tax goods at a rate of 0.85 percent
and services at a rate of 1.95 percent. Business groups charge that passing
the GRT will translate into higher prices for consumers, but Kane
characterizes such reasoning as assumptive. Furthermore, Kane argues, the current tax structure is
based on the “old economy,” and the tax structure needs to be
updated to incorporate a more global service economy. Kane points to
Washington, Delaware, Hawaii, Ohio, Texas, and Kentucky as states that have
passed the GRT and managed not to fall into ruin, as critics predict will happen should the
tax pass here. Collin Hitt, an associate with the Springfield-based
Illinois Policy Institute who attended Monday’s conference,
doesn’t agree with the comparison. “The governor’s people are not comparing
apples to apples or GRTs to GRTs,” Hitt says. In Texas, for example, the GRT was coupled with an
reduction in the state property tax, and Illinois’ GRT would be the
largest of its kind in history. Hitt also takes issue with Kane’s assertion that
companies won’t necessarily pass the GRT along to customers. “Is a shipping company going to eat the cost of
gas just because gas prices went up? There’s no way a business is
going to eat the GRT. That would be inconsistent with economics — and
psychology, for that matter.”
Contact R.L. Nave at rnave@illinoistimes.com.
This article appears in Apr 12-18, 2007.
