Will County Chamber of Commerce Position Statement on the Proposed Illinois Gross Receipts Tax Plan
Governor Rod R. Blagojevich in his recent budget address to the people of Illinois called the need to make sweeping changes in how business is taxed in Illinois a moral imperative.
The Will County Chamber of Commerce opposes the Governor's proposed Goods and Services Tax as patently unfair, and certain to not only cost Illinois citizens jobs, but also cost higher quality manufacturing jobs needed for the working middle class.
While the Chamber agrees that significant reform is needed to rescue Illinois from its current and future budget challenges, balance must be achieved through spending discipline and fair tax reform that does not keep business growth out of Illinois and does not drive away existing businesses.
The Governor's solution to the state's budget woes is the imposition of a Gross Receipts Tax (GRT) on business in Illinois called the Goods and Services Tax. A second tax, a 3% payroll tax on all employers with ten or more employees based on the level of health insurance they provide, is also part of the so-called "Tax Fairness Plan."
Illinois businesses paid $29.7 billion in state and local taxes in Fiscal Year 2006 (Ernst & Young). While firm numbers are not available, it is estimated the proposed GRT would generate more than $7 billion a year in new business taxes. Without a doubt, the proposal represents the largest tax increase in the history of the state.
The Will County Chamber of Commerce opposes the Gross Receipts Tax.
We call on state legislators to refuse to support the Governor's Tax Fairness Plan in total because there is nothing at all fair about it for Illinois businesses or its citizens. To put it simply, it's a bad idea.
The Governor's plan would affect Illinois' already declining competitive business stature. Retaining existing jobs and attracting new jobs, new business investment and securing the economic future of our citizens would be difficult. It would significantly affect the cost of Illinois-produced goods as well as in-state services.
Why is the GRT a bad idea?
*As proposed, a GRT would tax business income even if the business does not make a profit. The tax comes "off the top" before salaries, other taxes and business expenses are paid.
*Products manufactured in Illinois will have a disadvantage in the competitive market. The tax is charged at every step of the supply/manufacturing chain. The more production occurs in Illinois, the more expensive it becomes.
*High tax costs will drive businesses and investors out of Illinois. Our business climate and shortage of state programs to boost businesses are problems today. If the tax is enacted, why would a manufacturer or distribution company settle for higher taxes and a punitive environment when neighboring states open their arms to business?
*Small businesses will be forced to pay the tax regardless of profitability. New start-up, entrepreneurial, innovative companies that historically take several yeas to achieve profitability, will be "locked out" of Illinois.
*Agri-business, which currently has small, fixed margins, will lose what little margins they have to the new tax. This tax will have a devastating affect on the Illinois farming industry.
*Consumers will pay for the new tax "pyramid". Through the production and distribution chain every value added event is taxed on every good - the consumer ultimately pays.
*Locally produced pharmaceuticals and food face higher taxes than goods made out of state. Consumers will be forced to "think local, but buy global".
*The GRT is really a service tax. All services from legal assistance to haircuts will be taxed for the first time. The cost will undoubtedly be passed on to the consumer.
The Will County Chamber of Commerce understands the state has huge financial challenges that will be difficult to meet without some level of tax increases state-wide. We believe business has always been willing to pay its fair share. We also know that when business thrives, local and state tax revenues increase, citizens earn more money (and pay more taxes proportionately), and the quality of life improves.
The Tax Fairness Plan is punitive to business and must not be adopted by the State of Illinois.
John Greuling President & CEO Will County Chamber of Commerce
116 N. Chicago Street, Suite 101 Joliet , IL 60432 815-774-6060 815-922-1814 cell 815-723-6972 fx www.willcountyced.com