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Next Sesson Dates: February 26-28, 2007
Gross Receipts Tax…A billion here and a billion there
Legendary U.S. Senator Everett McKinley Dirksen often spoke passionately about the debt ceiling, federal spending, and the growth of government. The Illinois native is forever linked with the phrase, "a billion here, a billion there, and pretty soon you're talking real money." While Dirksen uttered these famous words nearly 40 years ago, unfortunately they are still extremely relevant to Illinois' budget discussion today.
According to most sources, Governor Blagojevich is poised to announce his desire to implement a Gross Receipts Tax (GRT) during the State of the State/Budget Address on March 7. It is anticipated that the Governor will support a one percent tax on all gross receipts in order to generate nearly $9 billion in new tax revenue to pay for government programs including universal health care. In addition, the Governor and legislature are looking for billions of dollars for education, capital infrastructure, and pensions.
The IMA is strongly opposed to a Gross Receipts Tax. A GRT will devastate the business community, particularly manufacturers, and place a new, regressive tax on goods and services. The GRT is extremely onerous for manufacturers because the one percent tax will be "pyramided" or compounded as the product moves through multiple stages of production.
Other problems with the GRT include penalizing companies that don't make a profit and hitting employers who have a low-profit margin. Further, the Governor's proposal is likely to eliminate the corporate income tax which will eliminate several tax incentives that benefit manufacturing companies including the Research & Development tax credit, and Manufacturers' Purchase Credit.
While Everett Dirksen is no longer around to lead the charge against this $9 billion tax hike, the Illinois Manufacturers' Association is. The IMA is engaged and prepared to fight on behalf of Illinois companies.
Help fight the Gross Receipts Tax . . . Come to the IMA's Business Day, May 2, in Springfield!
The Chicago Tribune, when editorializing about the Gross Receipts Tax, stated "imposing one percent tax at each step makes items manufactured in Illinois less competitive elsewhere." Unfortunately, the Chicago Tribune editorialized in favor of raising $3 billion in new taxes to fund state government — money that will come directly out of your pocket.
The IMA needs your help. On May 2, the IMA is hosting its annual Business Day at the State Capitol in Springfield. The day will focus on educating the Governor and legislators about the damage that a Gross Receipts Tax will wreak on the business community and manufacturers in particular. In addition to taxes, the day will focus on the universal health care proposal and energy costs. Mark your calendar for May 2nd and plan to attend the IMA's 2007 Business Day at the Capitol!
The day will consist of lunch, programs, meetings with legislators, and a gala reception. This is your chance to let your legislator know how you feel.
Call Kimberly McNamara at 630-368-5300 x2109 or email her at kmcnamara@ima-net.org to reserve your space today. Sponsorship opportunities are also available!
Debate on energy continues
Both the Illinois House and Senate are poised to continue the long-running debate regarding the deregulation of electricity next week. In the Senate, legislation (SB 1592) has been introduced by Sen. Gary Forby (D-Benton) that will provide a six-month extension of the rate freeze in the Ameren service territory only. The bill is scheduled for a hearing in the Senate Energy & Environment Committee on March 1.
In the House, Representative George Scully (D-Flossmor) has again introduced legislation that imposes a three-year extension of the rate freeze for residential customers. In addition to the rate freeze, HB 1750 would require that the utility companies issue a full refund to their customers for the additional charges incurred since January 1. While the bill is scheduled for a hearing in the House Electric Oversight Committee, the Speaker has also scheduled a "Committee of the Whole" on Tuesday, February 27. Every member of the House of Representatives will be able to attend and participate in the subject matter hearing.
The IMA continues to participate in the debate and has several concerns with these measures. First of all, the rate freeze extensions only apply to residential customers. Secondly, given the fact that electric transmission companies are locked into legal and binding contracts, a rate freeze extension would force these companies to sell electricity at a loss. As a result, transmission companies could enter bankruptcy which would then threaten the power supply for manufacturing companies or result in skyrocketing costs because power would have to be purchased on the daily spot market at a higher rate. The IMA will continue to fight to ensure that manufacturers have a safe and reliable source of power.
IMA supports competition in the cable industry
At a statehouse press conference, a bipartisan group of legislators teamed with business leaders, including Greg Baise, president & CEO of the IMA, and union representatives to push for increased competition in the cable television marketplace. Currently, due to a complex and complicated process, cable and video providers must negotiate individual contracts with municipalities to provide service. As a result, very little competition exists in the marketplace and customers are faced with skyrocketing costs.
Under the terms of HB 1500 (Brosnahan, D-Oak Lawn), the Illinois Commerce Commission would become a "one-stop shop" and administer the new franchise-authorization process. It is anticipated that the bill, if enacted into law, will spur competition and economic development in Illinois while allowing the market to drive down prices. As an association, the IMA strongly supports competition in the marketplace and opposes government rules and regulations that create a tilted playing field.
Senate passes "7 percent" solution
In a period of less than three days, the Democratic-controlled Senate amended and passed legislation, SB 13 (Link, D-Vernon Hills) that caps residential property tax assessments in Cook County while shifting the tax burden to commercial and industrial taxpayers. This legislation extends a previous law that capped rates for a period of three years. Under the legislation, property tax assessments are artificially capped at seven percent while assessments for business property continue to skyrocket. According to an independent study by the University of Illinois, nearly $200 million annually were shifted onto the business community. The IMA opposed this legislation and will continue to fight its passage in the House. The IMA appreciates Senators Cronin (R-Elmhurst), Radogno (R-LaGrange), and Lauzen (R-Aurora) who spoke in opposition to the bill.
House Committee passes workplace ban on smoking
Members of the House Environmental Health Committee unanimously passed a comprehensive statewide smoking ban on Wednesday. After listening to debate on both sides of the issue, legislators chose to impose this new regulation on every private business owner in Illinois. Under the terms of HB 246 (Yarbrough, D-Maywood), smoking would be prohibited in all public places, places of employment, and in governmental vehicles. The ban would prohibit smoking in all private businesses with one or more employees and all areas that employees are required to enter, leave or pass through during the course of employment including entrances and exits. No smoking would be allowed within 15 feet of the building.
The IMA opposes this excessive government intrusion into private business. Fundamentally, the IMA believes that every business should have the right to make this decision individually as opposed to having it mandated by state government.
Key bill introductions
The General Assembly introduces nearly 4,000 bills in a single year. While the IMA reads every bill and tracks hundreds of bills that impact manufacturing, we are able to highlight only a few key issues in this publication. If you have questions about a bill that does not appear on this list, please contact the IMA.
SB 445 (Martinez, D-Chicago)/HB 728 (Turner, D-Chicago): These two pieces of legislation would increase the state's real estate transfer tax on a graduated basis. Combined, it is expected that the bill will increase taxes by $99 million dollars. Currently, all transfers are taxed at a rate of $1 per thousand of property sale price but this bill would increase those rates to $3 (value between $500,000 and $1 million), $7 (value between 1 million and $3 million) and property valued at more than $3 million would be taxed at a rate of $10 per $1,000. IMA Position: Oppose
SB 1265 (Noland, D-Elgin): This misguided legislation creates the Jobs Preservation Act and punishes any company that "outsources" 100 or more jobs by prohibiting the company from holding any contract with state government, units of local government, or school districts. In addition, the companies are ineligible to receive any government loans, grants, tax incentives or economic development assistance. IMA Position: Oppose
SB 1296 (Cullerton, D-Chicago): Legislation proposed by the Illinois Trial Lawyers Association, this measure seeks to make sweeping changes to the personal injury and property damage litigation law. The bill would enhance a defendant's liability and responsibility to pay under the joint and several liability by changing the formula for determining apportionment. IMA Position: Oppose
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