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Next Sesson Dates: House & Senate, March 13-15, 2007
Governor proposes $6 billion tax hike on employers
Confirming the business community’s worst fears, Governor Rod Blagojevich used the annual State of the State/Budget Address to announce his intention to impose a new $6 billion Gross Receipts Tax (GRT) on Illinois employers. Unfortunately, Blagojevich has based his proposal on the false premise that businesses do not pay their "fair share" of taxes. The IMA is strongly opposed to this tax that will disrupt and cripple the economy.
According to the plans, a two-tiered GRT will be created in Illinois. A 0.5 percent tax will be imposed on manufacturing, retail, agriculture, mining, construction and wholesale activities while a tax of 1.8 percent will be levied for all service activities. In trying to lessen the impact of the tax, the proposal includes an exemption for companies with less than $1 million in Illinois receipts annually or goods and services exported from Illinois.
Despite these exemptions, the GRT will devastate the manufacturing community due to taxes that "pyramid" or "compound" as a product makes it way from raw material through production to distribution. The tax would hurt companies with low-profit margins and encourage companies to buys products from suppliers outside of Illinois.
In his remarks, the Governor cited statistics from the state of Washington to bolster his case. According to the Governor, during the period from 1980 through 2000, wage and salary employment grew by 64 percent in Washington. However, a closer review of the real facts shows that Washington ranks 3rd in the number of business failures according to the U.S. Small Business Administration.
Furthermore, according to the Washington Policy Center, a nonpartisan, state-based think tank in Seattle, their GRT (called the Business & Occupation Tax) is widely referred to a "draconian tax that particularly punishes new and small businesses." The Policy Center states that the existing B&O tax structure is a hidden tax that raises the cost of production to businesses—which then raises the cost to the consumer.
The Governor plans to use the estimated $6 billion to help fund his universal health care program and provide $1.5 billion for K-12 schools ($10 billion over four years). In addition, he plans to lease the state lottery for $10 billion to help reduce the state pension debt. At close to $45 billion, Illinois’ pension debt is one of the largest in the United States. Together, the Governor plans a record $60 billion state budget this year.
According to comments made by Greg Baise, president & CEO of the IMA in the Peoria Journal Star, "the gross receipts tax would be the absolute death knell to manufacturing in Illinois." Additional remarks by Baise were provided to the media and IMA membership immediately after the speech. To view the video clip, visit
http://www.ima-net.org/video/stateofthestate07.cfm
For more information about a tax on gross receipts, read the special report prepared by the Tax Foundation on the Web at
http://www.taxfoundation.org/news/show/2180.html. If you would like to join the Coalition for Jobs, Growth & Prosperity and help defeat this tax, please email Mark Denzler at
mdenzler@ima-net.org and ask to be added to the list of opponents.
Double whammy . . . three percent payroll tax on employers proposed by governor
In addition to the $6 billion GRT tax, the Governor piled on the business community by calling for a three percent payroll tax on Illinois employers to fund his universal health care program. Entitled "Illinois Covered" the proposal seeks to extend free or subsidized health care to the approximately 1.6 million Illinoisans who are currently uninsured. The Governor anticipates that the new health care plan will cost $374 million in FY08 but will skyrocket to nearly $4 billion within three years.
Illinois Covered has three essential components: (1) Illinois Covered Choice will require health insurance companies to offer guaranteed, affordable private health insurance plans for employers and individuals; (2) Illinois Covered Rebate will provide state assistance to families (income of $82,500 or less) to help with the cost of insurance premiums; and (3) Illinois Covered Assist will help transition nearly 500,000 people into Medicaid.
The universal health care program exempts businesses with less than 10 employees and provides a dollar-for-dollar income tax credit for companies that provide health care benefits to their employees.
While the vast majority (98 percent) of manufacturers understand the importance of health care and provide health insurance to their employees, this plan seems to create more problems and questions that must be addressed. Illinois Covered does not address the skyrocketing cost of health care and seems to mandate a new level of coverage. Many questions also remain about whether the new revenue will cover the Medicaid expansion and whether the business community who already provide health care should be expected to "finance" the cost of the program.
The IMA opposes any plan that will unfairly burden employers or risk the viability of the competitive insurance marketplace which would result in a lack of insurance availability and even higher costs.
Join the effort to defeat the Gross Receipts Tax – 2007 IMA Business Day
In the past several weeks, we have heard from many business leaders who want to help stop the Governor’s $6 billion tax hike. It will be a long and expensive battle but there are two easy ways in which your company can join the fight to defeat this massive tax increase: (1) attend 2007 Business Day in Springfield and (2) join the Coalition for Jobs, Growth & Prosperity.
On May 2, hundreds of business leaders plan to meet in Springfield to let the Governor and legislators know that the GRT will cripple the Illinois economy. Please mark your calendars and plan to attend. The day will consist of lunch, speakers, Capitol visits, and a gala reception. For more information, or to register, contact Kim McNamara at 630-368-5300 x2109 or via email at
kmcnamara@ima-net.org.
The Coalition for Jobs, Growth & Prosperity, of which the IMA is a founding member, represents a joint effort by the business community to unify and speak with one voice to defeat this tax. It is a 501c4 organization that allows us to raise money and educate the public on this important issue. If you would like to add your name to the list of Coalition members, or contribute funds to help fund a media campaign, please email Mark Denzler at
mdenzler@ima-net.org.
House approves residential electric rate freeze
Nearly a week after the House met as a Committee of the Whole to discuss the on-going electricity rate issue, members of the House overwhelmingly voted (92-5) in support of a three-year rate freeze extension. If enacted in law, HB 1750 (Scully, D-Flossmoor) would impose an additional three-year rate freeze for residential customers while requiring utility companies to provide refunds with interest to their customers.
The legislation, while crafted to address a political problem for legislators, could result in severe problems for the business community who rely on a safe and reliable source of energy. By freezing rates at an artificial level, HB 1750 would require transmission companies to sell power to customers at a loss because they are locked into contracts to purchase power. This would threaten their financial solvency and could ultimately result in increased rates and brownouts because the transmission companies would be forced to buy power on the costly daily spot market.
While the legislation passed the House overwhelmingly, it faces an uncertain future in the Senate where President Emil Jones (D-Chicago) has indicated that he believes deregulation should be allowed to work.
Committee discusses electronic scrap recycling
At a subject-matter only hearing, members of the Senate Energy & Environment Committee discussed a proposal (SB 1583) by Sen. Susan Garrett (D-Lake Forest) that would create a quasi-state entity to recycle electronic scrap. The legislation would create a number of mandates for manufacturing companies including fees and program participants.
In testimony, the IMA applauded Sen. Garrett for her dedication to the environment but used the opportunity to address specific flaws in the legislation. In particular, the legislation is overly broad in its definition of covered electronic devices and the scope of entities that must comply with the regulation. The IMA believes that the legislation should be more narrowly focused on portable computers, monitors, and televisions and should apply to households. Many businesses already have recycling opportunities and must manage the confidential disposal of e-waste.
Similar legislation (HB 433) has been introduced by Rep. Holbrook (D-Belleville) in the House. The IMA will continue participating in discussions and seeking to limit the vast expanse of the bill.
Cable competition bill debated
An IMA-supported initiative that would allow for increased competition in the cable television marketplace was debated this week in the House Telecommunications Committee. Under the terms of HB 1500 (Brosnahan, D-Oak Lawn), the Illinois Commerce Commission will become a one-stop shop and administer the franchise-authorization process. Currently, under a complicated process, cable and video providers must negotiate individual contracts with each municipality. The new legislation, if approved, will increase competition and allow the market to drive prices. Debate will continue in committee next week.
EPA set to release flame retardant report — legislation to follow
According to sources, the Illinois Environmental Protection Agency (EPA) will soon be releasing a report that is critical of many flame retardants. The report will categorize the products and will likely call for a ban on brominated flame retardants. In anticipation of the report, Rep. Elaine Nekritz (D-Des Plaines) has filed HB 1421 that will prohibit a person from manufacturing, processing, selling or distributing a variety of products (mattresses, furniture) by January 2008 or January 2010 (electronic devices, televisions).
The IMA opposes this legislation that would eliminate an important fire prevention and protection product that has been deemed safe by many entities including a European Commission, the National Academy of Sciences, and the U.S. Consumer Products Commission. Illinois would be the first state to ban this product.
Senate committee passes real estate transfer tax
Despite reservations from several Democrats on the Revenue Committee, legislation increasing the real estate transfer tax passed by a partisan 6-3 vote. SB 445 (Martinez, D-Chicago) seeks to create a new graduated tax system that would raise more than $100 million in new revenue. Under current law, the state of Illinois imposes a tax of $1 per $1,000 of transferred property. SB 445 creates a graduated scale that increase tax rates to $3 ($500,000 to $999,999), $7 ($1 million to $3 million) or $10 ($3 million or more). The IMA strongly opposes this tax hike that will greatly increase the cost of buying or selling property.
Are you dazed, confused and stunned about new utility rates? The IMA can help. Contact Mark Frech at 217-522-1240, ext. 3022, or e-mail
mfrech@ima-net.org.
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