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Next session dates: House: April 23-27 & Senate: April 24-26, 2007
Senate committees hold first hearing on gross receipts tax
In a marathon, and sometime raucous hearing, members of the Senate Revenue and Education Committees took the first public testimony about the Governor's proposed $8 billion gross receipts tax (GRT). The event, which was theatrically-staged by Senate President Emil Jones (D-Chicago) and the Governor's office to rally support for the proposal, featured four hours of testimony from out-of-state academics and several school district officials about the need for more education funding before opponents, including the IMA, were allowed to testify.
Greg Baise, president & CEO of the IMA, addressed the hearing and chastised the Governor and legislators for sending a message that discourages investment in Illinois. Noting that more than 200,000 high-paying manufacturing jobs have left the state since 2000, Baise noted that the GRT will devastate the industrial sector and lead to additional job loss. Responding to biased rhetoric from legislators that "business is not paying their fair share," Baise refuted the point by explaining employers have to pay workers' compensation, unemployment insurance, property taxes, sales taxes and other costs.
Additional opponents from the Illinois Jobs Coalition noted that the GRT could have constitutional problems because it creates a graduated income tax, imposes multiple income taxes on employers, and prohibits employers from showing the cost of the GRT on their sales receipts. The Illinois Constitution (Article IX, Section 3a) provides that "income shall be on a non-graduated rate" and "there may be no more than one such (income) tax imposed by the state . . . on corporations." In addition, a recent decision in the U.S. District Court for the Eastern Division of Kentucky (Bellsouth Communications, Inc. vs. Farris, February 27, 2007) held that a blanket prohibition against separately stating the gross receipts tax on a consumer's bill was excessive and therefore violated the First Amendment.
The IMA greatly appreciates Sen. Don Harmon (D-Oak Park) and Sen. Kim Lightford (D-Chicago) for co-chairing this meeting and Senators Dave Luechtefeld (R-Okawville), Matt Murphy (R-Palatine), Bill Brady (R-Bloomington), Dan Cronin, (R-Elmhurst), and Brad Burzynski (D-Dekalb) for pointing out the flaws in the legislation and its negative impact on the business community.
Senate President Emil Jones: GRT will hit consumers
In statements that directly contradict Gov. Blagojevich, Senate President Emil Jones (D-Chicago) admitted publicly that the Governor's $8 billion gross receipts tax will be borne by consumers. In debate with a small business owner who testified in opposition to the GRT, President Jones stated that "any costs that businesses incur, they always pass it on to the consumer."
The IMA and business community have argued for months that the gross receipts tax will harm businesses and consumers alike. The Governor, in contrast, has claimed that businesses will absorb the cost of the GRT and it won't be passed along to working families. This statement, before the Senate Education and Revenue Committee, is simply one more indication that the gross receipts tax is ill-advised and damaging to the economy.
Governor's universal health care plan debated
Members of two Senate committees — Public Health and Human Services – met in a joint session this week to debate the Governor's proposed multi-billion dollar universal health care program entitled Illinois Covered. Sponsored by Sen. Carol Ronan (D-Chicago), the amendment to SB 5 (Trotter, D-Chicago), seeks to create a new government-run health care program and expand the Medicaid rolls to cover the state's uninsured population. To fund this measure, the Governor is seeking to raise billions of dollars by imposing a new three percent (3%) tax on employer payrolls.
A three percent payroll tax will be assessed on businesses if any business fails to pay the lesser of four percent of their total payroll costs, or $7,500 per full time equivalent employee on healthcare. Two part-time employees will be treated as one full-time employee. Businesses that provide between 2.5 percent and four percent of their payroll cost on health care will see their total tax burden limited to a payroll tax of 1.5 percent. Employers will be forced to pay their health care "assessment" at the same time as employee withholding.
In addition to the employer costs, the legislation will allow the state to enter the private insurance marketplace by creating a new program. It will require that all group health insurance and HMOs provide dependent coverage until the age of 30 and will require "guaranteed issue" for all consumers and impose some rate limits.
The IMA appreciates the need for health care and its importance in attracting and retaining a good workforce. More than 98 percent of manufacturing companies currently provide health care to their employees. However, SB 5 is a huge expansion of state-run health care funded primarily by the business community. This IMA opposes this costly new proposal that comes at a time when the state faces a $2.5 billion deficit.
Quinn blasts gross receipts tax before House panel
Calling the gross receipts tax "just plain gross," Illinois Lieutenant Governor Pat Quinn (D) took direct aim this week at Governor Rod Blagojevich's proposed $7.6 billion tax increase proposal in a House Revenue hearing. Quinn, who strongly opposes the GRT, called it the "soak the middle class tax" because of its negative impact on businesses and consumers in Illinois. Quinn also noted that the highly respected Institute on Taxation and Economic Policy ranks the state of Washington as the most regressive taxing state because of its form of GRT.
The comments came before the House Revenue Committee, led by Chairman John Bradley (D-Marion), which is hosting a series of bipartisan meetings to discuss important fiscal policy issues. A lead economist from the Department of Revenue, speaking in support of the Governor's proposal, indicated that "states have to spend money to make money." In actuality, it is the business community in the state — not government — that makes money and creates jobs.
Members of the Illinois Jobs Coalition attended and testified to the fact that the business community pays nearly 50 percent of the state and local tax burden – a figure far in excess of the national average and well above our neighboring states. The House Revenue Committee will continue with its hearings next week.
Senate considers electric rate relief for residential customers only
After months of negotiations and discussions, members of the Senate voted 35-20 to approve a proposed one-year rate freeze for Ameren electrical customers. Just prior to voting to pass the bill, the Senate had approved an amendment to extend the freeze for customers of Commonwealth Edison. But a rarely used parliamentary maneuver stripped the provision from the bill, leaving the Senate with only the Ameren portions.
SB 1592 (Forby, D-Benton), seeks to appease residential customers while possibly jeopardizing the supply of power for industrial and business customers. If the legislation becomes law, electric transmission companies will be forced to sell power at a loss because the companies have signed legal contracts to buy power at a higher rate. If this occurs, the utility companies could go bankrupt and be forced to buy power on the high-cost daily spot market resulting in skyrocketing prices and brownouts on days with high energy usage.
The measure now moves to the Illinois House where Speaker Michael Madigan is expected to add Com-Ed back into the bill.
Don't miss this opportunity to have your voice heard in Springfield . . .
plan NOW to attend:
Illinois Manufacturers' Association
Business Day 2007
Help defeat the gross receipts tax and the payroll tax proposals
Wednesday May 2, 2007
President Abraham Lincoln Hotel Springfield, Illinois
Business Day offers the opportunity for you to meet with your elected officials to help drive home our message of job growth and prosperity. With your participation, legislators can more completely understand the impact of their actions on the employers of Illinois.
Register Today!
Visit the IMA web site for additional information and to register: http://www.ima-net.org.
Questions? Call Kimberly McNamara at 800-875-4462, ext. 2109 or email kmcnamara@ima-net.org.
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