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Next session dates: House & Senate: May 28-31, 2007

Call your legislators — Tell them to hold the line on taxes and spending
Visit: http://www.bipac.net/page.asp?content=startpage&g=IMA to find contact information for your legislator.

Senate Democrats attack business, unveil $5 billion "GRT Lite"
Members of the Senate Democrat Caucus, led by the Governor's chief ally, Senate President Emil Jones (D-Chicago) discussed an alternative tax proposal on Friday that seeks to grab billions of dollars from the pockets of Illinois employers. The $4.9 billion tax hike plan will be used to fund Governor Rod Blagojevich's massive new spending plan that includes universal health care. Components of the plan include:

1. Create an alternative minimum tax (AMT) for Illinois businesses. The AMT is a 0.25 percent gross receipts tax on all of a company's revenues, prior to deductions, which will be implemented on any business with no corporate income tax liability. The $600 million annual tax will devastate businesses that are facing tough economic times.
2. Expand the Corporate Income Tax. Under the plan debated by the Senate Democrats, the 4.8 percent corporate income tax will be applied to all Subchapter S corporations, partnerships, and LLCs. This $1.2 billion tax expansion will result in double taxation for these entities which already pay taxes at the individual level.
3. 3 Percent Payroll Tax for Health Care. Senate President Emil Jones continues to push the Governor's proposal to impose a 3 percent payroll tax on employers. Despite the fact that the state owes nearly $2 billion to its medical providers, the Governor and Senate continue to push for a new $1 billion tax hike to help a massive health care expansion.
4. Expansion of Gambling in Illinois. While details are not finalized, the $2.3 billion gambling plan will include several new riverboats in Illinois and expanded slot machines at existing facilities.
5. Streamlined Sales Tax. Under the Senate Democrat plan, Illinois sales would be taxed at the point of delivery as opposed to the point of sale. In addition, the plan will impose the statewide sales tax on computer software in order to generate tens of millions of dollars.
6. Closing Corporate Loopholes. While the Senate Democrats did not identify their list of "loopholes," they indicate that it will generate nearly $650 million annually. If this cost estimate is correct, it would mean that nearly every single tax incentive in law would be repealed.

During the Memorial Day weekend and throughout next week, the Illinois Manufacturers' Association encourages its member companies to contact their legislators and ask them to vote NO on these tax proposals in the Senate.

House speaker polls members on tax proposals
While the Senate Democrats pushed forward with a new $5 billion tax hike proposal, House Speaker Michael J. Madigan (D-Chicago) earlier this week polled his members on several possible tax hike proposals. After the caucus met and debated proposals, the Speaker hosted a press conference and indicated that there was little, if any, support for either an income or sales tax hike. House members, Republican and Democrats alike, had unanimously voted to oppose the gross receipts tax. However, many members of the Democratic caucus indicated support for closing corporate loopholes.

Democrat members of the House are now being asked to indicate which loopholes they would like to close including the software tax, straight-line depreciation, decoupling from the federal "qualified production activities income" and motor fuel retailer's discount. A full list of proposals is available for your review on the IMA website and we encourage you to contact your legislators. For contact information visit http://www.bipac.net/page.asp?content=startpage&g=IMA.

Tax on the privilege of operating in Illinois, utility companies a "burden"
In an absolutely shocking occurrence, Democrat members of the House Electric Utility Oversight Committee led by Rep. George Scully (D-Flossmoor) voted this week to impose more than $2 billion in new taxes on electric generation companies solely for "the privilege of operating in Illinois." Proceeds from the tax will be paid back to residential customers — not business customers — to help offset their energy costs. In testimony that sent a chilling message to members of the business community, Scully stated that "it is a burden for the state of Illinois to be the host" to power plants. He also noted that Illinois would be the first state in the country to impose such a "privilege tax." In addition to the tax, SB 1592 seeks to impose a one-year rate freeze on energy for residential customers. And to top it all off, utility companies are required to give credit for the residential rebates to members of the legislature.

Greg Baise, IMA president & CEO, testified before the committee that the $2 billion tax on electric generation will be passed onto commercial and industrial taxpayers who will see their electric rates increase by an average of 25-35 percent. Energy costs are significant for manufacturers and passage of SB 1592 could harm the industrial sector in Illinois. Additional testimony provided at the committee noted the troubling idea of imposing a tax on the business community for the sole purpose of passing the money to consumers.

There is a very fundamental question that results from this action: If Rep. Scully and Democrat members of the Committee can attack an industry that employs tens of thousands of Illinoisans in good, high-paying jobs and contributes millions of dollars to the economy through taxes and philanthropic donations, then what industry in Illinois is safe?

Governor and Democrat leaders discuss state budget
For the first time this year, the three top Democrats in Springfield met jointly on two occasions to begin discussions on this year's state budget. Governor Rod Blagojevich, House Speaker Michael J. Madigan, and Senate President Emil Jones got together on Thursday and Friday but no major breakthroughs were reported.

Governor Blagojevich and President Jones have yet to publicly abandon their desire to impose a new gross receipts tax on the Illinois business community in order to increase education funding and expand health care. At the first meeting, House Speaker unveiled a recent poll from members of his caucus that showed little, if any, support for increases in either the income or sales tax. There was some support in the House Democrat Caucus for closing corporate loopholes and an expansion of gambling.
Republican Minority Leaders Frank Watson and Tom Cross, who were excluded from the budget meeting, continue to call for a maintenance budget that does not include any tax increases. They believe that the state needs to reform its structural spending problem before throwing more money at the problem.

Late Friday, the Governor indicated that he would support an expansion of gambling if it was used to provide health care to every uninsured Illinoisan. He indicated opposition to a gaming expansion used for other purposes. At the same time, a group of Hispanic legislators issued a press release indicating their opposition to any budget that does not provide substantial education funding, property tax relief, and a bailout for Chicago regional transportation. A number of House Democrats are also circulating a letter that opposes a "no growth" budget.

Illinois Covered Plan
Members of the Senate Public Health Committee debated amendments to the Governor's Illinois Covered insurance program that is funded by a payroll tax on employers. Members of the committee adjourned the Committee prior to taking a vote. The IMA continues to oppose the massive expansion of health care, funded by employers, while the state faces a monumental budget deficit that includes billions of dollars in unpaid bills to health care providers.

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