Next session dates: House & Senate in continuous session
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This week...
IMA President Greg Baise Denounces Governor Blagojevich
In a new statewide radio spots, IMA President & CEO Greg Baise took issue with Governor Blagojevich's handling of the Illinois economy and claimed "enough is enough' citing the billions of dollars in new taxes sought by the Governor. During the tenure of Governor Blagojevich, more than 55,000 manufacturing jobs have been lost while he continues to promote disastrous tax policies such as the gross receipts tax and payroll tax that will lead to additional job loss.
Fortunately, members of the Illinois General Assembly, particularly the Illinois House of Representatives, have stood fast in opposition to tax hikes pitched by Governor Blagojevich and Senate President Emil Jones. The IMA is very appreciative of legislators who support companies that still manufacture products in Illinois.
Governor: Tax Parking Spaces
In one of goofiest ideas ever to be proposed, Governor Rod Blagojevich has come forward with a proposal to tax parking spaces in northeastern Illinois. The "parking lot tax" or property tax surcharge would be imposed on every commercial parking spot – whether free or paid - located in the counties served by the Regional Transportation Authority (Cook, DuPage, McHenry, Kane, Will, and Lake). Each parking space will be taxed $5 monthly or $60 annually so a business with 20 parking spots for employees and customers would be assessed a yearly tax of $1,200.
The House Mass Transit Committee is scheduled to meet on Tuesday, October 9 at 10:00 a.m. to debate this proposal. The meeting will be held at the Harold Washington Community College, Community Room 1115 (11th floor), 30 E. Lake Street, Chicago and the public is invited to attend. The IMA is prepared to attend and offer testimony in opposition to this latest tax hike proposal from the Governor but we encourage IMA members to contact your local state representatives and senators in advance and encourage their opposition.
Utility, Sales Tax Hikes Proposed in Cook County
Faced with a massive deficit and a bloated Cook County budget, County Board President Todd Stroger is seeking to hike taxes on employers by hundreds of millions of dollars. Despite claims that he would use "fiscal responsibility" to close the budget hole, Stroger has instead refused to cut spending and political patronage, instead preferring to squeeze additional money from employers.
Earlier this week, the County Board debated, but did not pass, a new 2 percent hike in the sales tax that would raise nearly $1 billion in revenue. If successful, the sales tax in the city of Chicago would rise to 11 percent, the highest tax rate in the United States. Fortunately, a majority of Cook County Commissioners opposed the tax and a vote was deferred for two weeks.
While the Board considered the sales tax, Commissioner William Beavers, Stroger's chief ally on the Board, filed three ordinances that would impose new taxes on electricity, natural gas and telecommunications devices (phones, faxes, cell phones, etc) in Cook County beginning on January 1, 2008. It is estimated that these tax will raise more than $600 million annually for Cook County coffers. Manufacturers rely on stable and reliable energy and these are anticipated to increase electricity and gas bills by more than 5 percent annually while the telecommunications tax would increase by 40 percent.
The IMA is staunchly opposed to these utility taxes that will further increase the cost of doing business. Elected officials need to learn to show restraint in spending and learn to live within their means.
And Chicago Taxes…
While the General Assembly and Cook County Board consider tax proposals, the Chicago City Council is set to debate their own tax increases to help close a projected deficit of nearly $200 million. City leaders are loooking at a wide variety of taxes that could be used to help close the deficit including a property tax increase, water and sewer tax hikes, a 10 cent tax on bottled water or items in plastic containers, doubling the gas tax from 5 cents to 10 cents, ½ percent tax on restaurant meals, 4 cent liquor tax, 2 cent wine tax, $2.50 telephone tax, 75 cent parking tax for lots and meters, 50 cent per square foot tax on development, and 1 percentage point increase in lease transactions. It is anticipated that these items will be discussed in the coming months and alderman push forward with a new budget.
Cook County Property Tax Shift
Despite opposition from the IMA, legislators in the House and Senate reached a compromise during the legislative session to continue the 7 percent cap on residential property at the expense of commercial and industrial taxpayers. The compromise legislation included a 3-year phase-out of the cap on residential assessments in addition to new property tax breaks for veterans, disabled, and senior citizens.
An original pilot program that capped residential property tax assessments in Cook County is expiring after three years and lawmakers have consistently sought to extend the law that shifts the property tax burden from homeowners to employers. A study conducted by the University of Illinois showed that nearly $270 million in property taxes shifted from homeowners to businesses in the first year of the program alone. The shift is exacerbated by the classification system in Cook County that arbitrarily sets tax rates instead of using median values in a market-based system.
The 7 percent cap was originally enacted as short-term solution to growing property tax bills in Cook County where property is reassessed every three years meaning that the valuation of residential property could increase no more than 21 percent over that period of time. However, it has created a political problem for legislators who do not want to see their constituents with higher tax bills, despite increases in property values.
The IMA and other members of the business community strongly opposed any extension of the 7 percent cap because of its negative impact on employers in Cook County who already face higher-than-average costs. Despite these concerns, the General Assembly, led by Majority Leader Barbara Currie (D-Chicago) and Sen. Terry Link (D-Vernon Hills) passed an extension of the cap that will be phased-out over three years. The maximum exemption in the first year would be $33,000 of the assessed valuation falling to $20,000 in the final year.
Unfortunately, Governor Blagojevich took and bad bill and made it worse by re-writing the legislation through an amendatory veto in include a $40,000 assessed valuation that is permanent. As such, the tax shift from residential property to commercial and industrial taxpayers would continue on indefinitely.
Here are two examples of how the 7% solution works under the Governor's amendatory veto:
EXAMPLE #1: A modest Cook County residence with a market value of $500,000. Because of Cook County's classification system, it has an equalized assessed value (EAV) of $110,000 or 22% of the market value. Because property is reassessed every three years, that property increases in value 30% or $150,000 to $650,000. The new EAV is $143,000 (22% of the market value) or an increase of $30,000. Due to the 7% solution, the EAV can only increase 7% annually or, over a three-year period, $23,000. The remaining $7,000 from this property is shifted to commercial/industrial and less affluent residential property owners.
EXAMPLE #2: A Cook County residence has a market value of $1 million or an EAV of $220,000. The EAV grows 30% over a three year period by $66,000 to $286,000. The most it can grow is 7% or $46,200. Since there is also a $40,000 cap on the amount of the homestead exemption that can be claimed by the homeowner, this EAV only grows $26,000 to $246,000. That means the remaining $40,000 (the difference between the actual 30% growth in EAV and the actual amount the Cook County residential homeowner pays) is shifted onto the backs of commercial/industrial property owners and residential property owners whose property is not appreciating quickly.
On Wednesday, the House voted overwhelmingly (92-19) to override the Governor's amendatory veto. The Senate must now also vote to accept the Governor's amendatory veto in order for it to take effect. If they do not, the entire bill is dead and the cap is no longer in effect. However, it is unlikely that the legislature can simply allow the existing 7% cap to expire. The Senate has already begun the process of codifying the Governor's changes into law and discussions will continue.
IMA Testifies at Committee of the Whole
Mark Denzler, IMA Vice President of Government Affairs, testified on Monday before the Committee of the Whole regarding the negative impact of the Governor's budget cuts in the area of employee training and education. After the General Assembly passed the state budget (HB 3866), Governor Blagojevich used his veto pen in an overtly political manner to punish those who opposed his tax-and-spend policies. In particular, the Governor slashed $5 million, or nearly 25 percent of funding for the Employer Training Investment Program (ETIP) that help workers received the necessary training to compete in today's global economy. As a result, tens of thousands of Illinois workers and thousands of companies will be at a competitive disadvantage.
Ultimately, the Illinois House voted overwhelming (104-4) to restore most of the cuts including reinstating ETIP funds and additional workforce development programs. However, Senate President Emil Jones (D-Chicago), who originally helped craft the budget and then broke his word, has so far refused to call for an override of the Governor's veto. If he refuses to allow a vote, President Jones will have single-handedly allowed the vetoes to stand and education funding to be cut.
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