The total bite from taxes and fees in Illinois will still be lower than half of the other states. We have the lowest burden of all of our surrounding states, and with the GRT will have the second lowest burden.
Affordable health insurance coverage will make Illinois a more attractive place to live, work and run a business.
Health insurance costs to businesses will be reduced.
With the State assuming a larger role in the funding of schools, the pressures to increase property taxes will be reduced.
The economy of the state of Washington, which has had a GRT for many years at rates similar to those proposed in Illinois, consistently out performs the national economy.
Job growth in Washington last year increased 60 percent faster than in the country as a whole.
The GRT spreads the tax burden more evenly across all business sectors, reducing the upward tax pressure on businesses that pay existing taxes.
The three states that have had a GRT for a number of years, Delaware, Washington and Hawaii, are ranked respectively 9th, 11th, and 24th by the Tax Foundation in its 2007 State Business Tax Climate Index.
In a Washington State Survey, only 8 percent of businesses said that the state’s tax system “had a negative effect on the ability to conduct business.”
A year after the GRT went into effect in Ohio, the Ohio Business Roundtable said, “Unlike the old business taxes, this new tax does not penalize job creation and investment, and also encourages participation in the global marketplace.”
The Texas Association of Manufacturers endorsed the adoption of a GRT in that state, calling the GRT, “a more broad-based, low rate tax structure that is reasonable and taps into the diverse business economy of Texas – ensuring that all businesses do their part in funding education for the future workforce of our state.”
There is no evidence that business is leaving Washington, Delaware, Hawaii, Ohio, Texas, Kentucky, New Mexico, or Arizona, all states that have some form of a gross receipts tax.
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The total bite from taxes and fees in Illinois will still be lower than half of the other states. We have the lowest burden of all of our surrounding states, and with the GRT will have the second lowest burden.
- But the overall state and local tax burden will rise from 22nd from the highest to 9th highest in the USA. See www.taxfoundation.org/research/show/22336.html. And when ranked very high in overall taxation rates, state economic growth suffers. Check this reference: http://www.heartland.org/Article.cfm?artId=9356.
Affordable health insurance coverage will make Illinois a more attractive place to live, work and run a business.
- I agree that affordable health insurance is a positive for Illinois. I just don't understand how a 30% increase in the general revenue fund taxes by way of the GRT makes health insurance more affordable. The GRT does not address the high cost of litigation, liability insurance, limitations on the number of physicians, rising drug costs, etc.
Health insurance costs to businesses will be reduced.
- My business pays for health insurance. I do not see how a GRT will lower any costs for the business. My calculations show GRT to result in higher taxes than the income tax based on typical net income before tax (NIBT).
With the State assuming a larger role in the funding of schools, the pressures to increase property taxes will be reduced.
- The pressure on property taxes will be reduced with certainty only if there is explicit legislation to trade the GRT for property tax increases, and no such explicit legislation is proposed by the governor.
The economy of the state of Washington, which has had a GRT for many years at rates similar to those proposed in Illinois, consistently out performs the national economy.
- And the state of Washington has no personal income, but Illinois does. Would a GRT plus the Illinois personal income tax add up to Illinois consistently outperforming the national economy?
Job growth in Washington last year increased 60 percent faster than in the country as a whole.
- To repeat, Washington has no state income, not personal, not corporate.
The GRT spreads the tax burden more evenly across all business sectors, reducing the upward tax pressure on businesses that pay existing taxes.
- Does it? Suppose a company is in the service business only, a company like Service Master (SVM). They average about 8% NIBT. If they pay 4.8% income tax, that is $38.40 on a profit of $800 on every $10,000 in sales. The GRT is $195 on on $10,000 of sales. This is a 407% tax increase.
This also raises the question whether the GRT would replace the 4.8% income tax plus the 2.5% “replacement tax”, or just the 4.8% income tax. If the full 7.3% would be replaced, the GRT will still be a 167% tax increase.
The three states that have had a GRT for a number of years, Delaware, Washington and Hawaii, are ranked respectively 9th, 11th, and 24th by the Tax Foundation in its 2007 State Business Tax Climate Index.
- And what about Ohio, who just passed a GRT, and is ranked 49th? http://www.taxfoundation.org/files/bp52.pdf
In a Washington State Survey, only 8 percent of businesses said that the state’s tax system “had a negative effect on the ability to conduct business.”
- Can't find this same survey. I suspect the survey result is because most state of Washington taxes come from use taxes, like cigarette taxes, sales taxes, gasoline taxes, utility taxes, etc. The end user, or consumer, seems to pay the lions share of the taxes in Washington.
http://dor.wa.gov/
Docs/Pubs/ExciseTax/FilTaxReturn/MajorTaxes.htm
In Washington, the GRT nets about $2 billion, with half the population of Illinois. Illinois proposes a GRT that will raise nearly 4 times that, plus keep the personal income tax.
A year after the GRT went into effect in Ohio, the Ohio Business Roundtable said, “Unlike the old business taxes, this new tax does not penalize job creation and investment, and also encourages participation in the global marketplace.”
- Take a look at the full 12 page report here. http://ohiomeansbusiness.com/
docs/BRTTaxReformYr1Review.pdf
The total Ohio package was one of tax reform and tax cuts, nothing like the 30% tax increase proposed for the state of Illinois.
The Texas Association of Manufacturers endorsed the adoption of a GRT in that state, calling the GRT, “a more broad-based, low rate tax structure that is reasonable and taps into the diverse business economy of Texas – ensuring that all businesses do their part in funding education for the future workforce of our state.”
- But not the Illinois Manufacturers Association. See www.ima-net.org Just because the folks in Texas endorsed their form of the GRT, that does not translate directly to Illinois. Hence we find opposite positions on the GRT.
There is no evidence that business is leaving Washington, Delaware, Hawaii, Ohio, Texas, Kentucky, New Mexico, or Arizona, all states that have some form of a gross receipts tax.
- A GRT all by itself is not the only issue. When a GRT is the keystone of a 30% general revenue tax increase for the state of Illinois, the GRT in not comparable to the above 8 states. By the way,
take another look at this report http://www.heartland.org/Article.cfm?artId=9356
to see what it has to say about 40 years of tax policy in Kentucky as compared to its neighbor, Tennessee. “As a result, by 1997, Kentucky's overall tax burden was 25 percent higher than Tennessee's. On average, a family of four in Tennessee earned $703 more per month than its counterpart in Kentucky.”
Russ Straayer
I, too would challange Mr. Kane, a Wisconsin resident who posts, almost daily blogs in support of the proposed Illinois GRT, to disclose if he or his company is receiving compensation for his comments. In fact, he appears to be a big fan of the Sheriff of Nottingham tax theory, take the tax first then see if you have a profit, pay on that amount also! The GRT will require every individual in Illinois to pay more for their goods and services. Think a gallon of gas or your utilities are high now? Just wait!
Whoops, I forgot to add the best quote from Becky Carol, the governor's deputy chief of staff for budget policy, in Crains Chicago Business on April 2, 2007;
"Illinois is a very competitive location for business and we've created a gross-receipts tax proposal that will make it even more competitive." Huh? What?
If you look closely at the Tax Foundation's Tax Burden study you will see that Illinois' ranking includes an estimate of what Illinois residents pay in Nevada casino taxes, Wyoming coal taxes, and Alaska and Texas oil severance taxes. The appropriate numbers seem to me to be, Illinois imposed taxes and fees, since that is all we have control of.
The following comments of mine on the "12 Reasons" had a key missing word, thanks to my late night proof reading. Here are 2 comments re-stated with the missing word, tax in bold.
The economy of the state of Washington, which has had a GRT for many years at rates similar to those proposed in Illinois, consistently out performs the national economy.
- And the state of Washington has no personal income tax, but Illinois does. Would a GRT plus the Illinois personal income tax add up to Illinois consistently outperforming the national economy?
Job growth in Washington last year increased 60 percent faster than in the country as a whole.
- To repeat, Washington has no state income tax, not personal tax, not corporate tax.
Mr. Kane:
You said "If you look closely at the Tax Foundation's Tax Burden study you will see that Illinois' ranking includes an estimate of what Illinois residents pay in Nevada casino taxes, Wyoming coal taxes, and Alaska and Texas oil severance taxes. The appropriate numbers seem to me to be, Illinois imposed taxes and fees, since that is all we have control of."
You are correct that we do adjust our tax burden estimates to account for the true "economic incidence" of taxation. This is necessary because what Illinois "imposes" in taxes and fees tells Illinois taxpayers nothing about their true tax burden, since states routinely collect taxes from those within and without the state.
What you failed to point out is that our adjustment only changes our Illinois estimate by less than 1 percent (see Table 5 in Curtis Dubay, "State and Local Tax Burdens Hit 25-Year High", available at the Tax Foundation website).
Even if we got rid of the adjustment, it wouldn't stop Illinois from rising in our rankings if the GRT is adopted.
Sincerely,
Chris Atkins
Staff Attorney
Tax Foundation
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