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Governor Blagojevich: Waving Goodbye to Businesses in Illinois

2 min readBy: Jonathan Williams

Governor Rod Blagojevich has been busy. Recently, he has been spending a good amount of time promoting his proposal to raise taxes by $7.1 billion through the creation of a gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. and a taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on business payroll. As we reported earlier, Blagojevich’s tax plan would represent the largest hike enacted by any of the 50 states in the last decade – nearly three times larger than the next largest. (To read our full study on the magnitude of the Illinois tax increase, click here)

As we have reported before, gross receipts taxes are among the most economically damaging taxes that states can choose. Therefore, maybe it’s not too surprising that there has been overwhelming opposition to Governor Blagojevich’s gross receipts tax – even by members of his own political party. For instance, Mayor Richard Daley of Chicago has also gone on record opposing the governor’s approach of bashing businesses to sell his gross receipts tax. From the Chicago Sun Times:

“Business people are not fat cats…To describe every major CEO in Illinois as fat cats is a mistake…..They don’t have to be here. They can go to Wisconsin. They can go Indiana. They can go to India. They can go to China. So, if you want to beat up businesses, go beat `em up and when they leave, just wave to `em and they’re going to wave back to you,” Daley said.

Additionally, State Treasurer Alexi Giannoulias has expressed reservations with the governor’s plan. More surprisingly, even Blagojevich’s own Lieutenant Governor, Patrick Quinn, has voiced opposition to the gross receipts tax. From the Chicago Sun Times:

“Quinn said he cannot support the governor’s proposed gross receipts tax, a lynchpin of Blagojevich’s 2008 state spending plan, because it is “regressive,” unfairly targets the working class, and provides no tax relief. “I really don’t think this is a fair approach,” Quinn said.

Considering the strong public opposition to his plan and the numerous public policy problems inherent in gross receipts taxes, maybe it is time for Governor Blagojevich to head back to the drawing board.

To read more on the public policy problems associated with gross receipts taxes, click here and here.