March 16, 2007

Governor Using Taxpayer Dollars to Sell Largest Tax Increase in State History

Governor Blagojevich has sent more than 345,000 letters to small businesses in a taxpayer funded, $110,000 attempt to convince small businesses his $7.1 billion tax increase won’t negatively affect them.

In the letter, the Governor declares “Small businesses are the economic backbone of Illinois and over the last four years I’ve been committed to helping small business grow.”

While the letter stresses that businesses with less than $1 million will be exempt from the new tax, he fails to address the following critical issues:

• · The $1 million exemption he mentions does not apply to net revenues, it applies to gross receipts. Many, many small businesses bring in very thin margins on sales of a million dollars or more.
• Businesses that have gross receipts even one dollar over the threshold will face the tax on all of their $1,000,001 in receipts.
• Small businesses will be hit by a substantial cost increase every time they do business with an employer over the $1 million threshold. Every product and service they purchase will have a pyramid of taxes built into the new price.
• The Governor’s health care plan also relies on a new 3% payroll tax that applies to all businesses with more than 10 employees, regardless of income.
• Once a four-year “transition period” is completed, the Governor will put all of the exempted businesses into the GRT or some other new tax.

Hospital Association Spearheading Group in Support of $7 Billion Tax Increase

The Illinois Hospital Association has thrown its public support behind the Governor’s gross receipts tax and 3% payroll tax proposals. What is more, the group is co-chair of a new group that is funding the Governor’s advertising campaign, contributing large amounts of money to the air of those ads.

The disappointing decision ignores the fact that employers already pay a disproportionate share of health care costs in Illinois. For decades, employers have carried the burden of rising costs for their employees, but also a massive cost shift of into the private pay market. The shift is a result of poorly reimbursed care through government funded programs and the cost of providing free or discounted charity care to the poor.

Another $7 billion in taxes on employers is sure to further weaken the private-pay market and the economy that makes it possible

Civil Justice Legislation Moving to Center Stage

Only the extraordinary nature of the tax and budget issues before the General Assembly could overshadow personal injury attorneys’ most aggressive push in five years of Democratic control. If passed, the trial lawyers’ agenda has the capability of overwhelming the recently enacted medical liability reform law while saddling the entire state with the title: Judicial Hellhole.

SB 1296 (Cullerton) would undo vital protections for defendants in tort cases that have very little liability. Currently, defendants that are found to be less than 25% at fault in a case pay only their proportion of damages. Under SB 1296, that protection would be stripped away when parties with larger share of fault settle their cases instead of going to trial. Under this bill, a defendant found to be as little as 1% at fault could be forced to pay 100% of damages.

HB 1798 (Fritchey - D, Chicago) would create an entirely new kind of damages: grief, sorrow and mental anguish. Under the legislation, juries can award additional damages in wrongful death cases based on the amount of grief felt by surviving spouses and next of kin.

Fight the personal injury attorney’s attempts to turn back the modest progress made in restoring fairness to Illinois courts. Go to www.deeppocketsillinois.com <http://www.deeppocketsillinois.com> to learn more about this legislation and to urge you legislators to reject the attorney’s agenda.

Streamlined Sales Tax Legislation Passes Senate Committee

SB 1429 (Cullerton - D, Chicago) is legislation that attempts to bring Illinois in compliance with the national Streamlined Sales Tax Project (SSTP). SSTP is designed to facility the voluntary collection of sales tax from internet retailers. The Chamber-opposed legislation passed Senate Revenue Committee on a party-line vote.

A new tax on leased software and other tax increases are embedded in the legislation, including provisions that would double the sales tax on food and drugs in Cook County, increase the tax on some consumer goods and tax some medical equipment, such as wheelchairs. Considerable compliance and retooling costs for all employers are inherent in the legislation, as well.

The sponsor did add an amendment in an attempt to minimize the software tax by offering an income tax credit for some industries as partial reimbursement. However, such an approach is fraught with difficulties and a direct approach will be necessary if there is any hope to developing a bill acceptable to the majority of employers.

Prospects in the full Senate are uncertain, as is the timing for consideration. With tax increase proposals seemingly around every corner, it is difficult to see why Senate leadership would want to add another tax increase to their members’ records. The Chamber will remain actively engaged on the issue.

Transportation for Illinois Coalition Rallies for Critical Infrastructure Needs

The groups of employers, labor organizations, and public transportation leaders that make up the Transportation for Illinois Coalition held their annual rally for infrastructure investment on March 14. The legislature has not passed a transportation capital bill for six years, while vital infrastructure has continued to deteriorate.

Chamber President addressed hundreds of attendees declaring “this coalition is going to do everything it can to make sure that transportation is not off the public agenda when the legislature is in session.”

House Revenue Committee Launches Series of Hearings on Economy and Taxes

House Revenue Committee Chairman John Bradley (D-Marion) will begin holding a series of committee hearings to give legislators an in-depth assessment of the Illinois economy and various tax proposals, including the Governor’s gross receipts tax. The meetings will be held Monday in Springfield, prior to regularly scheduled session days.