January 11, 2008

 

Business Tax Changes Finally Approved

 

In a rare win for the business community, the legislature has taken the final steps to approve important tax revisions contained in the Budget Implementation Bill, SB 783.  Following the Governor’s surprising decision not to amendatorialy veto the tax provisions, the legislature voted unanimously this week to finalize action on the legislation.

 

Banking, auto rental, transportation, telecommunications and general service industries will all benefit from provisions that will now become law.

 

The action on SB 783 marked the end of the long, strange road to final passage of the FY08 budget.  More than six months into the fiscal year, business taxpayers will finally have certainty as to their tax liability, schools will finally receive full funding and the state police will not be faced with massive layoffs. 

 

The House had originally delayed passage of the budget implementation bill in response to the Governor’s action of cutting more than $450 million of spending out of the General Assembly-drafted budget.  Once the implementation bill was passed by the legislature in November, the Governor waited until the last possible day to approve most of the bill; including the tax provisions.  The legislature’s vote this week accepted two small technical changes made by the Governor.

 

Governor Caves to Legislature; Approves Sales Tax for Mass Transit

 

In a move that puts one major issue to bed, but casts a long shadow over the fate of a capital infrastructure program , the Governor announced he will go along with a sales tax increase to fund mass transit in northeastern Illinois .  To distract the public from his flip-flop on supporting a tax increase, the Governor also announced that he will add language to the bill to require all senior citizens to ride transit for free.

 

The move will allow the CTA to avoid fare hikes and service cuts, but removes a large amount of leverage from legislators pushing a capital infrastructure program.  Those legislators had held up passage of similar mass transit legislation in the past by refusing to vote for it unless the capital program was also finalized.  With a January 20 “doomsday” deadline approaching for the CTA, political pressure grew to the point where Speaker Madigan and President Jones forced some reluctant legislators to abandon the capital linkage and vote for mass transit.

 

HB 656 will allow the Regional Transportation Authority to increase its sales tax authority by .50%, in the collar counties and .25% in Cook and allows the City of Chicago to increase the real estate transfer tax within its borders.  The collar counties will receive half of the sales tax increase for their own transportation and public safety needs.