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According to his plan, manufacturers and
retailers will pay .5%, and service-based companies will pay 1.8% of
their gross income to the state. The current state Corporate
Income Tax of 4.8% will be phased out over the following 4 years.
Businesses which gross less than $1 million per year and exporters
will be exempt from this new tax, but will continue to be subject to
the Corporate Income Tax. This new taxation is expected to generate
between three billion and six billion dollars in new revenues for
the State of Illinois.
Blagojevich has shown himself to be a thinker.
He has sold off state properties to raise revenue, and then leases
those same properties back from the new owners to make short-term
gains. He wants to sell off the tollways, sell
off the state lottery, and has put on a statewide hiring freeze
to save or raise new money.
The purpose of this new taxation plan,
according to Blagojevich, is to pay for universal healthcare
insurance for those citizens of Illinois who are unable to afford
it, and for a new income source for our public schools and public
education.
The reason Blagojevich gives for taxing
businesses is that he claims small and large businesses exploit tax
loopholes and don’t pay their fair share to support state
initiatives and programs. According to Blagojevich, the majority of
the tax burden falls on the shoulders of common citizens while
businesses and corporations are growing fat.
In response, the Illinois House of
Representatives has drafted their own proposal to
Blagojevich’s GRT which raises income taxes on all citizens and
corporations in the state to 5% and closes many of the corporate
loopholes. The House proposal reduces the state portion of local
property taxes that currently fund the majority of public school
costs (I like this proposal).
While the Illinois Legislature considers this
proposal and others in their upcoming sessions, business groups
across the state are lining up to oppose this new tax. The NFIB
(National Federation of Independent Business) has called for April
19th to be dubbed “GRT lobby day.” Businesspeople
are being urged to contact their state representatives and
senators to let their disapproval be heard on this issue. Their
main point in opposition to the GRT is that it isn’t “fair” to
charge businesses for the care of individuals. The governor has
countered with a state website addressing this “fairness” issue at
http://www.illinois.gov/taxfairness/default.htm, but the
rhetoric on the website seems circular, obtuse, and is fraught with
grammatical, emotional and logical problems.
My observations and opinion of this Blagojevich
proposal is that there are three falsehoods that surround this
approach:
1.
Let’s tax businesses because they have plenty of money.
As you know, there are two major political
parties in this country: the Republicans and the Democrats. These
two parties are polarized on many different issues, and seem to be
especially polarized on the issue of business (Republicans) vs labor
(Democrats).
When the Republicans are in the majority, they
favor businesses both small and large with legislation that makes it
easier for business to earn money and keep more of it. They also
seem to do away with social programs which make the people along the
margins of society lose benefits. The operating concept here is
that people are better off when they have to work for what they get,
and are rewarded for their struggle.
When the Democrats are in the majority, they
vilify businesses and business people, and favor laborers and the
people along the margins. Democrats pass legislation that removes
the Republican favors for business and put in place programs which
reseat the power of labor unions and increase federal, state and
local programs to share this country’s wealth with the less
fortunate.
The citizens of our nation and our state have
benefited from a balance of both approaches.
Blagojevich, a Democrat, believes businesses
should get less favors and pay more to fund social programs like
healthcare and education.
It is a mistake to believe that all the
businesses that operate in Illinois are awash in cash that they are
hoarding, and therefore should pay their fair share. According to
census figures, the majority of businesses in Illinois are small
businesses, employing less than 25 people. The majority of people
employed in this state and this country work for these small
businesses. In fact, the majority of businesses are what are called
“mom and pop” shops, with fewer than 5 employees (if you don’t
consider mom or pop an employee). And according to national experts
like the NFIB, most of these businesses are marginal, and mom and
pop usually live one year above the poverty line and the next year
below the poverty line (the feast and famine cycle).
Mom and pop live marginally, many not being
able to afford their own health insurance, putting all their
earnings back into their business with the prospect that they might
actually make a go of their dreams and efforts. National figures
report that 80% of new businesses fail within the first 2 years.
Mom and pop, who put their savings and their earnings into their
business and even went into debt for their business now are left
only with the debt.
Blagojevich says he understands how hard it is
to be in business and has made the GRT fair to struggling
businesses. The first $1M in gross income is exempt from the GRT,
and those businesses will instead continue to pay the CIT (Corporate
Income Tax) of 4.8% instead. What Blagojevich doesn’t seem to
understand is that gross income is not an indicator of business
health or wealth. In this age of falling margins and rising costs,
the net income is where there is margin to pay added expenses, not
the gross income.
I am sure there are numerous businesses in
this state that can shoulder the added burden of the GRT without
flinching. Those businesses will probably spend money to find
loopholes to avoid the GRT in the same manner they currently avoid
the CIT. But the majority of businesses in this state will be
further burdened by yet another added Blagojevich tax or fee.
Believe me, small businesses are not hoarding
all the money.
[to top of second column] |
 2.
Taxing businesses will cause them to pay their fair share
Blagojevich claims that loopholes in the state
tax laws allow businesses to avoid paying their fair share to fund
social programs in the state. But instead of attempting to fix the
tax code, he is instead putting a new tax code into place that
affects only one portion of our citizenry – businesses.
In reality state tax codes have graduations and
loopholes for private citizens who are “labor,” for those who are
below the poverty line, and for businesses which are struggling to
opt out of paying taxes. Our tax philosophy seems to be that those
who are making it should pay for those who are not.
Blagojevich, a Democrat, wants to close the
loopholes and considerations on only one group of taxpayers –
businesses, to pay for the benefits to another group, the citizens.
In truth there are some really misaligned
loopholes which allow businesses as well as citizens to opt out of
paying their fair share, but it seems unfair (to borrow
Blagojevich’s word) to close the loopholes to one group and allow
the loopholes to persist for all the others, especially since none
of the proposed benefits of this added taxation will be applied to
businesses.
Businesses will have to raise prices and cut
costs in order to operate within these new guidelines. This will
affect the marginal peoples because they will be able to buy less
and will have less opportunities for employment.
In our current tax code, businesses already pay
the lion’s share of sales taxes, property taxes, state and federal
taxes, as well as fees and judgments to the government. If you want
to use the word “fair,” then close the loopholes equally for every
taxable entity, not just one.
3.
Health Insurance will cure our healthcare crisis
I went to the doctor about two month ago with
a problem – slight pains in my upper left chest that I had been
having for 2 weeks. My doctor prescribed specific testing to
determine what kind of problem I actually had to make an accurate diagnosis.
My insurance company responded two weeks later
that they would not pay for that prescribed testing even though they
admitted it would provide an accurate diagnosis. My insurance
company, one of the nation’s top health insurers, said I could pay
for the test myself or have some other less accurate testing done.
However, when I was having a heart attack then they would pay for the
test. Since that time, fortunately, those symptoms have gone away.
One of the problems of popular government is
that they often fail to do the right thing and do the popular thing
instead. It is popular to get
somebody other than the private citizen to pay for medical costs,
and so politicians are garnering support to
push for state funded medical insurance for marginal peoples in
order to take care of our healthcare crisis. The insurance lobby
suggested it and insurance companies will be the biggest
beneficiaries of this concept. The insurance companies can
negotiate with healthcare providers, and everyone will live happily
ever after, especially since cash-hoarding businesses will be
footing the bill for the less fortunate.
But insurance companies will then be in charge
of my health and will not responsibly guard my welfare because they
are responsible instead to make a profit for their stockholders. My
health and welfare will only ever be a secondary consideration.
*****
What will happen is that there is currently
Blagojevich's proposal, the House's proposal, and will probably be
an Illinois Senate proposal. These three parties will probably
sit down and try to hammer out an agreement but will not be able to
bridge the gaping differences between them, and this whole matter
will be dropped. The politicians will wring their hands and
say to the voters, "I tried to make a difference" during their next
campaigns.
[Jim Youngquist]
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