The Legislature's Commission on
Government Forecasting and
Accountability took a look at how Illinois taxes services --
everything from providing electricity and natural gas to cutting
hair and lawns. The report states that Illinois does not tax many
services -- only 17 -- and that other states tax many more, with the
average being 56. COGFA's analysis estimates that the state could
generate between $4 billion and $8 billion if lawmakers were to
expand the service tax base.State Rep. Mike Tryon, R-Crystal
Lake, said that's not going to happen. Tryon said he doesn't know
many Democrats in Springfield, and even fewer Republicans, who would
vote for another tax increase. He said passing the 67 percent
personal income tax hike earlier this year has left a bad taste with
many lawmakers.
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"Are we the highest in sales tax? Are we the highest in property
tax? Now we're midway in income tax, and then be the highest in
services taxes?" Tryon asked. "We're building a government we can't
afford."
But it's not just the GOP that is reluctant to talk taxes again.
State Rep Elaine Nekritz said few Democrats want to fight that fight
again.
"I think that another tax discussion has almost a zero likelihood
of happening," she said. "That being said, the only scenario which I
could see (a service tax hike) is if we were to roll back part of
the income tax increase and move to a broader sales tax base."
Nekritz said the next realistic, and politically viable, chance
to talk about taxes will come in four years, when future lawmakers
will have to decide whether to make this year's income tax increase
permanent.
Ralph Martire with the Center for Tax and Accountability said
many states have already looked at service taxes, and Illinois will
likely have to do the same. Martire said Illinois' economy has
changed, but the tax code has not.
"We tax the sale of products. ... Back in 1965 the sale of
products was 32 percent of all economic activity in Illinois," he
said. "Today that has declined to 12 percent."
In the same period, services in Illinois have jumped from 35
percent of the economy to more than 60 percent.
Martire makes no secret of the fact that he'd like to see a
service tax increase or expansion, but critics said he's calling for
more taxes and not enough spending controls.
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Tryon said Illinois just raised $6.7 billion from the personal
and corporate income taxes. Some of that money will go either to
reduce the state's deficit or to pay Illinois' massively underfunded
pensions.
"I'm not looking at putting more tax burden on Illinoisans,"
Tryon said. "I believe the way to turn our economy around is by
creating jobs. And you don't do that by raising taxes. You do that
by providing a platform for a consumer-driven market to flourish."
Tryon said that unless lawmakers stop spending, adding new taxes
is not going to solve the state's budget problems.
But Nekritz said pointing the finger at spending is not telling
the whole story.
"I think for the GOP to say we're willing to cut $7 (billion) to
$8 billion from (the budget) ... is a little bit disingenuous,"
Nekritz said.
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Kelly Kraft with Gov. Pat Quinn's budget office said the whole
story is complicated when all of the state's taxes are taken into
consideration. She said the situation is also ever-changing.
"Obviously there are many considerations to take into account
when contemplating taxing services, and we will continue to hear
arguments for and against the idea," Kraft said.
The report from COGFA does not advocate for or against a service
tax increase or expansion. But the report does highlight issues that
lawmakers may face if they choose to take on service taxes.
[Illinois
Statehouse News; By BENJAMIN YOUNT]
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