Fritz Pfister

Who is against all children having health insurance, and day care? No one. How can a state make these promises and then be able to pay for them? In Illinois it is being done by the governor proposing the largest tax increase in state history, and telling Illinois’ citizens that he won’t tax people, he’s going to tax businesses which haven’t paid their fair share. Sounds good, but patently misleading, and untruthful.

The proposed Gross Receipts Tax (GRT) of .5% on sales of goods, and 1.8% on services will raise an estimated six billion dollars squarely on the back of Illinois business. Should this tax pass into law, the reality is businesses will have five options. Option one; pass the tax along through higher prices to people. Option two; cut jobs to be able to pay the tax. Option three; a combination of passing along the cost to people, and cutting jobs. Option four; leave the state to more business friendly, and profitable states. Option five; go out of business.

The governor is promoting his plan through wisely crafted TV ads and campaign style appearances saying this is a fairness plan, because it does not tax people. The truth is people will pay the tax through higher prices and lost jobs.

The GRT is a perfect example of a regressive tax. Unlike the sales tax where you see the amount on your receipt, the GRT will be collected during all phases of production to retail, and you will not see the tax on any receipt. Sources tell me the Farm Bureau estimates that after the tax has been collected from producer, wholesaler, and retailer the .5% tax increases the product cost to consumers by 7%. Low and middle income families will be hardest hit with job losses, and have to pay higher prices.

The governor is also proposing a 3% payroll tax on all companies with eleven or more employees to pay for a new program called ‘Illinois Covered’ which is to provide health insurance for all uninsured Illinois citizens. Who doesn’t want to see everyone provided health insurance? No one. This tax proposal however will have the same result as the GRT with businesses passing along the cost to people, or by cutting jobs. In this situation a company with ten employees couldn’t expand to eleven because the added 3% payroll tax on eleven employees would be the same cost as hiring three new employees, when only one is needed. Do you think companies with eleven employees will lay off at least one person? Following the passage of the new minimum wage in Illinois a local business retailer told me he was going to have to close one of his five locations due to the added cost. How many more of his remaining four stores will he have to close if these tax proposals are passed into law?

If the governor can pull the wool over the eyes of the people of Illinois by making them believe the people are not going to pay for these tax increases, and the Democrat controlled legislature passes these taxes into law, there will be disastrous results in the Illinois economy, especially in housing.

In 2006 home values fell in the state due to decreased demand, and over supply of homes for sale. Should this tax plan pass into law home prices will be forced down, making 2006 home price decreases look good. If Illinois families are paying the tax through higher prices, the buying power to purchase a home will be diminished. Thousands of jobs will be lost as businesses trim payroll to pay for the tax they can’t pass along and remain competitive, and many businesses will leave the state. New business development will become nonexistent if the legislature passes these taxes. Why would any business want to relocate to a state that is patently anti-business, pay a GRT, and higher payroll taxes? Businesses, unlike government, have to earn their money, and have to make a profit or the business doesn’t survive. The governor’s proposal places Illinois business on life support, while attempting to pay for new programs popular in theory, but unworkable in reality. What will be the result of the governor’s promise not to tax people? People will be harmed the most. As with well intended government programs throughout history, the people harmed most were the ones that were intended to be helped. If the people buy the Trojan horse that this is a fairness plan, then it will be the people most unfairly hurt.

With weakened purchasing power, and fewer buyers, and the loss of expanding new businesses the value of a home in Illinois will fall. This will impact the borrowing power of a family on their home’s equity, and will see dramatic decreases in sale prices if they decide to sell. People will pay a price even when departing the state with their business.

The hardest to be hit in the housing market will be home builders. The new taxes will add to the cost of building while the impact of the new taxes drives down the prices on existing homes. With the purchasing power of home buyers diminished through higher prices businesses will be passing along, many home buyers will choose the more affordable existing home instead of a new home. Builders will be placed in a serious competitive disadvantage resulting from the GRT. The new construction market has suffered through the worst year in building in a decade. Many builders will be forced out of business, or have to relocate to other states if the GRT, and payroll tax increase are passed into law.

Indiana repealed their GRT in 2002. Indiana is now the fastest growing Midwestern state in new business development. Ohio passed a GRT called a Commercial Activity Tax in 2005. Sources say it is too early to tell the impact of that tax. However, since the tax passed the Nestle company closed their Ohio plant, and moved to Indiana. Honda Motor Corporation narrowed their search for a new plant to Ohio, and Indiana. Honda chose Indiana although having strong ties in Ohio with a plant operating there for over three decades. The Crowne Corporation, a builder of fork lifts, although with a plant employing 5000 in Ohio, chose Indiana for their new plant. Ohio’s version of the gross receipts tax is less than half of what is proposed in Illinois. If Ohio is losing thousands of jobs to Indiana over a tax that is less than half of that proposed in Illinois, how many thousands of jobs will Illinois lose?

This week an alderman with the city of Springfield proposed an ordinance that would establish fines for panhandlers who ask people for money. How does this alderman think they can collect a fine from a person who doesn’t have any money to begin with? The same will be true for the governor of Illinois, how can you tax businesses that leave the state, and businesses that reject the state for more business friendly, and profitable environments?

There is no question the governor’s tax plan will be the biggest job incentive program ever in the history of Illinois. For its neighbors.

The sad part of all the governors well intended plans that will have the opposite effect in the real world, is the governor proposes this while other departments are in financial peril. In the name of cost cutting here are the results of the governors actions to date. The department of corrections has been gutted. There is only one prison guard in Illinois today for every 450 prisoners. These front line people put their lives on the line every day to keep us safe. The department of human services, likewise has gutted front line personnel, those who actually serve the people one on one, while the director and deputy director have chauffeurs making over $75,000 annually apiece. To list all the front line cuts here would take hours. You get the picture, jobs that help people are cut in the name of saving money, while the upper management becomes bloated with political allies, huge salaries, and perks. Cost savings to help people, hurt people. But ‘you ain’t seen nothing yet’, for what will happen to people, if the governors plan to help people passes into law.

The governor claims it’s the ‘fat cats’ in big business that aren’t paying their fair share. Truth be known it’s the ‘fat cat directors’, and governors office that aren’t doing their job. Now there’s talk of tying property tax relief with the GRT. Beware any government official, elected or otherwise that lowers a tax to pass a new tax. Once the government has their hands on your hard earned money, they never let go. You will see a temporary decrease in property taxes to get the GRT in place. My hunch is in less than three years property taxes will be back higher than they are today. The governments appetite for your money is insatiable, while their aptitude to manage your money is intolerable. It’s so easy to mismanage, and waste other people’s money. It’s a shame we have no real leaders in government anymore, at least people with integrity. Don’t take my word for it, just watch and listen to the governor’s TV ads. Remember those words when the opposite result is produced. It may take decades of viable leadership to undo the economic harm this adminisrtation has already created, and continues to propose.