By CHRISTOPHER WILLS Associated Press Writer
May 11, 2007

SPRINGFIELD, Ill. (AP) _ It takes a lot to ruin Gov. Rod Blagojevich’s day.
The House overwhelmingly rejected his proposal for a major new tax. Lawmakers of both parties mocked his attempt to put a positive face on the rejection. Fellow Democrats talked of dumping the health care program that is Blagojevich’s top priority.
But the governor still declared Thursday a good day.

‘There’s ups and downs, but (I) feel good about it,” Blagojevich said after an appearance in Chicago. ”Things went pretty well today.”

In a test vote meant to reveal whether his $7.6 billion tax on business transactions had any support, not a single lawmaker backed the proposal, while 107 opposed it.

Blagojevich sought to minimize the vote’s impact. Beforehand, he suddenly asked lawmakers to vote against his plan as a signal that they think it’s too soon to take a firm position.

Lawmakers of both parties scoffed, calling the request an attempt to put a positive spin on what would otherwise have been a clear-cut defeat. Only one lawmaker, a close ally of Blagojevich, suggested the vote was not a referendum on the tax itself.

Republicans displayed signs saying ”’No means no,’ governor!”

And Rep. Marlow Colvin, a Chicago Democrat and chairman of the House’s black caucus, said Blagojevich was disguising the fact that his plan probably wouldn’t have gotten 20 votes.

”Rather than facing that embarrassing defeat, they spun it to say this is an ongoing debate and discussion,” Colvin said. ”To their credit, I think it’s the first smart move they’ve made.”

The complete rejection left lawmakers wondering where else they could find money for schools, health care, transportation and the state’s many other needs.

Raising income and sales taxes are two options, although Blagojevich has promised to fight them relentlessly. Expanding gambling and cracking down on companies that avoid paying income taxes are other options mentioned by lawmakers.

Another possibility is passing a budget that holds spending at current levels, which would mean no expansion of health insurance programs.

House Speaker Michael Madigan, D-Chicago, for the first time took a clear public position against Blagojevich’s proposed gross receipts tax, which would be the largest in Illinois history.

He said it is regressive and would hurt poor people who are ”the least able in our society to take on additional costs.”

The tax would apply to business transactions. Basically, every time a company took in money, it would pay a small share to the state.

Companies with under $2 million in annual revenues would be exempt. The first $5 million in revenues for larger companies would not be taxed. Blagojevich’s office says the result is that 90 percent of Illinois businesses would pay nothing under the new tax.

Blagojevich wants the money, along with $1 billion from a new payroll tax, to pay for programs that would ensure everyone in Illinois has access to health insurance. It also would provide more money for schools and $1 billion in local property tax relief.

Business groups predict it would force them to raise prices or cut jobs. Some advocates for the poor argue it would be a bigger burden on the needy than the rich. Lawmakers are nervous about supporting such a large increase.

The Illinois House heard eight hours of testimony on the gross receipts tax Wednesday, including a personal pitch from the governor. Blagojevich spokeswoman Abby Ottenhoff said the hearing produced good questions and suggestions, so a test vote shouldn’t have been taken until the administration had time to respond.

Madigan said he would meet with House Democrats next week to consider other revenue possibilities. He would not answer reporters’ questions after the debate.

Rep. Frank Mautino, D-Spring Valley, said he expects Madigan’s staff to lay out the state’s many expenses and the size of the tax increases that would be needed to pay them. Then Democrats will attempt to reach some consensus on what they support.

Mautino said he sees general support for an income tax increase, even if it means a battle with Blagojevich, so long as the money is used for schools and other long-standing needs.

”I do believe the will is out there to increase taxes. I just don’t believe it’s there to create new programs with that money,” Mautino said.

But Blagojevich says he is committed to creating a major new health program. The Chicago Democrat is unlikely to take the House vote as the last word. And he renewed his vow to veto any income or sales tax increase.

”We’re not going to raise taxes on people on top of high gas prices and on top of electric bills that people can’t afford to pay,” he said.

Senate President Emil Jones, D-Chicago, also backs the gross receipts tax, although his chief priority is education funding, not health care. After the House vote, Senate Republicans called on Jones to conduct a vote in the upper chamber so the tax could be defeated once and for all.

He ignored the request and challenged Republicans to spell out what tax proposals they’d be willing to support. He later told reporters he doesn’t consider the tax dead yet.

Chicago Sun-Times Editorial
May 11, 2007

After the rough treatment the governor received while defending his proposed gross receipts tax before the Illinois House on Wednesday, it was hardly surprising that House members overwhelmingly rejected the idea in a non-binding resolution Thursday. The governor, who assuredly knew the rejection was inevitable, tried to save face by telling lawmakers he wanted them to vote against his plan, arguing that a no vote would send “a clear message that this issue is too important for a rush to judgment.” It was a nice try — actually, it was laughable — but it doesn’t change the fact that opposition to his plan is deep and broad-based.

It’s doubtful that any lawmakers were swayed by the governor’s appearance before the House on Wednesday, part of an eight-hour meeting convened by House Speaker Michael J. Madigan to weigh the tax plan’s pros and cons. But the hearing was hardly useless. In addition to exposing widespread legislative skepticism, it also illuminated some of the flaws with the tax and the governor’s rhetoric.

Blagojevich wants to raise $7.6 billion by taxing all the money that businesses take in, not just their profits. The tax is the linchpin of his plans to extend health insurance to uninsured Illinoisans, boost school funding, provide property tax relief and fund other programs. He denies that the tax will be passed on to the “working families” that he says he is trying to spare by rejecting a sales or income tax increase to fund his programs.

If that’s so, lawmakers asked, then why exempt food and drugs? Is it because you’re afraid those products would cost more if they weren’t exempt? The governor also says his plan is preferable to all others because good tax policy calls for a low rate on a broad base. But critics pointed out that he also has exempted about 90 percent of all businesses, which seems to narrow that base considerably.

The governor told lawmakers that he’s ready to compromise. But lawmakers, including many fellow Democrats, who control the chamber, asked how that was possible, since the governor insists his idea is the only one he’ll consider?

In fact, he did say there was another option — to do nothing. When he was running for re-election last fall, he left voters with the impression that, thanks to his policies, the state’s finances were in fine shape. There was no warning about the need for new revenue, let alone a call for a massive new tax. Now, however, he issues a dire warning that doing nothing means a billion-dollar hole in the budget, leading to severe cuts in education, public safety, transportation, even school football uniforms. At the very least, the governor is now conceding the need for more money. If only he were open to other ideas about how to raise it.

By Kevin McDermott
POST-DISPATCH SPRINGFIELD BUREAU
05/11/2007

SPRINGFIELD, Ill. — The Illinois House on Thursday dramatically rejected Gov. Rod Blagojevich’s ambitious proposal to raise billions in new taxes on big business with a nonbinding but politically humiliating 107-0 vote against the plan.

The Blagojevich administration scrambled to dismiss the vote as meaningless, but it probably ends the Democratic governor’s attempt to raise more than $7 billion annually for schools and health care by taxing the gross receipts of the state’s biggest businesses.

Any change in the state’s tax structure would require formal approval by both chambers of the Legislature. Thursday’s vote was intended to send the message that there’s no support in the Democratic-controlled House for the controversial measure.

A Blagojevich spokeswoman said the administration intends to press ahead with the plan, which is awaiting a formal vote in the Senate. But, in a rare instance of bipartisan consensus, House members from both parties indicated they are done with the issue.

“The gross-receipts tax is dead,” declared Rep. Tom Cross, R-Oswego, the House minority leader.

Cross’ Democratic counterpart, House Speaker Michael Madigan of Chicago, sponsored the nonbinding resolution as an up-or-down vote on Blagojevich’s plan. Madigan spoke against the plan before the vote.

“The imposition of a gross-receipts tax in Illinois would constitute a fundamental shift in the philosophy of

taxation in this state,” Madigan told fellow lawmakers. He noted that, unlike the current business income tax, Blagojevich’s proposed tax would hit new businesses that aren’t making money yet and existing businesses that heavily reinvest.

That, Madigan and other critics have said, would create costs that ultimately would be passed on to consumers, and would prompt some businesses to move out of the state. “Illinois today is not exactly a mecca for those who want to invest money,” Madigan said.

Blagojevich earlier this year laid out an ambitious plan to pump billions of new dollars into education and to create near-universal health care in Illinois. With his standing refusal to consider a general income tax or sales tax increase, his proposed gross-receipts tax was to be the primary funding source for those goals.

Details of the plan have gone through several revisions as the administration has attempted to win converts. The most recent version would impose the tax mostly on businesses that gross more than $5 million annually — fewer than one-tenth of the state’s companies — at a rate of up to 2 percent of gross revenue.

Blagojevich has promoted the tax plan by repeatedly attacking the corporate sector for “not paying its fair share” in taxes. He has noted that many of the largest businesses in Illinois pay no state income tax at all because of reported losses, deductions and loopholes.

Of 10 lawmakers who spoke in House floor debate on the issue Thursday, just one — Rep. Jay Hoffman, D-Collinsville — defended Blagojevich’s proposal. Hoffman, an old Blagojevich friend and his top legislative ally, stressed the “fundamental unfairness” of the current tax structure and derided Madigan’s resolution as a “charade.”

“This House resolution isn’t real,” Hoffman said. “This is a practice game.”

In a last-ditch attempt at political spin, Blagojevich’s office put out a statement early Thursday encouraging all lawmakers to vote “no” on the resolution, as a protest against the process. The statement said the “no” votes should be viewed as “a clear message that this issue is too important for a rush to judgment on a nonbinding resolution.”

The maneuver drew laughter and derision among reporters, lobbyists, lawmakers and others around the Capitol, because it was clear that the administration knew — as did all parties in the debate — that the resolution already was facing an avalanche of “no” votes.

Hoffman said his “no” vote was meant as a protest against the process, and a number of other Blagojevich allies in the House apparently cast similar protest votes. But most members who spoke on the issue stressed that their “no” votes were meant to oppose the tax plan. Several desks on the House floor displayed signs that read: “No means no, Governor!”

The vote followed an unusual all-day hearing on the issue Wednesday in which it became clear there was little support among House members for the tax plan.

Minutes after the vote, Madigan announced that he will talk with lawmakers next week about potential alternative tax plans to fund the state’s expenses for the next year. No additional details were immediately available.

For any House measure to garner more than 100 “no” votes is so rare that there is a tongue-in-cheek legislative “award” for it, called the “Century Club.” After Thursday’s vote, House leaders — apparently worried about the appearance of treating the controversial tax issue too lightly — ruled that nonbinding resolutions weren’t eligible for the Century Club award.

We’ll title this one “Gov. Blagojevich in Wonderland.”

On Wednesday, House Speaker Michael Madigan and the rest of the House held a rare committee of the whole hearing on the GRT proposal. Beginning with the governor and GRT supporters, the meeting went on for eight hours.

Not a lot of new ground was covered. Supporters of the plan talked about the need for billions of dollars to expand health care and improve education funding. They said the GRT was the best way as it would tax corporations and other businesses, which they say are not paying their fair share.

Some opponents do not question the need for more revenue, though opinions greatly differ on just how much more money is needed and where it should go. One thing most legislators do agree on is that the GRT - as proposed so far - is not the way to get that money.

It has been criticized as a stealth tax. Opponents note that while it is aimed at businesses with revenues of $5 million or more, it will actually be passed on to consumers through higher prices. Business groups also believe it could hurt the state’s competitiveness, chase some businesses out of Illinois and force others to close their doors.

The governor disputes those claims and insists the GRT is the only way to go. If the legislature passes any income or sales tax increase, he promises to veto it. If nothing is done, Blagojevich promises plenty of painful cuts to popular programs. Let’s look at the options that Blagojevich has left on the table - GRT, GRT or GRT.

Madigan let his members cast their votes on a nonbinding resolution asking whether they support the GRT. After Wednesday’s testimony and questions, it appeared pretty obvious that Blagojevich was not going to pull out a victory on this one.

But never underestimate the governor. Less than two hours before the vote in the House, Blagojevich issued a statement to assure his victory.

“Considering that this meaningful dialogue was initiated just 24 hours ago, it would be premature to conclude the discussion today and ask members to make a decision before they have an opportunity to get answers to their questions and offer their ideas. So we are asking all members to vote ‘no’ to send a clear message that this issue is too important for a rush to judgment on a nonbinding resolution,” wrote the governor. The vote went 107 against the GRT, goose egg in favor.

Brilliant! Vote against my proposal to assure everyone you might still be for it, commanded the governor. Not since Alice fell through the looking glass have we seen such logic. We are not sure if the governor was simply trying to save face knowing that his GRT proposal was crashing faster than the ’69 Cubs, or if he really thought a “no” vote would send a positive message. We hope it was the former as the latter raises questions of competency.

The real problem here is not just the GRT. It is the amount of money being sought - $7.6 billion. That huge figure is also the reason for the GRT - the Mother of All Tax Increases. Make this comparison - raising the personal income tax from its present 3 percent to 4 percent (a 33 percent increase) and a commensurate increase in the corporate income tax would raise $3.7 billion. So raising it two full percentage points to 5 percent (a whopping 66 percent increase) would still fall shy of the governor’s desired $7.6 billion goal. And raising the sales tax five percentage points would still bring in slightly less than $7.6 billion.
No wonder the governor wants the stealthy GRT. No one would stand for raising $7.6 billion in direct income or sales taxes. But people will still pay that amount with the proposed GRT.

By Ray Long and Jeffrey Meitrodt
Tribune staff reporters

May 10, 2007

SPRINGFIELD — Unmoved by a two-month blitz of TV ads and rallies, the Illinois House on Thursday resoundingly rejected Gov. Rod Blagojevich’s plan for a $7 billion business-tax increase and immediately began discussing alternatives for solving the state’s fiscal mess.

The second-term Democrat was unbowed in the face of one of his biggest political setbacks, and he pledged to keep pushing for his new tax on business revenues to bolster schools and expand health-care coverage. He said the most discussed alternatives—raising income or sales taxes—were “off the table.”

Blagojevich had sought to blunt the impact of the vote by suggesting beforehand that he wanted lawmakers to reject the referendum on his plan. But after the roll call he used a rally in Chicago to accuse legislators of being too cozy with business interests who “eat fancy steaks” and “shuffle around in Gucci loafers.”

“Your lawmakers in Springfield sometimes forget where they came from. Sometimes they forget who hired them,” Blagojevich said. “Waiting outside that chamber, where the people are supposed to have their representatives do their job, are all these high-powered lobbyists twisting their arms.”

House Speaker Michael Madigan (D-Chicago) engineered the vote on a non-binding resolution that asked lawmakers whether or not they supported the governor’s plan. The result was a striking 107 opposed, zero in favor and seven voting “present.”

Madigan called on House Democrats to return next week to discuss whether they would support another tax increase, how big it should be and where the money should be spent.

Madigan’s political power play was a clear signal that he is moving past the governor’s proposal. But Senate President Emil Jones (D-Chicago), who huddled privately with the speaker on Thursday morning, remained foursquare behind Blagojevich.

Many of Jones’ closest legislative allies are getting antsy to reach a compromise, amid a growing fear that Democrats who control state government are speeding toward a bitter gridlock that will go well beyond the legislature’s May 31 adjournment deadline.

Madigan has said a tax increase is needed this spring but has declined to say what he would endorse. Voicing his opposition to the gross-receipts tax for the first time, he maintained the governor’s proposal amounted to a “regressive” tax that would hurt consumers as well as businesses.

Blagojevich helped build up the number of no votes against his plan when it was clear he was headed to certain defeat. With lawmakers predicting his proposals might not even garner two votes, Blagojevich issued an 11th-hour statement asking all lawmakers to vote against his plan.

“So we are asking all members to vote ‘no’ to send a clear message that this issue is too important for a rush to judgment on a non-binding resolution,” Blagojevich wrote.

But the vote also provided an outlet for lawmakers frustrated with Blagojevich’s style of public campaigning for big-picture programs with little regard for negotiating the details with the General Assembly.

Lawmakers scoffed at the governor’s last-minute missive, saying he was trying to put a positive spin on what was clearly going to be a major defeat.

Many Republicans, who had no intention of supporting Blagojevich’s tax plan, hung small signs on the back of their laptop computers reading, “No means No Governor!”

Democrats said the plan is now toxic.

“It’s like Kryptonite,” said Rep. Julie Hamos (D-Evanston), who had considered voting for the governor’s tax plan.

Gridlock feared

Blagojevich’s chief House ally, Rep. Jay Hoffman (D-Collinsville), called Madigan’s resolution a “charade” and said he feared it could lead to gridlock that would force an austere budget without the revenue to support new spending.

Still, Hoffman said he couldn’t support Blagojevich’s plan in its present form.

Rep. Lou Lang (D-Skokie), who is pushing for increased gambling to raise revenue, implored the governor and lawmakers to “get past the speed bump of gamesmanship, to get past the speed bump of partisan politics, to get past being told what we are going to do, and taking the bull by the horns and stating what we think we should do to move the state of Illinois forward.”

Emboldened by the House vote, Senate Republicans demanded an immediate roll call on the governor’s tax legislation in the Senate.

“I believe we have the votes here to immediately kill” it, said Sen. Bill Brady (R-Bloomington).

But Jones rejected their request.

“The easiest thing you can do in the General Assembly is to say what you are against,”‘ Jones said. “But sometimes in life you have to be for something.”

Alternatives pushed

Afterward, a top Jones deputy, Senate Majority Leader Debbie Halvorson (D-Crete), suggested it is time to consider a “Plan B,” which might be a mixture of other taxes.

Clearly energized by the House vote was Sen. James Meeks (D-Chicago). His attempts to push a plan that would swap higher income and sales taxes for reduced property taxes have stalled in the Senate even though a companion effort is progressing in the House.

Meeks maintained that the loss of the governor’s plan in the House makes his so-called tax-swap proposal the “most viable option.”

Jones still does not support it, said Cindy Davidsmeyer, Jones’ spokeswoman.

The governor wants a tax on business revenue at every step in providing services or products, with exemptions for firms with $2 million or less in annual revenue. He said tax credits would help firms with revenue up to $5 million.

Rep. Gary Hannig (D-Litchfield), Madigan’s point man on budget issues, said he might be able to support a gross-receipts tax if the threshold were $100 million or $200 million—a move that would target only major corporations.

Even so, House Minority Leader Tom Cross (R-Oswego), who co-sponsored the resolution on the governor’s plan, said he doesn’t think his caucus will support any new taxes this year, especially not a modified gross-receipts tax. He said House Republicans want lawmakers to find ways to cut costs.

Despite the day’s events in Springfield, Blagojevich characterized the lopsided vote as a positive development.

“Today, I think, was basically an up . . . I feel good about it,” he said.

By Christopher Wills
The Associated Press
Published Wednesday, May 09, 2007

SPRINGFIELD — Gov. Rod Blagojevich warned lawmakers today he will never agree to raise income or sales taxes, so the only way to come up with more money for schools and health care is to approve his plan for billions in new business taxes.

Speaking to the Illinois House, which had gathered for a rare all-day hearing on the tax plan, Blagojevich did his best to slam the door on raising other taxes as an alternative to his plan.

“I will not raise taxes on people. I won’t do it today. I won’t do it tomorrow. I won’t do it next week, next month, next year,” Blagojevich said. “I believe it’s wrong and this is not an issue I’m prepared to horse trade.”

The Chicago Democrat also offered a grim picture of what might happen if lawmakers do nothing to increase state revenues. Spending would have to be cut by $1 billion, he said.

“It means cuts in education and health care and police protection. It means cuts in mass transit. It means cuts in funding roads and bridges — the sorts of things that matter to people,” he said.

Blagojevich even warned that uniforms for high school football players would be threatened, a claim that prompted hoots and calls of “Come on!” from the audience.

The governor’s 22-minute address was followed by about an hour of mostly polite questioning from lawmakers. The event represented an important chance to sell skeptical lawmakers on his plan for a new $7.6 billion tax on businesses’ gross receipts — the largest tax increase in state history.

House Speaker Michael Madigan, D-Chicago, announced that the House will vote Thursday on a resolution on whether the members support or oppose the tax.

Rep. Tom Cross, the chamber’s minority leader, said he supports the vote and expects it to show lawmakers dislike the tax plan.

“You can talk and talk and pontificate and posture. I think it would be good for everybody to know it’s either alive or dead and we move forward,” the Oswego Republican said.
Rep. Lou Lang, D-Skokie, asked the governor how he could claim to be willing to compromise while simultaneously ruling out any increase in sales or income taxes. The question prompted a round of applause.

The plan has gotten a cool reception since Blagojevich unveiled it in his March budget address.

Business groups predict it would force them to raise prices or cut jobs. Some advocates for the poor argue it would be a bigger burden to the needy than the rich. Lawmakers are nervous about supporting such a large increase. A majority of the House has already signed up to co-sponsor a resolution rejecting the new tax.

Madigan convened the “committee of the whole” so that everyone in the chamber can hear both sides of the tax debate and ask questions.

“I hope by the end of the week it will be apparent to everyone that the gross receipts tax is a terrible idea,” Douglas Whitley, president of the Illinois Chamber of Commerce, said Tuesday. He was to speak at today’s hearing.

In the Senate Tuesday, the Executive Committee approved a new version of the gross receipts tax. The revisions would raise the top tax rate to 2 percent, from 1.85 percent, and give smaller businesses a credit for everyone they employ.

May 9, 2007
BY DAVE MCKINNEY AND WHITNEY WOODWARD
Chicago Sun-Times

SPRINGFIELD — Facing criticism from both parties, Gov. Blagojevich went before skeptical House members today to make a last-ditch appeal for his proposed $7.6 billion gross receipts business tax and warned of “devastating” budget cuts if the plan isn’t passed.

“We can do this and do big things for the people of our state, or we can sit back and do nothing,” Blagojevich told the full Illinois House.

If lawmakers balk at his gross receipts tax on businesses, the governor repeatedly vowed to veto increases in the state income or sales tax as alternatives to funding schools, transportation and health care.

He also said if lawmakers opt not to raise any taxes, his administration will be left with having to make $1 billion worth of cuts to support a “do-harm” state budget — a spending plan that Blagojevich said will hit broad segments of society but be particularly acute for public schools.

“We will hurt people,” Blagojevich said. “Schoolteachers will have to be laid off because school districts won’t have the money they need to be able to fund our schools. New textbooks won’t come because the school districts won’t have the money they need. Football teams might not get the uniforms at their high school football games because we don’t have the money we ought to have for our schools.”

His reference to football players being deprived of uniforms triggered a chorus of groans from Republicans and a handful of Democrats, who viewed the warning as an over-the-top scare tactic.

“I’m a little worried about the football players without uniforms,” House Minority Leader Tom Cross (R-Oswego) said sarcastically after the governor’s appearance. “I’m trying to envision…our high school football games this fall with only [players] having pads on and spikes. That concerns me.”

Cross predicted the governor’s tax plan has a “short life” because “it’s, policy-wise, an awful tax. It’s bad for jobs. It’s bad for business. It’s bad for consumers.”

On Thursday, it will become clear whether the governor’s lobbying push had any effect or whether he will have to scrap the proposal.

House Speaker Michael Madigan (D-Chicago) announced his intention to call a vote on a non-binding resolution that will ask whether House members favor or oppose the gross receipts tax.

Under the governor’s plan, any company with more than $2 million in revenues would pay the tax on most business transactions, including on materials used in the manufacture of goods. The administration says about 90 percent of businesses would be exempt from the tax.

Blagojevich contended that big businesses throughout the state are dodging corporate income taxes and placing too heavy a burden on individual taxpayers.

“They’re not paying their fair share,” the governor said. “They’re avoiding their responsibilities to fund health care, to provide funding for our schools, to pay for the police protection that keeps all of us safe.”

Later, Blagojevich fielded questions from lawmakers, who sought answers from the administration in writing and asked repeatedly how the tax wouldn’t eventually trickle down to consumers.

Rep. Lou Lang (D-Skokie) drew loud applause by pressing the governor on how he could suggest a willingness to work with lawmakers on the issue when he won’t consider any other tax proposals.

“Why don’t you tell us how we can compromise with you if there’s only one thing left on the table?” Lang said.

“I proposed my budget. Now, if you guys have ideas… I’m happy to hear them. The only one I’m taking off the table is the income tax and sales tax on people,” Blagojevich responded.

After the governor and his team of advisers departed the House after nearly two hours on the hot seat, the governor’s running-mate, Lt. Gov. Pat Quinn, came to the House floor and promptly blasted the tax increase plan.

“I heard the governor a while back this morning talk about it. Ben Franklin, one of the founders of our country, said two things are inevitable in life: death or taxes. But Ben Franklin did not say it’s inevitable to be taxed to death, and that is the problem we have here today.”

Labor and business leaders, economists and other interest groups were scheduled to follow Quinn during testimony that was expected to last into the late afternoon.

“The gross receipts tax will level the playing field so working families will have partners in the corporate community” to share in the cost of government and health care, said Michael Carrigan, president of the Illinois AFL-CIO.

SPRINGFIELD, Ill., May 9 /PRNewswire-USNewswire/ –

The gross receipts ax proposed by Governor Blagojevich would take a huge bite out of construction employment in Illinois, as slower growth in the state’s economy due to the new levy would cause a projected permanent loss of 3,968 jobs in the sector, a new study finds. The study results were provided in written testimony today in a hearing of the Illinois House Committee of the Whole on the proposed gross receipts tax.

The study, commissioned by the Illinois Association of REALTORS, finds that housing construction employment alone would fall by more than 1,700 jobs under the weight of the proposed gross receipts tax (GRT).

The research also calculates that the GRT would increase the cost of new homes in Illinois by $5,400 to more than $12,000, depending on the purchase price of the home.

“These new research findings offer further proof that the mammoth tax increase proposed by the Governor would siphon growth, vitality and jobs from our state’s economy and cause far more harm than any possible good it might achieve,” said Gary Clayton, Chief Executive Officer of the Illinois Association of REALTORS. “This purported tax on business in fact takes a heavy toll on the working families of Illinois.”

The new research was conducted by RCF Economic and Financial Consulting, Inc. of Chicago. It projected the impact of the proposed tax on construction employment by estimating the increased tax burden on businesses from the proposed GRT, the reduction in state economic and population growth resulting from that increased burden, and then estimating the effects of slower population growth on construction employment.

“Construction is fueled both by the need to replace old buildings and by the need to house new residents, so it can be expected to be sensitive to changes in population growth,” said George S. Tolley, president of RCF and professor emeritus in the University of Chicago’s Department of Economics.

The strength of the GRT’s impact on the construction industry’s share of employment was estimated using 2002 data from the Illinois Department of Revenue, federal Bureau of Labor Statistics and the U.S. Census Bureau.

The impact of the GRT on the construction industry also can be expected to increase the cost of housing as firms pass on the added cost of the tax, the RCF study found. This is due to the “cascade effect” that occurs as the gross receipts tax is applied at more than one stage in the process of building a house.

For example, an electrical contractor that pays the GRT will pass those added costs along to the developer, who then pays the GRT on the entire sale price of the home and passes the cumulative tax onto the consumer. The same calculation applies to other contractors and it applies to firms from which the contractors have purchased materials, RCF said in its study.

In a previous phase of its research on behalf of the Illinois Association of REALTORS, RCF projected that the GRT would increase the cost of a new home by nearly 3 percent (2.84 percent). Applied to existing Illinois data on house prices by income group, that impact translates into additional housing construction costs ranging from $5,339 for lower
middle-income families up to $12,261 for families earning $100,000 or more. RCF calculated the impact of the GRT in Illinois based on a 1.95 percent GRT on services and a .85 percent tax on construction contracts and materials.

The study is available on the IAR Web site at http://www.illinoisrealtor.org/grt.htm.

CHICAGO, May 8 /PRNewswire-USNewswire/ — The Chicago Automobile Trade Association (CATA) predicts that 25 percent of its 500 franchised new-car dealership members would close should Governor Blagojevich’s proposed Gross Receipts Tax be implemented.

The business climate for dealers has been tenuous for a number of years. According to Auto Outlook, the CATA’s marketing research publication, new retail light vehicle registrations in the Chicago area are predicted to decline 2.3 percent this year. The only good news is that the decline is well below the 6.6 percent drop in 2006, and the market has a good chance of improving in 2008-”if unimpeded,” said Jerry Cizek, president of the CATA. He echoed concerns that are being loudly voiced across the state in protest to this tax, but lamented the possible fate of his association’s members.

“It’s no secret that the past few years have been tough in the automotive segment,” continued Cizek. “Many of our dealers are walking a tightrope of profitability or loss. One of the biggest problems with this tax is that it would be levied whether a business is profitable or not. Our best estimates indicate that the GRT would force a tipping point and push a quarter of our dealerships over the edge, forcing them to close up shop.

“An average dealership in Illinois employs 67 workers,” said Cizek. “If 200 such businesses close, the state would be burdened by more than $400 million to fund an average $28,000 unemployment compensation payout over 26 weeks — and there would be 13,400 more Illinoisans without employer-supported health care coverage. I should point out that these numbers reflect only the impact of this tax upon dealerships. If extended throughout the rest of Illinois business, it doesn’t take much imagination to realize that defeat of this initiative is imperative to our state’s economic ability to thrive.”

Chicago area new-car dealers were instantly aware of its grievous potential impact, according to CATA Chairman Bob Loquercio.

“This tax will close dealership doors, raise consumer costs, put employees out of work, and put their families at risk,” said Loquercio. “The governor has been less than forthcoming with his portrayal of this tax. The retail automotive business deals in big-ticket items, but operates on a very low margin, often less than 1 percent.

“The governor portrays his GRT as making ‘big business’ pay its share of the load, but dealerships are not giant corporate monoliths,” he continued. “For the most part, dealers are small, local firms who have done business in their community for decades. The closure of these stores would not only impact the state through increased unemployment, but also slash the sales tax revenues that are contributed directly back to the communities in which they operate.”

Source: Chicago Automobile Trade Association