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Wednesday, April 18, 2007 01:58 am

Money talks

But will the GRT walk?

Untitled Document Although experts contend that no single governor or General Assembly is to blame for Illinois’ ongoing fiscal  crisis, it wasn’t until Gov. Rod Blagojevich laid out his plan this year for a gross-receipts tax that the problem came into sharp focus. The controversy — and PR battle — continued this week. On Wednesday, the Campaign for Better Health Care and other organizations picketed a meeting of a GRT foe, the Illinois State Chamber of Commerce, in Springfield. Part of the proceeds from the GRT would help pay for universal health insurance. The Chamber also participated in a Lobby Day on Wednesday to oppose the plan During a daylong conference on Monday, sponsored by Southern Illinois University, the governor’s budget officials defended the GRT, which Blagojevich anticipates will raise about $8 billion annually in new dollars, and business organizations ripped the plan as a tax increase. According to the Center for Tax and Budget Accountability, Illinois isn’t bringing in enough tax revenue to meet its unfunded pension obligation or keep pace with the rising costs of education and human-service programs such as Medicaid. R. Eden Martin, president of the Commercial Club of Chicago’s civic committee, concedes that even if cuts are made additional revenue will be needed. However, his group opposes a tax increase that isn’t accompanied by reforms. Of all the ideas that have been floated, which include increases in personal and corporate income taxes, as well as the state sales tax, economist and former state legislator Doug Kane, who’s been advising the governor, says that the GRT is the most fair. The GRT would tax goods at a rate of 0.85 percent and services at a rate of 1.95 percent. Business groups charge that passing the GRT will translate into higher prices for consumers, but Kane characterizes such reasoning as assumptive. Furthermore, Kane argues, the current tax structure is based on the “old economy,” and the tax structure needs to be updated to incorporate a more global service economy. Kane points to Washington, Delaware, Hawaii, Ohio, Texas, and Kentucky as states that have passed the GRT and managed not to fall into ruin, as critics predict will happen should the tax pass here. Collin Hitt, an associate with the Springfield-based Illinois Policy Institute who attended Monday’s conference, doesn’t agree with the comparison. “The governor’s people are not comparing apples to apples or GRTs to GRTs,” Hitt says. In Texas, for example, the GRT was coupled with an reduction in the state property tax, and Illinois’ GRT would be the largest of its kind in history. Hitt also takes issue with Kane’s assertion that companies won’t necessarily pass the GRT along to customers. “Is a shipping company going to eat the cost of gas just because gas prices went up? There’s no way a business is going to eat the GRT. That would be inconsistent with economics — and psychology, for that matter.”

Contact R.L. Nave at rnave@illinoistimes.com.
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