CHICAGO – Governor Rod R. Blagojevich today welcomed the support of the American Federation of State, County and Municipal Employees (AFSCME) for his ambitious proposal to reform Illinois’ tax system, which closes corporate loopholes and brings greater stability to the state’s fiscal future. The Governor’s plan to establish a Gross Receipts Tax (GRT) on commercial activity has been embraced by many economists because of its broad base and low rates.
“For too long, some of the wealthiest corporations in our state have paid little or no state income taxes while working families have paid more and more. Now we have the unique opportunity to make a fundamental change that will ensure that everyone pays their fair share,” Gov. Blagojevich said. “We’re very pleased that AFSCME shares that goal.”
Many large corporations pay little or nothing in corporate income taxes, and they are not paying their fair share to meet the state’s ongoing infrastructure, education, healthcare and public safety needs. Gov. Blagojevich’s plan takes historic steps to change the Illinois tax structure – one of the most regressive and unfair to working families in the nation.
According to the Illinois Department of Revenue, 37 of the 99 ‘Fortune 100’ companies that filed taxes in Illinois paid no state income taxes, despite the fact that they averaged $1.2 billion in sales during 2004. On average, 48 percent of corporations that generated $50 million or more in annual sales in Illinois paid no income taxes from 1997 through 2004.
“We believe it is critically important to ensure that the Illinois tax system is fair, stable and produces adequate revenues,” said Henry Bayer, Executive Director of Council 31. “Governor Blagojevich’s proposal for a Gross Receipts Tax meets that test on every count. Contrary to the claims of some in the business community,” Bayer said, “we believe this plan has the potential to provide a real boost for the Illinois economy. We intend to do all we can to help enact it.”
States including Washington, Delaware and Hawaii have had a GRT for years, and, recently, Ohio and Texas have adopted a form of the tax. The GRT will only apply to businesses that make more than $2 million each year, which means 85 percent of all businesses in Illinois will be exempt. The GRT will tax service industries at a low 1.95 percent rate, while manufacturers, construction, retail and wholesale companies will be taxed at an even lower .85 percent. Exports will not be taxed. The plan also mitigates costs being passed on to consumers by excluding certain goods, such as retail food and pharmaceuticals.