March 19, 2007
See also: Gross Receipts Tax: Wrong Way to Finance Illinois Government
For media inquires please email Brian Phillips or call 202.464.5102
WASHINGTON, D.C. -- The Tax Foundation released a study today calling the proposed tax reform plan by Illinois Governor Rod Blagojevich the "largest state tax increase this decade." The study measures the total tax increase as a percentage of both economic output (state GDP) and state revenue and compares it with tax increases in other states.
If enacted, the tax increase would consume an average of $550 per person in Illinois.
"By all measures, this is a huge tax increase on the people of Illinois," said the author of the study, Tax Foundation economist Jonathan Williams.
The governor's plan would phase out the corporate income tax and create a new gross receipts tax that is expected to generate $6 billion in new revenue. While manufacturers, wholesalers, and retailers would only pay a .5% rate, almost all other business would pay a rate of 1.8%, giving Illinois the highest gross receipts tax rate in the country.
According to the study, the tax increase would represent 1.2% of Illinois' GDP - roughly three times the highest tax increase this decade, which was enacted by Indiana in 2003. The Illinois tax hike would represent over 26% of state revenue, almost twice the amount of Nevada's 2004 tax increase, the next highest.
"Instead of using surplus tax payments to make the tax code more competitive, Governor Blagojevich has decided to move in the opposite direction," says Williams.
"Upturns in the economy have given states unprecedented opportunities to do the things that will promote growth and stability. From giving families and small business tax relief to so-called ‘rainy day funds,' the trend has generally been to make state economies more solvent, not straddle them with huge tax burdens," says Williams.
The full text of the study is available here.
For media inquires please email Brian Phillips or call 202.464.5102.