Gross Receipts Tax Numbers from HRO


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An overview of the gross receipts tax as proposed and examples of failures from other states

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Gross Receipts Tax Numbers from HRO

  1. 1. GROSS RECEIPTS TAX The “Governor Raises Taxes” Plan (GRT)
  2. 2. GROSS RECEIPTS TAX <ul><li>Governor Blagojevich’s “Tax Fairness Plan” is an estimated $7 billion tax increase according to the Office of the Governor </li></ul><ul><li>The largest tax increase in history of the State of Illinois </li></ul><ul><li>And also the largest tax increase out of all 50 states this decade </li></ul>
  3. 3. THE GOVERNOR’S PROPOSAL <ul><li>1.95% Tax Bracket </li></ul><ul><li>GRT applies to all service providers with gross revenue over $2 million </li></ul>The Creation of Two Additional Tax Brackets <ul><li>Amusement parks </li></ul><ul><li>Racetracks </li></ul><ul><li>Bowling alleys </li></ul><ul><li>Cable TV </li></ul><ul><li>Golf courses and country clubs </li></ul><ul><li>Fitness and recreational sports centers </li></ul><ul><li>Sports teams </li></ul><ul><li>Performing arts companies </li></ul><ul><li>Miniature golf </li></ul><ul><li>Sightseeing tours </li></ul><ul><li>Limo services </li></ul><ul><li>Movie theaters and more </li></ul><ul><li>Barbers </li></ul><ul><li>Beauticians </li></ul><ul><li>Travel agents </li></ul><ul><li>Computer repairs </li></ul><ul><li>Carpet cleaning services </li></ul><ul><li>Dry cleaners </li></ul><ul><li>Storage units </li></ul><ul><li>Nail and skin care </li></ul><ul><li>Consumer goods rentals </li></ul><ul><li>Diet services </li></ul><ul><li>Photo studios </li></ul><ul><li>Interior designers </li></ul><ul><li>Auto repairs </li></ul><ul><li>Parking lots and garages </li></ul><ul><li>Towing services </li></ul>
  4. 4. THE GOVERNOR’S PROPOSAL <ul><li>0.85% Tax Bracket </li></ul><ul><li>Farmers </li></ul><ul><li>Mines </li></ul><ul><li>Manufacturers </li></ul><ul><li>Construction firms </li></ul><ul><li>Wholesale service providers </li></ul><ul><li>Retail services providers </li></ul><ul><li>Exemptions </li></ul><ul><li>Goods for export </li></ul><ul><li>Gaming proceeds </li></ul><ul><li>Medicaid payments </li></ul><ul><li>Non-profit entities </li></ul><ul><li>Retail sale of non-taxed food </li></ul><ul><li>Retail sale of pharmaceuticals and medical supplies </li></ul><ul><li>Investments </li></ul>The Second Additional Tax Bracket
  5. 5. SO WHAT IS A GROSS RECEIPTS TAX? <ul><li>GRT is a tax on all gross revenue incurred by a business, not just the profits </li></ul><ul><li>GRT is a stealth tax which is hidden from the consumer </li></ul><ul><li>GRT is a tax on business regardless of whether they make a profit or take a loss </li></ul><ul><li>GRT is imposed on each stage of the service or product… creating a pyramid effect which is passed on to the consumer in higher prices </li></ul>
  6. 6. WHAT IS THE PYRAMID EFFECT? <ul><li>The tax embedded in the prices </li></ul><ul><li>grows as the product moves through the production chain </li></ul>As products progress through production, taxes are imposed during every single transaction In other states this pyramid effect has been devastating to both businesses (higher costs) and consumers (higher prices)
  7. 7. HOW DOES THE PYRAMID EFFECT OF THE GRT COST US? <ul><li>You buy a brand new car… </li></ul>Let’s explore the taxes imposed on this product with a gross receipts tax in place.
  8. 8. <ul><li>Mine sells iron to foundry... </li></ul>Taxed The mine is taxed for the entire sales amount of the iron.
  9. 9. <ul><li>Foundry sells steel to car manufacturer… </li></ul>Taxed The foundry is taxed for the entire sales amount of the steel.
  10. 10. <ul><li>The manufacturers buy parts to include in the car… </li></ul>Taxed Taxed Taxed Taxed Taxed Taxed Taxed Taxed Taxed <ul><li>Windshield </li></ul><ul><li>Horn </li></ul><ul><li>Headlights </li></ul><ul><li>Tire </li></ul><ul><li>Wheels </li></ul><ul><li>Axle </li></ul><ul><li>Steering wheel </li></ul><ul><li>Leather </li></ul><ul><li>Rag top </li></ul>
  11. 11. <ul><li>Manufacturer sells car to dealer… </li></ul>Taxed The manufacturer is taxed for the entire invoice price of the car.
  12. 12. <ul><li>The dealership sells the car to you… </li></ul>Taxed The dealership is taxed for the entire sales price of the car.
  13. 13. <ul><li>And if that wasn’t enough… </li></ul>Taxed The increased cost of production is passed along to you. And don’t forget your sales tax!
  14. 14. SO WHO WILL A GROSS RECEIPTS TAX IMPACT? <ul><li>Everyone </li></ul>
  15. 15. WHAT ARE BUSINESSES ALREADY PAYING IN TAXES? <ul><li>What the Governor doesn’t tell us: </li></ul><ul><ul><li>Businesses already pay almost 50% of all state taxes through </li></ul></ul><ul><ul><ul><li>Property Taxes </li></ul></ul></ul><ul><ul><ul><li>Payroll Taxes </li></ul></ul></ul><ul><ul><ul><li>Income Taxes </li></ul></ul></ul><ul><ul><ul><li>Sales Taxes </li></ul></ul></ul><ul><ul><ul><li>State Unemployment Taxes </li></ul></ul></ul><ul><ul><ul><li>Workers Compensation Taxes </li></ul></ul></ul><ul><ul><ul><li>Insurance Taxes </li></ul></ul></ul><ul><ul><ul><li>Excise Taxes </li></ul></ul></ul><ul><ul><ul><li>Personal Property Replacement Taxes </li></ul></ul></ul>
  16. 16. GRT WOULD COST ILLINOIS JOBS <ul><li>According to ‘Crain’s Chicago Business’, Illinois already has the highest tax burden on business than any of the states that surround us </li></ul><ul><li>Employers would have to begin exploring alternatives </li></ul><ul><li>Indiana repealed its much lower GRT in 2002 because the business climate in the State of Indiana became less competitive </li></ul><ul><li>Employers in Illinois are already saying they will either close their doors or relocate out of state </li></ul>
  17. 17. ONLY FIVE STATES HAVE A GRT <ul><li>States with GRT: Delaware, Kentucky, Ohio, Texas & Washington </li></ul><ul><li>Ohio ranked 49 th in business climate after imposing a GRT lower than proposed by the Governor </li></ul><ul><li>Unlike the Governor’s tax increase, Texas’ GRT is tied to a significant reduction in property taxes </li></ul><ul><li>Washington’s GRT places a relatively high tax burden on low profit margin firms </li></ul><ul><li>Indiana, Minnesota and West Virginia and New Jersey repealed their GRT citing concerns that it increased costs to consumers and reduced their competitive edge to compete for new businesses </li></ul><ul><li>If the GRT is so great why do only five states have it? </li></ul>
  18. 18. WHAT PEOPLE ARE SAYING <ul><li>“ We are very concerned about what the Gross Receipts Tax will do to consumers, as well as the negative impact it will have on jobs in Illinois.” </li></ul><ul><ul><ul><ul><ul><li>Tom Cross, House Republican Leader </li></ul></ul></ul></ul></ul><ul><li>“ The idea of trying to drive businesses out of this city and state is a serious mistake. Why? They don’t have to be here. They can go to Wisconsin. They can go to Indiana. They can go to India. They can go to China. So if you want to beat up business, go beat ‘em up, and when they leave, just wave to ‘em, and they are going to wave back at you.” </li></ul><ul><li>Mayor Richard M. Daley </li></ul><ul><li>AP, March 14, 2007 </li></ul>
  19. 20. WHAT EDITORIAL BOARDS ARE WRITING <ul><li>“ Blagojevich, for example, insists that his proposal for taxing businesses transactions wouldn't drive away jobs. In other words, he says a new tax that supposedly will extract billions more dollars from businesses that aren't &quot;paying their fair share&quot; won't discourage businesses from staying in or moving to Illinois. Tell me, how does that work?” </li></ul><ul><li>Dennis Byrne, Chicago Tribune Editorial Published March 12, 2007 </li></ul><ul><li>“ The biggest proposed tax increase in state history must not move forward… This tax hike ultimately would be paid by residents… Does the governor really believe that the cost of the tax will not be passed along to employees in the form of smaller raises and reduced benefits or, worse, job loss? </li></ul><ul><li>Northwest Herald Editorial </li></ul><ul><li>Published March 10th, 2007 </li></ul>
  20. 21. <ul><li>Governor Rod Blagojevich </li></ul><ul><li>207 State House Springfield, IL 62706 </li></ul><ul><li>(217) 782-6830 </li></ul>We need your help House Speaker Michael Madigan 300 State House Springfield, IL 62706 (217) 782-5350 Senate President Emil Jones, Jr. 327 State House Springfield, IL 62706 (217) 782-2728 Please call or write: