Illinois Governor Rod Blagojevich is planning to play hardball unless his gross receipts tax plan passes to help fund universal health-care in Illinois. While universal health-care is a noble endeavor, our Governor is clearly shooting arrows at the wrong targets in order to achieve his ultimate goal.
Much has been written about this increasingly unpopular crusade by the governor, which has resulted most recently in an overwhelming rejection by legislators on both sides of the partisan aisle. What I would like to accomplish through his posting is to help everyone understanding what this tax would mean to Naperville as well as finding a way help regular Napervillians understand the impact of such a tax by applying the same principle to their own individual income.
First, Naperville enjoys a thriving economy which provides a balance of both charm and entreprenurial spirit alongside corporate economic development investment. Though Naperville is an attractive location for corporate and business relocation, the truth is in economic development you can have the best place in the world to locate business and generate prosperity, but if the price of doing business becomes too high, we all lose.
The governor’s plan does not just stop at business-to-consumer, but also reaches the gross revenue of business-to-business and service providers ranging from accountants to potentially daycare operators. All businesss and enterprises are not created equal and survival is often weighed on the overhead cost of doing business.
This proposed tax does not discriminate between those with high overhead expenses/narrower profit margins and those with lower overhead expenses/higher profit margins. When you consider gross receipts, the $2 million threshold suddenly does not seem that high considering the often considerable cost of doing business.
Who ultimately pays? We all do. Whether it be higher prices as the extra tax is passed along to the consumer or the loss of vital business tax revenue in Naperville due to business closure/relocation or missed future economic development opportunities. At the end of the day, the entire Naperville community as well as all communities benefit greatly from a healthy business environment.
Now on to a simple comparison which can help us all better understand the sting of such a tax. If you were to apply the gross receipts principle to indivdual income, then you would face an additional 0.85 – 1.95% tax levied atop your gross income regardless of tax deductions or personal/family overhead expenses such as childcare and home improvements. This might provide a clearer picture of what all the debate is about.
While I support the principle of universal health-care, I believe the governor, state legislature and business leaders need to head back to the table to determine a more appropriate funding mechanism. At the end of the day, we all have a responsibility to make a direct contribution at some reasonable level to a universal healthcare program.
Please feel free to provide your own comments.