Gross Taxes

Illinois is in a heap of trouble. Pandering to the least common denominator, buying votes, and a lack of self-government has gotten us here. The question is: what'll get us out?

According to my sources at the Chamber, for fiscal 2007, the State will have $28.8B in receipts. To fund true costs, approximately $5.9B more would be needed. Worse yet, when you total up all of the State's debts and unfunded obligations (apart from general obligation bonds), the price tag is a whopping $106B, or roughly $8,800 per person for the 12 million residents of Illinois.

(deep breath)

OK, this is very bad, and appears to be getting worse. We're the worst in the Union with respect to unfunded pension liabilities: $46B. This number is going to grow - rapidly - while the State continues to operate in the red. And we'll continue to operate in the red as long as the General Assembly sees fit to spend exorbitantly on pensions and health care for State employees and dream up anti-competitive measures like the Gross Receipts Tax (GRT).

The GRT works like this. You own a business and sell your services for $100. Before you factor in any of your costs and expenses, the State taxes a cut right off the top of 1%. This affects every business in the product cycle. So if you sell $100 of steel to a manufacturer, you pay 1%. If the manufacturer makes a product (say, a truck part) and sells it to a distributor for $250, he pays 1% of that amount. If the distributor sells it to another party (who uses the part to modify a truck chassis, for example) for $300, the distributor pays 1%. The last party sells a truck with the part in it for $500, and pays his 1% fee. You can see quickly how Illinois businesses will be directly hurt via the pocketbook, and how indirectly they'll be hurt by companies seeking parts or raw materials from neighboring states like Indiana or (shudders) Wisconsin.

I told you what has gotten us here, but let me elaborate just a bit. Businesses have been accused of not paying their fair share of taxes, while education and entitlement programs have spiraled out of control. I'm no disciple of the Wall Street Journal editorial page. I'm in business, but when you get right down to it, so is most everyone else who has a job. My point is this: I'm no defender of business, just for the sake of defending business. But I am, I like to think, fair.

Folks, we have a self-government problem, and there's a solution. As I've said before, and I'll keep saying it, most government programs should be pushed to the most local levels possible. County for sure. Township preferably, City ideally. Then, when the bills come due, people get to decide: as residents of our town, do we want our taxes to be used to pay for out-of-market retirement benefits for municipal employees? For classroom expenditures that serve to supplement parental involvement? For universal heath care coverage? Then, and I think only then, are we going to see a return to common sense. People will rediscover self-government in their DNA - no, it's not gone, it's just been dulled and underutilized.