problems with illinois' gross receipts tax plan
Got a few mentions today in a story exploring the questionable economics behind Illinois Gov. Rod Blagojevich’s plan to enact a Depression-era gross receipts tax in Illinois:
The gross receipts tax targets every transaction or sale that comes in the door and would replace the current corporate income tax that targets profits and allows for deductions.
The states that resurrected the tax in recent years had one major problem — pyramiding. Every transaction that takes place to transform raw material into a final product had been taxed at different amounts as different industries became involved in the process, said Andrew Chamberlain, an economist with the Tax Foundation in Washington, D.C.
“Even something as simple as a loaf of bread shows pyramiding,” Chamberlain said.
The mill has to buy the grains to make flour, so that transaction is taxed. Then that flour is sold to a bakery, and that is taxed. The bakery makes the flour into bread and sells it to a distributor, and that’s taxed. Finally, that bread is sold to the consumer and it’s taxed again, he said.
“With the auto industry, it’s even more complex and has more layers of pyramiding,” Chamberlain said…
Because different tax programs will hurt some businesses and help others, it’s difficult to say what impact a gross receipts tax would have on Illinois businesses and the economy, said Chamberlain. He was one of the sources of research as Illinois leaders were shaping their tax plan.
“I talked with them (Illinois officials) extensively and told them the problems with a gross receipts tax, and to be fair told them some of the advantages,” he said. “The next thing I heard was Illinois was considering the tax. It’s such a mistake.”
Posted by Andrew on Wednesday March 7, 2007 | Feedback?
