I am not a political pundit, expert etc. I learned that when you announce an idea, you have to have a catchy name. The Straight Tax Express is the best I've got at this point. My marketing motor is not running very well lately . : )
This might be an alternative to the Gross Receipts Tax. Many of my friends on both sides are less than excited about the idea but do not have an alternative. I'm going to make an a rough attempt. Althought this is a very preliminary and very rough draft, I feel we need to have this discussion.
General Principles:
1. Any tax levied by the state should be transparent to the taxpayer. We should be able to clearly see when, how and to what organization we’re paying the tax levy. Attempts to hide taxes from the taxpayer ultimately result in additional costs that ultimately cost the consumer/taxpayer more.
2. The collection and distribution of tax revenues will be as simple as possible.
3. The tax system will encourage responsible spending by the government and limit the opportunity for political corruption.
4. If additional spending is needed, it will require either a reduction in other spending or a tax increase.
5. All tax increases should be to corporate and personal income tax to contain the regressive impact of potential tax burdens.
Implementation:
- Levy a tax on service providers of 1% and see how it works out. Offer a tax exempt number to service providers so that we eliminate the pyramid affect obvious with the GRT. Exempt medical services.
- Eliminate all fees on business that are passed down directly to the consumer unless the state is providing an actual service specific to the business. If the service is really a service to the people and gets passed to the people anyways, then eliminate the fee. Any type of special tax such as a tax on cigarettes or gasoline to encourage less consumption should be listed clearly as separate line item on the customer receipt.
- If the majority of Illinois residents want universal health, the state should pay premiums directly to health insurance providers who are more likely to offer the service in a more cost-effective manner. Only pay those premiums for those who cannot afford them. Offer incentives to business who offer more cost-effective health care options through credits to corporate income tax and/or direct payment of the premiums.
- If there is a budget deficit, raise personal and corporate taxes proportionally. Eliminate creative accounting.
The Results:
- The tax increase on service provider will only be levied once. If applied at a low rate, the initial impact would not be devastating (no pyamid affect). These providers are not currently taxed. As pro-business I am, it seems like a reasonable compromise.
- When the government sells a service to the people, the costs will be transparent to them. The voter will be empowered with the ability to determine whether or not they value a particular state service.
- Health care will be universal but more cost effective. It will ease the burden of the lower and middle class worker.
- We have responsibly addressed our moral imperative. It will be more difficult for legislatures to mislead the taxpayers.
- A fair and straight forward tax system in our state could minimize damage to our competitive advantage, even if Illinois will be a higher-cost state to live and do business.
- If the legislature runs a deficit and needs to raise taxes, they will be more accountable for the deficit and will be encouraged to better manage that deficit.
- Any tax increase would be progressively applied to those who more able to pay. Those with higher taxable incomes will be paying more, reducing the impact on the lower and middle class.
Alternatively, you can consider something like a GRT that goes against all of the principles. Our state can be pro business and pro people and attract both, even if it costs us more. If it does cost us more, just be honest and not hide fees and tax increases and minimize the additional cost. By taxing "only the largest business", the GRT implies to the consumer and taxpayer that the service is free to the middle class. My suggestions may be controversial, but it's straight-forward and honest.
Related thread discussing the feedback of the GRT:
http://www.illinipundit.com/2007/03/07/illinois-budget-sales-tax-increase-coverage#comment
"Eliminate all fees on business that are passed down directly to the consumer unless the state is providing an actual service specific to the business. If the service is really a service to the people and gets passed to the people anyways, then eliminate the fee."
I am not sure what kind of service you are talking about here. Can you give an example?'
John
From Hearltland.org:
A new Commercial Distribution Fee was imposed on trucks in 2004, in addition to the numerous taxes and fees already paid by such vehicles. The new fee is paid to the Secretary of State but deposited in the General Revenue Fund. According to the Illinois Chamber, this "fee" appears to serve no purpose other than to raise revenue for the state's general fund.
Here is just one example of the state raising fees on business that ultimately get passed down to the customer. The fee is not for any service provided to the trucking companies. The Governor imposed more than 300 new fees on business.
Here is one example of a service that the state provides to business. In this example, the Governor raided the funds of the DryCleaners Environmental Response Trust Fund causing licensing fees to TRIPLE. Those fees gets passed down to the customer. This is a tax increase on the customer, but technically the government offers a service to the business. Unfortunately, my proposal wouldn't protect consumers from all hidden tax increases.
http://www.senategop.state.il.us/index.php?option=com_content&task=archivecategory&year=2006&month=06&module=1
From the website:
A group representing 1,400 dry cleaners in Illinois is fed up because the Blagojevich administration wants to triple their fees. The fee increase comes after the Governor drained about $300,000 from the Illinois Drycleaner Environmental Trust Fund, in order to feed the state bureaucracy.
In a remarkable show of duplicity, a spokesman for the Governor’s office claimed Blagojevich does not support the fee increase, even though it’s his own agency that is seeking the fee increase and he has the power to block the increase if he wanted to. The latest flare up directly contradicts longstanding claims by Blagojevich that his administration only takes “excess” money out of the state’s many dedicated funds.
The administration is planning to hike the minimum licensing fee from $500 to $1,500.
According to a June 29 story in the Chicago Tribune, the Korean American Dry Cleaners Association wants to eliminate the Trust Fund and replace it with a bond program. Such a program could provide easier access to clean up funds, without allowing the administration to use the fees for other purposes.
http://www.news-gazette.com/news/business/2006/08/27/dry_cleaners_feeling_pressed_as_costs_rise
This article puts a face on the small business owner and how hidden tax increases affect s the consumers right here in Champaign/Urbana. You have to pay to see the article, sorry. This example is particularly disturbing in that dry cleaners as an industry are struggling and many shops are closing. Just this past year, Denny's Dry Cleaners shut down stores in the area.
What is your logic for taxing service providers and not manufacturers?
If you tax service providers how are you going to prevent them form passing on to consurmers?
Why are you giving health care based upon residency instead of through employers?
"If you tax service providers how are you going to prevent them form passing on to consurmers?" I'm not! It's exactly the opposite. What my proposal does is ensure that the end consumer is only taxed one time and the cost of the tax is transparent to them. I personally don't want to pay ANY tax, but this seems like a logical compromise.
"What is your logic for taxing service providers and not manufacturers?". Because manufactures pass costs down. Business who sell to businesses should be tax exempt because they are providing products and goods to the consumer. We already have this protection in place with products. Businesses do not pay sales tax on goods if they are going to be selling goods to the consumer. Same concept.
"Why are you giving health care based upon residency instead of through employers?" I feel that paying a private provider will be more cost effective than having legislators running it. I can't think of another realistic way to offer a more cost-affective way to provide health care to those who can't afford it. If employers are paying for health care, but end up paying less in wages, then the employee is paying for their health care. I would like to incentive businesses to offer their own options to take burden off the state and encourage more (and possibly better) options to employees.
As a service provider, I cannot pass the tax down since the service I provide is to a tax exempt agency. So I have to pay the tax as I am not able to change my service rates. You would force myself and others to re-locate outside of Illinois if this is put into effect. In all honesty, I would not bother contracting with any tax exempt agency within the state as I could not affort it.
I have no problem paying a private provider directly for health care. I do have a problem with your suggestion of giving health care based upon residency. I suggest if a person works, they, and their dependents would get basic state health care through their employer. If they are disabled or retired and not working they get health care already through medicare. If a resident choses not to work and are not disabled or retired, no basic state health care.
The sales tax on services would be paid by the person receiving the services, but collected by the business providing the service. It would very similar to a sales tax, but just a service tax. If you provide service to a tax exempt business or organization, you would not be taxed.
"I have no problem paying a private provider directly for health care. I do have a problem with your suggestion of giving health care based upon residency." I like your idea better than mine, so long as is does not force business to burden the expense. Not all small business can afford that and 75% of the business in this state is small business. It would be a challenge to implement a plan with a condition that it is only for working adults. There should also be provisions for those on unemployment and college students.