Education advocates, economists and experts voice support for Gov. Blagojevich's plan for record investment in education

SPRINGFIELD - Education advocates, economists and tax experts today testified before a joint session of the Senate Revenue and Education Committees about Governor Rod R. Blagojevich's Investing in Families plan that has been submitted to the General Assembly as Senate Bill 1.  The experts testified about how the Governor's plan would pay for an unprecedented investment in education and much-needed property tax relief by correcting the inequities of the state's tax system.  The Governor proposes ushering in sweeping transformation that would shift the tax burden away from individuals, who have been carrying an increasing share of the burden over the past thirty years, to large businesses, which have paid little to no income tax. 

 

"Illinois' corporate income tax system is littered with loopholes that allow big business to escape paying their fair share for healthcare, education and other services that government is expected to provide.  As a result, our schools are under-funded; millions lack access to quality affordable health coverage and the burden on working people is at a breaking point.  We can and should help Illinois families get relief, and make sure our kids are getting the best education possible - and we can and should do it without asking those same families to pay even more in taxes," said Gov. Blagojevich.

"I believe that Helping Kids Learn will go a long, long way in strengthening the academic performance of all students, and especially the most needy.   Not just more money, but more money where it most matters and assures the highest return on investment," said Glenn W. "Max" McGee, former State Superintendent of Schools, current Superintendent of Wilmette District 39, and Chairman of the Golden Apple Foundation.

 

Helping Kids Learn boosts funding by an unprecedented $1.5 billion in Fiscal Year 2008.  Under the plan:

 

The Governor proposes paying for his historic investment in education through his Tax Fairness Plan.  The proposal would replace the flawed and broken Corporate Income Tax (CIT) with a new gross receipts tax (GRT).  Illinois' tax structure is one of the most regressive and unfair to working families in the nation.  Even though large corporations enjoy the benefit of state services such as education, healthcare, roads, public safety and public transportation, individual taxpayers carry 88 percent of the burden of paying for them.  Individuals - many of whom are struggling to make ends meet - are paying an increasing burden of state income taxes, while the burden on businesses has gone down, even while corporations are posting record profits.

 

Doug Kane, a former state legislator and economist, testified before the joint committee to discuss many of the misconceptions about the Gross Receipts Tax, including how pyramiding is not unique to GRT, how costs are not generally passed on, and how Illinois will remain below the national median for the state tax burden should the GRT be adopted.

 

"The charge has been made that the gross receipts tax is a regressive tax and will make the Illinois tax system more regressive than it already is. Let's compare it to raising the sales tax, the personal income tax, or the corporate income tax, the three alternatives to the gross receipts tax that have been suggested.  It's simply not true," said Kane.  "The pyramiding is more than offset by the low rate. Even after pyramiding, the cumulative rate of the gross receipts tax would be less than the rate that would be required of any alternative tax that raises the same amount of revenue."

 

Also presenting at the hearing today was Dr. Joseph Persky, a professor of economics at the University of Illinois at Chicago.

 

"No one likes the idea of higher taxes.  There is no such thing as a perfect tax.  Every tax changes incentives.  Every tax creates an excess burden on taxpayers.  But what of today's burden on those without health insurance?  What of the burden on kids in schools in dire need of improvement.  If the state is to finance vital services in healthcare and education, we must expand tax revenues," said Dr. Persky.  "While the state should continue to pursue other steps such as closing tax loopholes and reducing waste in expenditures, such efforts cannot make a plausible dent in our needs.  Under the circumstances the gross receipts tax is the best ready option available to Illinois."

 

Most economists agree that while all taxes are disruptive to the economy, one with a broad base and low rate is the least disruptive and treats all businesses fairly. The GRT does exactly that.  It taxes all businesses within their sector at the same low rates, so no one business has an unfair economic advantage over another. Because the rates are so low, it is easier for businesses to assume the tax as a cost of doing business, as they would for other costs, such as increases in rent, property taxes, health care, labor and other bills.

 

Big businesses have been able to avoid paying the CIT as a result of the flawed tax system.  During 2004 alone, 54 percent of the corporations that filed an Illinois income tax return paid no Illinois Corporate Income Taxes on a cumulative $257 billion in U.S. sales.  Additionally, on average nearly half of the corporations that generated $50 million or more in annual Illinois sales paid no income tax between 1997 and 2004.