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May 9, 2007

Gov. Blagojevich challenges lawmakers to seize the moment and approve his Tax Fairness Plan
Governor presents his plan that shifts tax burden away from middle class families to create affordable health insurance options for 1.4 million uninsured adults and to fund record investments in education

Distinguished economists, healthcare, education, business and labor representatives testify in support of Governor’s plan

SPRINGFIELD - During a meeting of the Illinois House of Representatives Committee of the Whole, Governor Rod R. Blagojevich challenged lawmakers to approve his Tax Fairness Plan - his ambitious proposal to reform Illinois’ tax system, which closes corporate loopholes and brings greater stability to the state’s fiscal future to fund record investments in education and healthcare.

The Governor’s Tax Fairness Plan 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% of the burden of paying for them – despite the fact that corporations are posting record profits.

“We have a broken tax structure in Illinois that has allowed big businesses to reduce their income tax burden more and more over time at the expense of middle class families. When corporations don’t pay their fair share, our children suffer because their schools are not adequately funded, homeowners suffer because their property taxes keep rising, and working people find it harder and harder to afford health insurance. Right now 1.4 million people in our state don’t have health insurance, and millions more are struggling to keep the coverage they have. We have an historic opportunity to turn things around. Nearly thirteen million Illinoisans elected us to help make their lives better,” said Gov. Blagojevich. “It would be wrong to do nothing and let the problems facing families in our state get worse. It would be wrong to try to fix the problems by taking more money out of working people’s pockets. The challenges we confront are comprehensive; our solution needs to be comprehensive as well. I look forward to working with you to make history.”

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, healthcare, labor and other bills.

"The gross receipts tax is the best ready option available to Illinois. As put forward in the Governor’s proposal, an exemption for small businesses (less than $2 million in sales) will keep the tax from being a nuisance. Given our serious needs, is any alternative tax approach more attractive than the Governor’s gross receipts proposal? I think not. This plan is pragmatic and workable. It can generate large amounts of revenues with little complexity. This is a fair and minimally invasive approach to fund an ambitious and much needed public agenda,” said Joseph Persky, professor of economics at the University of Illinois at Chicago and a member of the Governor’s Council of Economic Advisors.

Under the Governor’s plan, all businesses that generate less than $2 million in revenue will be exempt from the GRT. The legislation approved in committee yesterday also includes an Illinois Job Tax Credit for businesses employing workers in Illinois. The tax credit will allow Illinois companies to offset their Gross Receipts Tax based on the number of employees in Illinois. Goods-producing companies that have and retain jobs in Illinois would get an annual tax credit of $2,000 for each full-time job (the equivalent of 1,500 work hours per year) up to $50,000, while service-based companies would get a tax credit of $2,000 for each full-time job up to $100,000. When including the new Illinois Job Tax Credit, which helps all businesses, especially the small businesses that generate many of the new jobs in Illinois, then most businesses with less than $5 million in revenue in Illinois will not be impacted by the GRT – more than 90% of all businesses in Illinois.

The Governor’s Tax Fairness Plan would give the state a solid, dependable revenue stream for moving forward to Invest in Families with $7.6 billion that will provide:

• A record new investment of $10 billion in schools over the next four years – nearly three times bigger than any increase in state history;

• “Illinois Covered” – an affordable, reliable healthcare plan to cover the 1.4 million uninsured adults in Illinois and provide assistance to millions of middle-income families and small businesses struggling to keep up with health insurance costs;

• Statewide property tax relief to alleviate costs that have escalated as a result of the state neglecting its primary funding obligation; and,

• Investments in the state’s transportation infrastructure through a $3 billion bonded capital road program.

“The Governor has proposed a bold new healthcare plan that would modernize the healthcare delivery system in the state while generating a significant reduction in the number of uninsured,” said Professor Ken Thorpe, Ph.D., Robert W. Woodruff Professor and Chair, Emory University. “The plan would generate over $7 billion in lower health insurance costs to those with insurance—more than double what the state will spend on the plan—when fully implemented. These savings come from the new Illinois Covered Choice and Rebate plans, reductions in cost shifting, and the statewide use of health information technology and a new best practice approach for preventing and managing chronic illness.”

More than 250 organizations also support Gov. Blagojevich’s plan, including the Illinois Federation of Teachers, the Illinois Education Association, AARP Illinois, Advocate Health Care, AIDS Care, Illinois AFL-CIO, AFSCME Council 31, Champaign-Urbana Public Health District, Chicago Area HIV/AIDS Caucus, Chicago Area Project, Chicago Black United Communities, Chicago Foundation for Women, George Washington Carver Association, Illinois Hospital Association, Illinois Maternal and Child Health Coalition, Illinois Planned Parenthood, Illinois Public Health Association, Illinois State Black Chamber of Commerce, National Black Nurses Association, Open Door Clinic, SEIU Illinois Council, Springfield Supportive Living and Springfield Urban League.

“The revenue provided by GRT will help hundreds of K-12 schools and higher education solve a fiscal crisis that gets worse year after year. These education needs are real. Class sizes are growing. Positive programs are being cut. Every election, local property taxpayers are being asked to bear a greater share of the burden,” said James Dougherty, President of the Illinois Federation of Teachers.

"The GRT represents an historic opportunity to ensure, for the first time, that everyone in Illinois has access to affordable, high quality healthcare, which will make the state a better place to work, live and raise a family. The Governor’s proposal addresses both sides of the equation – not only how to cover people, but how to make sure the dollars are there to provide the coverage," said Howard Peters, Senior Vice President, Government Relations, Illinois Hospital Association.


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