Wednesday, April 27, 2011

$8 Billion Service Tax Hike Unlikely

By Benjamin Yount, Illinois Statehouse News
A new report says Illinois is ignoring as much as $8 billion in potential tax revenue, but there is little support from either political party in Springfield for a grab at the money. The report states that Illinois does not tax many services — only 17 — and that other states tax many more, 56 on average.

The legislature's Commission on Government Forecasting and Accountability analysis estimates that the state could generate between $4 billion and $8 billion if lawmakers were to expand the service tax base. McHenry County State Rep. Mike Tryon said that's not going to happen.

Tryon said he doesn't know many Democrats in Springfield, and even fewer Republicans, who would vote for another tax increase. He said passing the 67-percent personal income tax hike earlier this year has left a bad taste with many lawmakers. "Are we the highest in sales tax, are we the highest in property tax, now we're midway in income tax, and then be the highest in services taxes?" Tryon asked. "We're building a government we can't afford."

But it's not just the GOP that is reluctant to talk taxes again. State Rep Elaine Nekritz said few Democrats want to fight that fight again. "I think that another tax discussion has almost a zero likelihood of happening," she said. "That being said, the only scenario which I could see (a service tax hike) is if we were to roll back part of the income tax increase and move to a broader sales tax base."

Ralph Martire with the Center for Tax and Accountability said many states have already looked at service taxes, and Illinois will likely have to do the same. "We tax the sale of products .. .back in 1965 the sale of products was 32 percent of all economic activity in Illinois," he said. "Today that has declined to 12 percent." In the same period, services in Illinois have jumped from 35 percent of the economy to more than 60 percent.

"Obviously there are many considerations to take into account when contemplating taxing services, and we will continue to hear arguments for and against the idea," said Kelly Kraft with Gov. Pat Quinn's budget office.

The report from COGFA does not argue for or against a service tax increase or expansion. But the report does highlight issues that lawmakers may face if they choose to take on service taxes.

You can read Andrew's full report at:

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