Illinois planning to tax everything

If you drive a car, I'll tax the street. If you drive to city ,I'll tax your seat.
If you get too cold, I'll tax the heat. If you take a walk, I'll tax your feet.
The Beatles, Taxman

Okay, maybe I'm exaggerating a bit with the headline, Illinois is not about to tax everything, but if Gov. Rod Blagojevich's plan to insure most if not all residents of the Land of Lincoln, a lot of things will be taxed that haven't been before. Such as legal fees and medical services in what's called a "gross receipts tax."

Corporate taxes collected in Illinois amounted to $1.6 billion. The gross receipts tax will up that to $6 billion, the Daily Herald reports.

Illinois businesses have taken notice.

More from the Daily Herald:

The Illinois State Chamber of Commerce has anticipated a gross receipts tax in Illinois ever since Ohio and Texas approved theirs about a year ago, said Chief Executive Officer Douglas L. Whitley.

"No one in the business world wants a gross receipts tax," said Whitley. "We feel it would be fundamentally devastating to the economy and every business in this country would be re-evaluating whether Illinois is the right place to do business or whether they should get their services here."

Whitley said the current corporate income tax only charges companies that have made a profit. A gross receipts tax would target all cash coming through the door, before deductions were made for business expenses.

It’s likely that companies could pass that extra burden onto their clients. The ripple effect would damage the state’s economy, not enrich it, business leaders said.

But it's worse than that. From Crazy Politico's Rantings:

What this tax does is taxes goods every time they change hands between companies, instead of just a sales tax at the end of the chain. So, right now the way it works is Company A makes a widget that goes into Company B's product, which is sold to the consumer. Right now Comp. B doesn't pay a sales tax when it buys the widget, instead the entire product is taxed at sale. Under Blago's plan every step gets taxed.

If passed, the new tax scheme will lead to an exodus of businesses out of Illinois. Most large Illinois-based corporations--and there are a lot of them here--have offices and plants in other states--or even other countries. It woudn't take much to push them out the door.

Which will lead to an underfunding of Blagojevich's insurance plan.

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