Some more thoughts on the loopholes...

Zorn had some off the 'corporate loopholes' that the Governor wants to address and I figured I was as good as anyone to respond.

Repeal deduction for foreign and domestic dividends received by corporations--Corporations are allowed to deduct dividends received from other corporations, while individuals are required to include dividends as income and pay tax on dividends received. Corporations exploit this loophole to create foreign subsidiaries that return profits to the U.S. parent corporation in the form of dividends, which cannot be taxed under current Illinois law. For example, an Illinois manufacturer creates a subsidiary in Mexico to manufacture widgets and closes its Illinois widget manufacturing facility. The subsidiary returns its profits to the Illinois parent as a dividend. This deduction is encouraging companies to export jobs overseas.

So raising a tax will help keep jobs in Illinois? That's just illogical. No one moves a widget operation overseas to just save the income tax expense. You move manufacturing overseas due to lower labor and material costs (material costs which can go up due to taxes). The likely difference in shipping costs (domestic vs. importing) would eat up any tax savings from this loophole.

Tax canned software which is subject to written license agreement -- Illinois is the only state the does not tax licenses of prewritten (canned) software and is one of only five that do not tax the prewritten base of software that is modified. Large businesses often escape sales tax on the acquisition of software when they do so through a license agreement, even though the software is identical to that which is taxed when it is purchased by individuals or other businesses. It is unfair to tax the individual or small business user, but not the large business user.

First, where does it say that because every other state taxes something we need to do so as well? There are other implications to the licensing of software besides the tax implications that make it worthwhile to license it (including the cost of upgrades, etc) Also with the growth of Software As A Service (think gmail) where you just pay a per-seat monthly fee to use the software over time corporate expenditures on software produced by other companies is going to go down. This golden goose is going to get killed by technology. Also software requires new hardware, training, etc. The state should be encouraging software licenses and sales not taxing them.

Disclosure moment, I work for a company that licenses software.

Repeal exemption for fuel transported to out of state destinations --By closing this loophole, fuel stored in Illinois will be taxed at the same rate, whether the ultimate destination of the fuel is in Illinois or in another state. Currently the state collects this tax for the LUST fund (Leaking Underground Storage Tax), but gives an exemption for that fuel which is sold in another state. Fuel stored in Illinois and exported to another state poses an environmental risk so the same tax should be charged. Further, the exemption gives a gasoline retailer in a border state at $.011 per gallon advantage over an Illinois retailer, if both buy fuel from the same Illinois distributor. In addition to ending the exemption, this proposal will actually reduce the tax rate from $.011 per gallon to $.010 per gallon, thus reducing the tax on fuel used in Illinois.

For more information about the LUST fund. For the last annual report available on-line 2003.

Perhaps the most illogical of them all, the LUST fund is primarily for storage tanks at gas stations. Not for tanks that store for distribution. Also it would appear that if you are not subject to the tax you can't enjoy the benefit.

That is a distribution facility would not be eligible for remediation with LUST funds. So if we start taxing that fuel, that is fuel that is just at a storage facility will LUST now be responsible for clean-up? That may be a penny wise and a pound foolish.

Also the LUST fund is supposed to pay for tank cleanup, is the LUST fund short of funds? Or is the goal of expanding the tax to make more money available for general revenue funds? Also if they are serious about this, how about removing the exemption for...

Those exempt include airports with more than 300,000 operations per year located in a city of more than 1,000,000 inhabitants (O'Hare International Airport and Midway Airport in Chicago);

Sounds like the Aurora Municipal Airport has to pay so why not O'Hare? I bet that would add some revenue!

So here is the question on this one, does the LUST fund need more money (and should it pick up some liability) or is this being eyed as a way to add some general revenue funds.

If the idea is help Illinois gas stations with out of state compition, then .01 a gallon might help. Reducing the .25% difference in the sales tax on gas with Indiana would help more. Gas is always more than $0.01 cheaper on the other side of the state line. There is a reason there are a lot more gas stations and truck stops on the Indiana side of I-80 and the LUST fund is not the reason...

Require income tax withholding on gaming winnings over $1000 from non-residents--Closing this loophole will allow the state to withhold tax from the gambling winnings of nonresidents, which is consistent with the laws of neighboring states. Currently Illinois residents have to pay Indiana taxes when they win at Indiana casinos, but Indiana residents don’t have to pay Illinois taxes when the win at Illinois Casinos. It is unfair to tax Illinois residents but not those from neighboring states on their winnings at Illinois casinos. The withholding requirements will both ease the burden on taxpayers and will assure that gambling winnings are reported.

Fine. I don't see how this is a corporate loophole however. Last time I checked Boeing doesn't go drop money at the boats.

Also are we doing this now for the lottery? How about the tracks?