The Decline of Chicago: The City that Doesn't Work

Steve Bartin from this local blog known as Newsalert offers his two cents on the state of the city of Chicago in this online column. Something that's worth a pull from this column among other things I'd like to excerpt...

Recently, Crain’s Chicago Business reported on Chicago winning an award from Fast Company magazine. “Chicago stood out in our reporting for its creativity and vitality,” Editor and Managing Director Bob Safian said at a press conference here. “Chicago offers something distinctive.”

Fast Company Magazine is representative of much of the media: not much on hard facts about Chicago. The Windy City has distinctions but not positive ones. Chicago’s retail sales tax is the highest in the nation at 10.25 percent. Unions, high taxes, and political corruption have made Chicago one of the leaders in big city decline.

One of the great modern myths of big city America is that Chicago is some sort of successful town and a role model for others. By any traditional performance standards Chicago has failed. Like many old, big industrial cities, Chicago peaked in the 1950 Census with a population of 3,620,962. In the 1950s over two percent of the entire U.S. population lived within Chicago city limits. Over a half century later, while America’s population doubled, Chicago’s population declined. The 1960, 1970, 1980, and 1990 Census numbers showed Chicago losing population.

Mayor Daley and Chicago residents were quite excited about the 2000 Census showing Chicago gaining over 112,000 people (a growth rate at half the national average for the 1990s). It appears the 1990s were an anomaly for Chicago. Since the year 2000, according to Census estimates, Chicago again continued its population decline with a loss of 63,000 from 2000 to 2006 leaving a total of 2,833,321.

....

Though 2000 was a somewhat positive year, that year’s Census numbers mask some rather disturbing trends. The white flight out of Chicago continued with 150,000 non- Hispanic white people leaving Chicago from 1990 to 2,000. African-Americans, for the first time, began leaving Chicago with a net loss of 5,000. The population gain in Chicago during the 1990s was due to Hispanics.

Here's another problem highlighted...

What is even more pronounced is the lack of white children in the public school system. The entire Chicago Public School is only 9 percent white . Not a single public school has a population that is majority white. Not one.

Recently, the stubborn facts of Chicago’s population decline made news. As CBS TV Chicago reported in January of 2008:

Half-empty schools are ‘unacceptable’ because they don't serve their students or the communities they're supposed to anchor, Mayor Richard M. Daley said Thursday, setting the stage for the biggest wave of school closings in decades.

Officials contend 147 of 417 neighborhood elementary schools are from half to more than two-thirds empty because enrollment has declined by 41,000 students in the last seven years. A tentative CPS plan calls for up to 50 under-used schools to close, consolidate with other schools or phase out over the next five years.

Most of the underused schools are on the South and West Sides, often where the student population is largely African-American, and in lakefront neighborhoods that include Lincoln Park, Lake View, Uptown and North Center.”

The situation isn’t any better in Chicago’s Catholic School System. The Chicago Tribune reported on February 27, 2007:

Nicholas Wolsonovich, superintendent of schools for the archdiocese, called the exodus from Chicago's Catholic schools ‘mind-boggling.’ In 1964, he said, some 500 schools were spread across the diocese, with about 366,000 students. Now, the system has 257 schools and fewer than 100,000 students. Over the last decade statewide, the number of Catholic schools has dropped from 592 in 1997 to 510 this year, according to figures released at the conference.

Chicago’s political elite love to give speeches about the importance of public education, but not for their children. Mayor Daley sent his children to private schools. Deborah Lynch, the former head of the Chicago Teacher’s Union, sent her kids to private schools. America’s newest political superstar, Barack Obama, sends his kids to private schools. With the exodus of the rich from Chicago’s public schools, 69 percent of the children in the Chicago Public School system are poor.

The horrible public schools, high taxes, and crime have driven families out of Chicago. The city’s job base cannot compete with anti-union places like Houston and Phoenix.

Let's talk a little about business in Chicago. Chicago and Cook County already has the highest sales tax in the nation but what might be the after effects of that and other taxes on businesses here...

Chicago’s high tax life style has driven businesses and jobs to the suburbs. Chicago is one ofthe only towns in America with an employee head tax on employment. Companies with over 50 employees must pay $4 a month per employee to the city. Most of the major corporate headquarters in the Chicago area are located in Chicago’s suburbs. Motorola, Walgreens, All State, Kraft, Anixter, Illinois Tool Works, McDonald’s, Alberta-Culver, and Abbott Labs all have their corporate headquarters outside city limits.

Recently, Chicago got its first Wal-Mart. In most places in America, politicians allow consumers to decide whether a business should fail or succeed. In Chicago, with the power of the unions, Chicago’s city council has made it difficult for Wal-Mart to open up any more stores. Chicago’s poor are relegated to paying higher retail prices and have less access to entry-level jobs. The adjacent suburb of Niles has the unusual distinction of being the only town in America (with less than 45,000 people) with two Wal-Marts. One of the Niles Wal-Marts is located right across the street from Chicago.

The largest employer in the city of Chicago is the Federal government. Followed by the City of Chicago public School system. Other major employers are the city of Chicago, the Chicago Transit Authority, the Cook County government, and the Chicago Park District. These thousands of government workers provide the backbone of the coalition for higher taxes, generous pensions and “political stability”.

Chicago’s political system is inefficient and costly. There are no term limits in Chicago. The Democratic Party has controlled the Mayor’s office since 1931(a big city record). There’s no opposition: Democrat’s control 49 out of 50 seats on the city council. Corruption is everywhere. Barely a month can go by without a major scandal. The FBI has the largest public corruption squad in the United States located in Chicago . Chicago voters don’t seem to care. Those who care about high taxes, good public schools, and low crime are a small minority in Chicago.

I just post this here because there are some things to consider here. Does anyone think the City of Chicago is in trouble? Does anyone think there might need to be some changes made in how the city is able to attract and retain businesses here?

This column concludes that low-tax and low-regulation Houston, Texas will over take Chicago in 15 years. Does anyone think that will happen?

Cross-posted at The Sixth Ward.

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Kensington Research's Frank Dal Bello appears on WGN-Radio

This afternoon, Bill Moller, subbing for regular WGN-Radio mid-day host John Williams, interviewed Frank Dal Bello of Kensington Research and Recovery, a Chicago-based firm. Eight days ago I related my experience with an overpayment we made to the Cook County Treasurer's Office. Maria Pappas is the Cook County treasurer. We received an official, scary looking property tax bill from the county, in the name of our home's previous owner, which we paid. Like most people these days, our property tax bill is included in our mortgage payment. As I explained in that post, it was a struggle to get our money back.

Dal Bello reiterated what I wrote last week, "If the county was doing its job, there would be no need for (Kensington) to exist."

The treasurer's office claims it's quite easy to recover overpayments, but does not automatically inform property owners that they've paid too much. Dal Bello says "some letters are sent, but it's just enough of an effort to say they're doing something."

According to Dal Bello, about 20,000 Cook taypayers overpay annually.

That sounds like the Cook County I know. Along those same lines, no one from the treasurer's office bothered to appear with Dal Bello and Moller.

About Kensington: Like the better known Keane Tracers, Kensington searches public records to find unclaimed monies. While searching Cook County records, it finds overpayments and double-payments. They inform the individuals who've overpaid, and the offer to get their cash back--Kensington keeps half.

This is important: After five years, if the overpayers do not collect their money, the county keeps it, Dal Bello added that "there is no recourse to recover this money" after that time has passed. Dal Bello believes that "roughly $20 million is kept by the county."

Yes, it may not seem fair that Kensington keeps half of the money they find as its commission. But as I stated in my post last week, and Dal Bello reiterated it, many people instead head to the Cook County Treasurer's web site, or call a special telephone number and begin the process, a difficult one I'd like to add, of getting their money back. But not everyone has internet access.

A bill in the Illinois General Assembly will limit fees companies like Kensington can charge to just a 10 percent cut. Fair? Perhaps. But it will put Kensington out of business. And it may mean the county, which just raised upped its sales tax levy by one percent, will keep even more money.

Kensington's Dal Bello believes that of Illinois' 102 counties, Cook is the only one that doesn't automatically inform taxpayers that they've paid too much.

County officials told WGN's Moller, off-air, that because of the enormity of Cook's population, over 5.3 million people, that it's too difficult to do.

But would an earnest effort by Maria Pappas' office cost more than $20 million? Or $1 million? The government, and I may be naïve on this point, is supposed to exist to serve the people--not the other way around.

Related Marathon Pundit post:

Cook County treasurer's office working against taxpayers

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Cook County treasurer's office working against taxpayers

Because Cook County, Illinois, where I live, added one percent to an already high sales tax rate, Chicagoans will soon be the sorry souls paying the nation's highest sales tax. Suburbanites like myself will pay a little less, but my sales tax rate will only be among the highest in the nation.

What do citizens like myself get in return? Not much.

Sometimes people pay too much in tax to the county, property taxes usually, and the county can't even handle that properly.

A Chicago company called Kensington Research and Recovery, a member of the Better Business Bureau, specializes in scouring public records to find cash for individuals who have overpaid their taxes, been overcharged, or for some reason or another have money owed to them from a government entity. Companies like Kensington, or the better-known Keane, are called "finder" or "tracer" firms.

Kensington mails letters to those who may have public money coming their way--and they keep half of what they find. This is completely legal. Keep in mind in many cases, the individuals who receive those letters quickly do some research on their own and collect their cash. All of it. Others hire Kensington.

Let me tell you from personal experience, getting money returned from Cook County is an onerous task. After we moved to Morton Grove in 1999, Mrs. Marathon Pundit paid the real estate tax--the bill came in the name of our home's previous owner, even though I told her that our property taxes are added into our monthly mortgage payments. Hey, I make mistakes too. And so do many of the 5.3 million residents of Cook County.

I quickly wrote a letter to the office of Maria Pappas, the Cook County Treasurer. The reply I got was something along the lines of, "Yes, you are correct. Mail a copy of the cancelled check you sent us, and we'll return your money." I did that. A month later, I got another letter, stating "We need a copy of both sides of the cancelled check." I called my bank, and they sent me the a copy of both sides--for a fee. A key point: In the first letter, the treasurer's office didn't specify they needs both sides of the check.

About four months later, we finally got our money back. It was sealed in red tape. Okay, I'm kidding about that last part.

Now you know why Kensington Research keeps half the money they collect for their clients. Dealing with government bodies can be an ordeal.

Kensington doesn't charge an "up-front fee," and if they collect no cash, Kensington doesn't charge their clients a penny.

For almost two years, until July 2007, Kensington was prevented from submitting requests to the county treasurer's office, saying "it had become overwhelmed by the number of requests." A judge now allows Kensington to submit 400 research inquiries a month.

Call me an idealist, but why can't Cook County simply notify taxpayers of overpayments? Especially since there is a five year statute of limiations to collect county overpayments.

Let me tell you about more red tape. Last Tuesday, I was summonsed for jury duty. I waited in line for a half an hour in the cold to make it past the security check so I could get into the courthouse. There are some regional county offices also in that building. The woman in line next to me, who was about sixty, was there to let the treasurer's office staff know that her mortgage was finally paid off.

That was mighty cold red tape.

NBC 5 Chicago did a story last Thursday on Kensington, one that took the politicians' side of things.

But let me remind you: Even on a relatively simple refund that was clearly owed to my wife and I, it was a major struggle to get our money back.

Illinois' State Treasurer, Alexi Giannoulias, has stepped into the fray. He told NBC 5, "Essentially, these companies are duping consumers for substantial amounts of money on property that is already theirs."

Giannoulias supports a bill that will compel firms like Kensington to disclose more information in their solicitation letters that will make it easier for taxpayers owed money, that is, to collect it on their own--for free--rather than using Kensington or some other company. As I stated earlier, often citizens do that anyway. The bill places a 10 percent finder's fee cap on the tracer companies. That may seem fair. But will the tracer firms bother to toil for a much smaller fee? And will this mean that Cook County will end up keeping more overpayments?

Let's be clear--If Cook County was doing things in a proper fashion--a foolish hope, perhaps, companies like Kensington wouldn't have to step in. Just as nature abhors a vacuum, so does the marketplace. When there is an unfulfilled need, business steps in. Particularly when the public sector fails.

There has to be a better way.

Giannoulias' office has a site where citizens can search for unclaimed property. But not for tax overpayments. The county treasurer's office site has nothing of the sort, but does note you can make tax payments at over 300 Chase Bank locations.

I'm sure Chase appreciates the plug, and the Chase logo looks real nice on the Cook County Treasurer's web site.

UPDATE March 20: There is a spot on the county treaurer's site to search for refunds, but it is not easy to use.


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Blagojevich Could Owe Taxes For Flights

Ouch from CBS2 this governor is taking a beating. Well since the summer he's been taking a beating for his expensive flights as the state legislature is toiling hammering out a budget. The complaints are that these flights between Springfield and Chicago costs money. Now it might cost him some money...

Tax experts say the Internal Revenue Service could consider that travel a taxable fringe benefit.

But Blagojevich's office says the governor's main office is in Chicago -- not the state capital -- so trips there are for legitimate business.

The AP review found that the value of the flights by Blagojevich, his family and guests could be at least $225,000.

That could mean a potential tax bill to the governor of $60,000. Taxpayers could get hit with a penalty of $40,000 if he doesn't pay the bill.



Blagojevich could have significantly cut the amount he might owe for personal trips on state aircraft if he would have used a federal tax formula.

The Internal Revenue Service allows a steeply discounted rate for the value of executive's personal travel on company aircraft.

An Associated Press review of flights by Blagojevich, his family and guests shows trips with no business purpose valued at $225,000.

He could owe taxes of $60,000 on the flights.

His office says the issue is moot because the governor's main place of business is Chicago -- not the state capital -- so flights there are for business purposes.

If Blagojevich had used the IRS discount -- the flights would have a value of $15,000 or less.

He likely would still be able to use the discount for 2007 flights. That would save him tens of thousands of dollars.

The potential tax bill of $60,000 is based on Blagojevich applying the discount for 2007.

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The Peraica Balanced Budget Plan

I got an email from the Peraica for State's Attorney campaign advertising that he will appear on FOX Chicago Sunday and NBC5's City Desk on Sunday morning. Also he provided a link to his budget plan for Cook County. I thought it deserved some play here.

- Calls for a modest reduction of 2% of the FY2007 appropriation level for most departments. The heads of these departments are the best position to know how to best appropriate the funds that their departments receive.

- Reduces the FY 2007 level for the Cook County Recorder of Deeds by 25%.

- Eliminates the TB Sanitarium District. The department of public health is equipped to handle any and all TB issues that arise.

- Eliminates the Police Department at John Stroger Hospital, which was supposed to be disbanded by September 2007, but was given a reprieve at the 11th hour.

- Calls for the elimination of duplicative administrative positions throughout the Cook County Bureau of Health. Examples include the Human Resource Departments in the Bureau of Health that have been absorbed by the Department of Human Resources.

- President Stroger claims there is a $230 million deficit in the budget, yet wants to clear it up by imposing $1 billion per year in new taxes. The deficit statistics given by the Stroger administration change with great frequency, thus making it difficult to determine what the real deficit level is.

- Even if the currently offered statistics were true, they do not justify adding $1 billion per year in new taxes. What do they plan to do with the additional $670 million?

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No fat in Cook County budget?

Last year Sen. Barack Obama called Cook County Board President Todd Stroger "a good progressive Democrat" and someone who will "lead us into a new era of Cook County government."

Stroger is a hack, but unfortunately he's someone who really is leading me and 5.3 million residents of Cook County into that new era.

The new era could end up with a doubling of the gasoline tax, a 2.8 percent property tax increase, and worst of all, the nation's highest sales tax.

Stroger says there is no fat left to cut in his proposed budget. But I found some from this year's budget, right here in Morton Grove in the Linne Woods Forest Preserve. What on earth is that in the picture? Is it a canoe landing? Maybe. If so, are the brains of Cook County government aware that the body of water in the picture, the North Branch of the Chicago River, is too shallow--with rare exceptions such as after heavy rains--for canoeing? Or is this a walkway to get a close look at the river? However, about 100 yards away, where grass is mowed, there is access, without steps, to the river.

How many projects like this well, whatever it is, are in Stroger's next budget?

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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?

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State makes big fuss over local couple's vegetable oil car fuel

A very old story from March 1st about a couple getting a knock at the door from two agents of the Illinois Department of Revenue. I wonder if anyone had actually heard of this story. If not I might as well expose this story to a statewide audience...

David and Eileen Wetzel don't get going in the morning quite as early as they used to.

So David Wetzel, 79, was surprised to hear a knock on the door at their eastside home while he was still getting dressed.

Two men in suits were standing on his porch.

"They showed me their badges and said they were from the Illinois Department of Revenue," Wetzel said. "I said, 'Come in.' Maybe I shouldn't have."

Gary May introduced himself as a special agent. The other man, John Egan, was introduced as his colleague. May gave the Wetzels his card, stating that he is the senior agent in the bureau of criminal investigations.

"I was afraid," Eileen Wetzel said. "I came out of the bathroom. I thought: Good God, we paid our taxes. The check didn't bounce."

The agents informed the Wetzels that they were interested in their car, a 1986 Volkswagen Golf, that David Wetzel converted to run primarily from vegetable oil but also partly on diesel.

Wetzel uses recycled vegetable oil, which he picks up weekly from an organization that uses it for frying food at its dining facility.

"They told me I am required to have a license and am obligated to pay a motor fuel tax," David Wetzel recalled. "Mr. May also told me the tax would be retroactive."

Since the initial visit by the agents on Jan. 4, the Wetzels have been involved in a struggle with the Illinois Department of Revenue. The couple, who live on a fixed budget, have been asked to post a $2,500 bond and threatened with felony charges.

OK this is not the way to promote or encourage the use of alternate fuels that will not burn any "greenhouse" gases. I don't have an axe to grind in this I just find this to be an unfortunate story.

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Black business and the gross receipts tax

Last week we saw the Governor rally support amongst black religious leadership. It seems obvious that at said press conference the ministers are for this tax-fairness plan and the Governor's programs for affordable health care and education. We see one segment of this population what about those blacks who owns businesses.

Well for the most part I saw opposition. Unfortunately no group is totally monolithic since I see that the governor has the support of another group of black business owners...

“The Illinois State Black Chamber of Commerce and its membership embraces the ideas of the Governor's plan to invest in Illinois families by providing access to affordable healthcare for small businesses and all Illinois residents, increasing funding for our schools, and creating a tax system that is fair for businesses and families alike. The State Black Chamber of Commerce agrees with the Governor that ‘the need is clear and the time is now,’ and that is why we are committed to working with the Governor's office to get the General Assembly's support so that we may create a fair and equitable system that levels the playing field, reduces the burden on middle class families, helps small and mid-size businesses become more competitive and lessens the tax burden on all Illinois residents,” Illinois State Black Chamber of Commerce President/CEO Larry Ivory said.

OK but what are those opposed to the tax fairness plan are saying anyway? From Crain's...

While ABLE formally decided to further review the matter and to examine a possible “alternative solution” to the state’s financial needs, President Hermene Hartman says the organization in fact opposes the proposal.

“We appreciate the governor’s desire to close corporate loopholes” in the existing tax structure, said Ms. Hartman, CEO and publisher of the Hartman Publishing Group, which produces N’Digo and Savoy magazines. “But making all business pay for the loopholes when we didn’t benefit from them is a mistake.”

Ms. Hartman is even more direct in a column posted on N’Digo’s Web site, which says passage of Gov. Blagojevich’s proposal as written will mean “the end of the entrepreneur” in Illinois.

Hmmm, what about this column by Hermene Hartman? Well here's a little taste of what she said in the aformentioned column...

The thought is that there are corporate tax loopholes favoring big business, so much to the point that some of the largest companies in that state are tax-exempt. The gross receipts bill is an attempt to correct that, and indeed it should. The tax excludes small business with revenues of $1 million or less. This sector represents the cottage industry, personality businesses, and ma and pa shops. These types of businesses usually do not employ more than three people. Everybody else pays.

The state has redefined “small business.” What happens to federal regulations that define small business? For the most part, small business is under $50 million or has “size standards.” Most businesses under a million in revenues do not hire, and are very small operations. The governor’s bill hurts small business enterprises that hire most employees and represent the fastest growing business sector.

For every million dollar for a professional service business, the proposal asks for 1.8 percent of gross receipts. That represents $18,000 per million. This is unfair. Essentially some companies will pay taxes on monies that might be passed through.
...
The entrepreneur is a special case, and I should hope along the way there is a separation between the entrepreneur business and the corporate business. There is a drastic dynamic distinction to be made. The entrepreneur is a small business working on his own steam, and is usually a niche type business with limited resources, bootstrap strategies, and in the case of the minority, limited access to working capital.

The comparisons are limiting. Why should the local neighborhood grocery store pay the same taxes as Jewel and Dominick’s? The small grocery will probably never grow to the heights of the Jewel. Why should the small boutique business be charged the same tax as the Michigan Avenue super store?

The point is, they shouldn’t. It is an unfair business comparison and an unfair business tax.

If this tax is passed in its present state, it is the end of the entrepreneur. The concept of small business needs to be reconsidered. A consideration should be given to grading business — small business, entrepreneur, corporate, and mega businesses. The margins of these businesses are drastically different. It is one thing for the Wal-Marts of the world to have a 5 percent margin, and another for the small grocer to have a 5 percent margin.

Entrepreneurs, as they exist in the State of Illinois, are on the way to extinction if this tax is enforced as it is currently stated. By the time you pay income tax, state tax, federal tax and payroll taxes, it just isn’t worth it. The entrepreneur’s operation is stifled, and literally the various governments become hidden business partners that most do not want.

Entrepreneurs are literally going to be penalized for being in business. It is unfair for the government to place the schools and health industry on one sector of society — the business community.

So she is going to bat for the entrepreneur here. And these are good points, but take a look at her recommendation and that includes raising the income tax. An income tax that she says hasn't been raised in 40 years...

Bite the bullet. Increase income taxes 1 percent for all citizens. This is the fairest tax of them all.

People who have children in school should be taxed differently than those who
have no children.

Tax businesses based on size.

Graduate the taxes by considering size of standards. Tax big businesses differently than entrepreneurs, different than small businesses, different than professional services.

Eliminate taxes. If you are paying gross receipts taxes, eliminate other taxes.

Equalize state business. Minority businesses receive a fraction of state business and should be taxed accordingly.

Minority businesses should be taxed based on opportunity in the market place, and with a formula access to capital.

Small businesses should be exempt from taxes for the first five years of existence.

Have business people assess government waste to improve efficiency, and perhaps there would be a need to increase taxes.

Have the gross tax receipt deductible from federal taxes.

I think these points right here are some good points for discussion. I hear a lot of bellyaching perhaps we can look at some alternatives.

Addendum: More information from that Crain's article...

But business groups generally have charged that the governor’s proposal instead will hurt them by raising costs too high, and many comments at the March 15 ABLE meeting were in that vein.

For instance, according to a copy of meeting minutes, Leon Finney of the Woodlawn Organization said his and many other black-owned companies would be directly affected by the new levy and that the state perhaps should look for another way to raise money.

“The tax provokes a certain amount of concern,” Mr. Finney confirmed in a subsequent interview. “It’s small companies that provide most of the jobs that drive our economy. . . .We agree with the goals that the governor set (for schools and health insurance). The question is, how do you get there.”

Becky Carroll, Gov. Blagojevich’s deputy chief of staff and spokeswoman on budget matters, conceded that ABLE gave the governor’s plan a “mixed reaction,” but said that it indicates “a willingness to learn more about the plan before making any rash decisions.”

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GRT gets headlines while Madigan plays with HB750

Phil Kadner at the Daily Southtown has the scoop that I haven't seen anywhere else.

The Illinois House of Representatives Committee on Appropriations -- Elementary and Secondary Education is expected to hold a public hearing today on House Bill 750.

This is a measure that would change the way public schools are funded by increasing the state income tax from 3 percent to 5 percent....

Lots of good stuff in his column. Last year Speaker Madigan didn't let this tax increase go anywhere even after a Senate committee approved it. Now he's apparently allowing a House committee vote on it, which should raise more than a few eyebrows. Blago's gross receipts tax and new 3% payroll tax are horrible, but HB750/SB750 is also bad.

Not that I think they are smart enough to pull it off, but it almost looks like Madigan and Blagojevich are working together to make sure some form of tax increase is passed this year. Blago proposing the awful gross receipts tax sure does make HB750/SB750 look a lot better in comparison and sets HB750/SB750 up to be a compromise. Watch your wallets and call your Reps.

If it's voted on in committee today I'm going to be very curious to see how Republican Reps. Eddy and Prtichard vote, both of whom have not ruled out support of an income tax increase.

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So the tax may depend on where you are from?

The Trib has the budget document as a PDF

On Page 32 of the PDF there is a set of actions intended to 'mitigate any unintended economic consequences'

"Given the historic policy of maintaining access to food and pharmaceuticals, the retail sale of food and pharmaceuticals to Illinois residents will not be subject to gross receipts tax."

So if you sell someone food or pharmaceuticals you have to ask them if they are a resident? That's the way I read it, if a drug store in Calumet City fills a prescription for someone from Indiana it is subject to the tax? Same thing if someone buys a burger in downtown Chicago at a hotel? Oh you are from out of state, I have to pay tax on that. If I am understanding this right, it is going to be a management nightmare.

Much more on the gross receipts tax at OneMan's Thoughts including some insight into the impacts on health care providers.

OneMan

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