Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts

Tuesday, February 17, 2009

What If New York Goes Bust?

I know that this article I found via RealClearMarkets isn't an Illinois related story, but I hope that Gov. Quinn can avoid the mistakes or misteps of two of our nation's most important states. It's seems we're already in a difficult economic and financial environment right now.

So what does John Avlon, a man who has worked on Rudy Giuliani and Bill Clinton's presidential campaigns in addition to working for Giuliani when he was mayor of NYC, and has to say about fiscal and economic health of NY and California.

If California and New York State were businesses, they'd be going bankrupt. If you're among the nearly 20 percent of Americans who live or work in these two states, the fiscal crisis is coming home for the holidays. And the worst is still on its way.

California, the world's eighth largest economy, will run out of money in March if the deadlocked legislature and Gov. Arnold Schwarzenegger can't come to an agreement on tax-hikes and spending cuts. Its bonds have been reduced to near-junk status after decades of borrowing and spending. State Treasurer Bill Lockyer summed up the situation in terms unhelpful to the tourist industry: "California's fiscal house is burning down."
...
Here's the really bad news: the full impact of the financial crisis in New York has yet to be felt.

The dirty secret of Empire State budgeting is that New York City depends disproportionately on Wall Street for its budget and New York State depends on New York City.

In the last four months, the financial landscape has changed dramatically. Investment banks that have been the engine of the city's tax revenue for decades have disappeared entirely or morphed into restricted new entities. According to E.J. McMahon, my colleague at the Manhattan Institute, between 1980 and 2007 the securities industry's share of wages in the state rocketed from 3 percent to 18 percent, with the average Wall Street salary and bonus rising to $379,000. Wall Street revenues made up 20 percent of the state's budget. So the 40,000 local jobs lost in the financial sector are only the beginning. We're not facing a cyclical downturn; we're facing a fundamental alteration of the facts of financial life in New York. And the 20 percent unemployment in some upstate counties will not help ease the squeeze.
...
In a preview of political fights to come, both New York State and California budgets are being crippled by outsized public sector union pension obligations that are now coming due in a perfect storm—a combination of an aging population, a declining tax base, and a fiscal crisis.

The Democrats who narrowly control both state legislatures have a notoriously cozy relationship with unions and they will be unlikely in the extreme to bite the hands that feed. But the unsupportable absurdities of the current arrangement are becoming evident.

The average state and local government employee now makes 46 percent more in combined salary and benefits than their private sector counter-parts, according to the Employee Benefit Research Institute—including 128 percent more on health care and 162 percent more on retirement benefits. New York City, for example, not only spends 10 times more on pensions than it did ten years ago, it now spends more on pensions and benefits for firefighters than it does on firefighters' salaries.
Like I said I hope that we can weather this current crisis. Illinois may not be up there with California or New York, but some of the problems that those two states are facing probably isn't much different.

Read more...

Friday, February 06, 2009

Time for some long-term fiscal planning

State Comptroller Dan Hynes already painted a dismal picture of the state's fiscal status with his projection of a nearly $9 billion deficit in fiscal year 2010, which starts July 1. He estimated that could drop to a roughly $6 billion deficit if the state received $3 billion from the federal stimulus package, but the federal bailout amount for states is in flux at this very minute. Adding to the problem is that the current fiscal year 2009 budget keeps getting more and more out of whack. The revenue forecast looks worse than it did in November, according to the legislature’s economic forecasting arm.


Last fall, the bipartisan Commission on Government Forecasting and Accountability said revenues for the current fiscal year 2009 would fall $550 million below the previous year, or $1.34 billion less than the level budgeted.

Part of that spending plan assumed the state would collect $435 million by selling the state’s 10th riverboat license, but the winning bid for the license came in at only $125 million — and it won’t be available in time to ease this year’s budget crunch. According to the Illinois Gaming Board, the money could come in two chunks, one in fiscal year 2010 and the rest in 2011.

In short, the current year’s revenue picture “worsened virtually over night to nearly $1 billion less than the previous year,” the commission said in its January revenue forecast.

The commission added that it may need to make further adjustments when state income and sales tax revenues decline as the national recession unfolds. The cumulative damage: at least $1.6 billion by March.

As all four legislative leaders met with Gov. Pat Quinn this past week, talk of tax increases and budget cuts circled the Capitol. Public administration professor David Merriman at the University of Illinois at Chicago said even if the state gets $3 billion in federal bailout money, cuts spending and increases the state income tax by 1 percentage point, it's still going to be a rough road ahead. "The state needs to do long-term fiscal planning, and they need the legislature to take that seriously," he said.

Watch for more context and analysis in the March edition of Illinois Issues magazine.

Read more...

Sunday, November 16, 2008

Washington Wins…Everyone Else (except maybe Chicago) Loses

I just wonder why Chicago and Washington is the big winner and most other cities do not from NewGeography:


What could prove to be the worst economic decline since 1929 may also have the unintended consequence of creating a booming real estate market for the Washington, D.C. metropolitan area over the next few years. Ironically this has been brought on not, as one might expect, by Democrats – traditionally the party of Washington – but by the often fervently anti-DC Republicans.

This process was set in motion by the Bush Administration’s $700 billion financial bailout. This has caused a potential geographic shift in power from Wall Street to Pennsylvania Avenue. By concentrating decision-making power and institutional ownership in the Nation’s Capital, the Administration has essentially drained power away from financial institutions historically headquartered in New York City. The local real estate market impacts of this shift in the locus of private-sector financial power will only be accelerated by the impact in that real estate market by the changing of the guard in Washington following the November 4th election.
We have to wait until the end of this piece to see why Chicago is going to benefit...

But then there are questions of whether this is good for the country. Most metropolitan areas are suffering (some, like Miami, Las Vegas, and Phoenix are hemorrhaging) while only perhaps Chicago – the geographic power base of President-Elect Obama – seems well-positioned to gather in the spoils of the new political order. Meanwhile DHL’s recently announced layoffs in Wilmington, Ohio, may impact an estimated one-third of the employable residents in that community. By way of this stark contrast, there’s something truly unseemly in the notion that the very place fundamentally responsible for many of our current economic woes should benefit from being both the cause and the cure of the economic maladies plaguing the country.
Things are about to get interesting aren't they?

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Friday, September 05, 2008

Unemployment Numbers: Good News for Obama, Bad News for Rod

New unemployment numbers are out, and there's two pieces of good news for Obama's campaign and more bad news for Rod Blagojevich.

First, the good news for Obama:

1. National unemployment numbers are at a five year high, underscoring his argument for Change.

2. Unemployment in states with Democratic governors is .2% LOWER than unemployment in states with GOP governors, which bolsters the argument that Democrats are better at managing the economy.

Now, the bad news for Rod:

1. Blagojevich has the second-worst jobless numbers (7.3%) of any Democratic governor, second only to Gov. Granholm, whose home state of Michigan has been decimated by the collapse of the U.S. auto industry.

2. Illinois has the fourth-highest unemployment rate in the nation, behind only MI, MS, RI.

Part of the reason this is such bad news for Rod and Illinois is that because of the diversity of our economy, Illinois is traditionally one of the last states to feel the effects of a recession but also one of the last states to rebound. In other words Campers, things are likely to get a lot worse.

By the way, if you're expecting the Capital Plan being discussed in Springfield to make a dent in Illinois' unemplyment numbers, think again. There are roughly 15,000 unemployed construction workers in Illinois, but 491,300 unemployed people overall. That's makes construction workers only 3% of all unemployed workers, and wouldn't even move unemployment numbers a tenth of a percent.

Read more...

Wednesday, August 06, 2008

NEWS YOU MISSED: The Economy Sucks

The U.S. Department of Labor's Bureau of Labor Statistics and Illinois Department of Employment Security are a wealth of information.

When Rod Blagojevich ran for re-election in 2006, he took credit for creating 95,000 new jobs in Illinois, and he's still taking credit.

I've always warned candidates against taking credit for the economy when things are going well, because its pretty tough to avoid blame when things are going bad. But, if Rod wants to be the one at the helm, so be it.

The latest numbers from BLS and IDES:

National unemployment rate: 5.7%
Illinois unemployment rate: 6.8%

Jobs Rod Blagojevich has created in his second term: - 28,218
Number of new people Rod Blagojevich has cost their jobs in his second term: 155,524

Manufacturing jobs Rod Blagojevich has eliminated since January, 2003: 102,300

Illinois Workers earning less than the federal minimum wage, thanks to Rod Blagojevich...
2003: 52,000
2007: 71,000

Unemployment Rates Increase Over the Year in All Metropolitan Areas In Illinois

Highest Unemployment:

Rockford: 8.6%
Danville: 8.4%
Kankakee-Bradley: 8.2%
Decatur: 7.6%
Chicago-Naperville-Joliet: 7.4%
St. Louis Metro-East: 7.2%

Counties with the highest unemployment rates (above 8%):

Hardin: 11%
Alexander: 10.2%
Pulaski: 10.9%
Perry: 10.4%
Franklin: 9.9%
Pope: 9.8%
Saline: 9.2%
Boone: 9.0%
Gallatin: 8.9%
Johnson: 8.8%
Marion: 8.7%
Mason: 8.7%
Massac: 8.7%
Union: 8.7%
Winnebago: 8.5%
Vermillion: 8.4%
Montgomery: 8.3%
LaSalle: 8.2%
Grundy: 8.2%
Kankakee: 8.2%
Clark: 8.1%

Counties by region:

Southern Illinois: 12
Central Illinois: 4
Northern Illinois: 5
Cook & Collar Counties: 0

Read more...

Friday, April 25, 2008

Illinois Law Schools & Attorneys

The Illinois Supreme Court Rules govern who may be permitted to practice law in Illinois and before every court therein. All applicants, whether seeking admission to the bar on examination, or by motion, must meet the educational requirements specified in Rule 703. Among other requirements, Rule 703 provides, "...each applicant shall have pursued a course of law studies and fulfilled the requirements for and received a first degree in law from a law school approved by the American Bar Association."

In dissent to Rule 703, Justice Heiple famously wrote the following:

I both dissent and object to these rules because they represent an improper delegation of a governmental and judicial function to a trade association of lawyers.

The American Bar Association is a voluntary association of dues paying lawyers (currently $225 per annum) that exists for the benefit of its members. No lawyer is required to belong. Most do not. It clothes its parochial existence with an overlay of public activities and pronouncements designed to convince the general public that it is interested in the general welfare. That its primary focus is the benefit of its members, however, is beyond question. That the American Bar Association is a trade association warrants neither commendation nor condemnation. As a trade association engaging in improving the status of lawyers and lobbying Congress and the State legislatures, it is on a par with any other trade association. It is decidedly not, however, an arm of the State of Illinois nor of this court.

It is improper for this court to assign and delegate to that organization the ultimate decisionmaking function of deciding for the State of Illinois which law schools warrant official recognition. It would be proper, of course, for this court and its Board of Law Examiners (now, Board of Admissions to the Bar) to consider and weigh the evaluations of the American Bar Association in considering which law schools are to be approved. The work of the American Bar Association in evaluating law schools could be considered as relevant evidence in that regard. No objection could be raised to that procedure.

This court, however, has no right to delegate its decisionmaking function to the American Bar Association, the Teamsters Union, the Republic of Uganda or any other such body or group. If the rule asserts a valid principle of law, then this court could as well assign all of its decisionmaking functions to others who might be considered experts in their field.

It is the Illinois Board of Admissions to the Bar--a public body, rather than the American Bar Association--that approves the colleges and universities at which applicants are required to complete at least 90 semester hours of acceptable college work before pursuing a course of law studies. The Board also reviews for acceptability the quality of preliminary, college, and legal education of applicants who received their legal education and law degree in foreign countries.

There are currently a mere 9 law schools approved by the American Bar Association in the State of Illinois; and if you aren't able to personally attend classes in Chicago, Champaign, DeKalb, or Carbondale, you may be out of luck, because, as a matter of policy, the American Bar Association does not approve distance education programs in law.

This policy is at odds with those who believe that distance education programs in law can offer the same level of quality and education as can traditional programs. The University of London, in England--the country upon who's tradition our legal system is based--as well as many others, offer a similar degree in law, without discrimination between traditional and distance education students; and these degrees are considered perfectly normal and acceptable for the purpose of practicing law in the United Kingdom and other common law counties.

In California, a public body known as the Committee of Bar Examiners, has approved a number of law schools not approved by the American Bar Association, including distance education programs (Some of these are computer based, and some are otherwise.) While a graduate of one of these programs may be permitted to practice law in California, according to Rule 703, they won't be permitted to do so in Illinois. In addition, if you're thinking about enrolling in the University of London's distance education program in law, or any other program in a foreign country, know that the Illinois Supreme Court Rules require you to also have been practicing law actively and continuously for at least five of the last seven years before admission here.

Consider the ongoing promotion of the Illinois Virtual Campus service and the fact that Abraham Lincoln never attended a law school approved by the American Bar Association.

Here are some questions for readers to answer in their comments:

1. Does the Illinois Supreme Court's delegation, and the American Bar Association's refusal to approve distance education programs in law, (a) limit the number of law schools in Illinois, (b) limit the number of licensed attorneys in Illinois, (c) drive up the cost of either due to limited supply in the face of constant demand, or (d) none of the above? Does the current arrangement make Illinois less competitive in the area of legal education?

2. Do you believe that the current arrangement best serves the interests of (a) current attorneys, (b) the public at large, (c) both, or (d) neither?

3. Do you believe that distance education programs in law can offer the same quality and education as traditional in-classroom programs? How does this affect your opinion on the Illinois Virtual Campus service currently being offered by the University of Illinois?

4. Should (a) the Illinois Supreme Court amend Rule 703 to read "law school approved by the Board of Admissions to the Bar" rather than "law school approved by the American Bar Association", (b) the American Bar Association start approving distance education programs in law, (c) something else, or (d) none of the above?

Read more...

Friday, February 15, 2008

NIU and taxes

Shooting lingers over Capitol
By Patrick O’Brien
Thursday’s shooting rampage at Northern Illinois University in DeKalb cast a pall over the Statehouse today. Legislative action led off with condolences and a moment of silence on the House floor. (The Senate was not in session today.)

A group of lawmakers also received a private briefing by Michael Chamness,
chairman of the Illinois Terrorism Task Force and adviser to the Illinois Emergency Management Agency. Chamness praised the efforts of university officials and first responders in DeKalb, saying that an alert about the shootings was issued through text messages and other means less than 20 minutes after the incident occurred. “From our standpoint, NIU did everything correct,” he said.

Comparisons between Virginia Tech and NIU were inevitable. Chamness said reports confirm it took two hours for word of the shooting to reach students at last year’s Virginia Tech shootings. In the case of NIU, students were given specific instructions shortly after the incident to stay away from the area of campus where the shootings occurred.

Chamness said it’s unlikely the DeKalb shootings could have been prevented. “There didn’t seem to be the flags there were at Virginia Tech” that may have alerted authorities.

And Illinois state universities learned from the Virginia Tech tragedy through training in school safety. NIU Police Chief Donald Grady and officials from 95 other state schools attended.

Further, a statewide Campus Safety Task Force is conducting a mental health survey to identify potential problem individuals, but there’s no clear-cut answer about how to prevent such incidents, Chamness said. The task force’s report, including the study, will be available April 1.

Tax talk
By Bethany Jaeger
Anticipate a battle between ideas for raising revenue and for stimulating the economy. There’s more talk about Gov. Rod Blagojevich seeking to garner revenue through a so-called carbon tax, which the Illinois Chamber of Commerce already is prepared to oppose if it appears in his annual budget address February 20. At the same time, even typical proponents of tax credits say the state should avoid anything that could further cut into a revenue shortfall.

If the governor does propose a form of tax on carbon dioxide emissions, expect vocal opposition from the agribusiness and coal industries. We’ll have more on the carbon tax later if it is indeed proposed. The chamber suggests http://www.carbontax.org/ to learn more in the meantime.

In addition, the Taxpayers’ Federation of Illinois said it will oppose all legislative proposals for tax credits, exemptions and deductions this year. “There’s no money,” said David Eldridge, legislative director for the group and former assistant counsel to House Speaker Michael Madigan.

Eldridge testified before a House Revenue Committee Friday and said the state faces a deficit ranging from $600 million to $750 million. The state needs all the revenue it can get for the upcoming fiscal year (that starts July 1). (See our previous blog for background.)

To generate money, the federation repeats an earlier position that it could support an increase in the personal income tax by 1 percent. The Commercial Club of Chicago’s Civic Committee recommended that last year, and increasing the rate from 3 percent to 4 percent already is proposed in a measure sponsored by Rep. Annazette Collins, a Chicago Democrat.

Rep. Frank Mautino, a Spring Valley Democrat and Revenue Committee member, said the federation’s statement is significant given the timing. “Normally, the members of the Taxpayers’ Federation are the large manufacturers who would be looking for the tax credits. But given the Chicago Civic Committee’s report from last year — and many of their members are members of the Taxpayers’ Federation — they came out in favor of an income tax with a corresponding corporate income tax increase.”

Rep. Bob Biggins, an Elmhurst Republican and committee member, said it’s a reasonable position, even for lawmakers such as him who like to propose tax cuts. A former township assessor, he said local governments saw enormous revenue growth as property values increased during the past 30 years. Now that property values are flat, particularly in the Chicago area, local governments aren’t collecting as much money.

“There’s a natural stoppage of increases in revenue from the real estate being flat to the economy in the state — people aren’t spending as much. We’re not going to have enough money. Let’s be prudent here, and let’s not make it worse.”

Read more...

Thursday, February 14, 2008

Stormy start to session

A week before Gov. Rod Blagojevich's annual budget address, the state's economy already casts a cloud over the Statehouse.

Amid national news that a full-blown recession is looming, President George W. Bush signed an economic stimulus package. It's supposed to send checks in late spring and summer to singles who made less than $75,000 and couples who earned less than $150,000 in 2007. (People qualify by filing their federal income taxes.)

If the national economy tanks, Illinois won't be far behind. That's the message of a report requested by the state General Assembly's Commission on Government Forecasting and Accountability. The agency's January briefing says, “Illinois will most certainly succumb if the economy sinks into a recession - if it has not done so already.”

Moody's Economy.com also said in a report for the commission that the odds of a recession increased from 40 percent to 60 percent last month.

Those reports couple with the Illinois comptroller's recent warning that state government is unprepared for a recession. His office released a report to the General Assembly. In his Statehouse office Wednesday, Comptroller Dan Hynes said, “The bottom line is that the state of Illinois, unlike many other states, has not taken advantage of our five years of economic growth. And now as we face a recession, our financial problems are daunting.”

He said the state accumulated “tremendous revenue growth” of $5.5 billion during the past five years. But lawmakers spent it on new programs rather than putting it toward compounding, long-term obligations. While the state devoted more money to pensions, Medicaid, health care, higher education and general education in that time, Hynes said it hasn't necessarily made a difference or addressed a structural deficit that the Blagojevich Administration often misrepresents.

“Each year, the governor has made his budget presentation and has declared that the deficit has been eliminated -- each and every year. And each and every year, that has been proven untrue when the final numbers come out. And that's a problem in and of itself, but it's especially problematic when the economy slows down," Hynes said. (For more information about whether the budget is balanced, see Charlie Wheeler's Illinois Issues column about the governor's 2006 budget address.)

Stormy Smoke Free Illinois debate
Rep. Bill Black, a Danville Republican and vocal GOP leader, blew his top in a House committee, later calling the chairwoman an “idiot” for not acting on her own and instead relying on behind-the-scenes staffers to tell her what to do.

Black threw a tantrum because the committee chair didn't call for his amendment to be attached to the Smoke Free Illinois Act, which went into effect January 1 but doesn't have all rules in place. Committee chairwoman Rep. Karen May of Highland Park said leadership told her that other amendments weren't ready and that they're expected to be called for debate next week.

This could happen a lot this session. New measures will have extra amendments that spell out the rules for implementing them. That's a direct shot at the governor, who publicly stated that the Joint Committee on Administrative Rules - which reviews such rules - doesn't matter. Blagojevich's office previously suggested the bipartisan legislative panel plays only an advisory role after the panel denied his rules for expanding health care to more low- and middle-income adults.

Black's measure, by the way, would change wording in the definition of private clubs. It would allow veterans' halls to vote on whether they want to allow smoking in their halls.

That's just one proposed exemption. A more sweeping measure sponsored by Rep. Harry Ramey, a Carol Stream Republican, would allow smoking in bars, bowling alleys, veterans' halls, strip clubs and casinos. In other words, restaurants would be one of the only mandated smoke-free facilities. Some Illinois veterans testified at the House committee. One urged lawmakers to retain the ban on smoking in all public places for the sake of public health. Another urged them to let veterans, many of whom started smoking while serving in World War II and Vietnam, smoke in their own halls.

Read more...

Friday, March 30, 2007

Last US horse slaughterhouse shut down in DeKalb, unwanted horse problem will worsen


Here's a story that serves as a reminder that good intentions can have some awful consequences.

From AP last week:

Kentucky, the horse capital of the world, famous for its sleek thoroughbreds, is being overrun with thousands of horses no one wants. Some of them are perfectly healthy, but many of them starving, broken-down nags. Other parts of the country are overwhelmed, too.

The reason: growing opposition in the U.S. to the slaughter of horses for human consumption overseas.

And that was the situation before the nation's last horse slaughterhouse, a facility in DeKalb, Illinois, shut down yesterday. About 1,000 horses per week were processed to produce meat for human consumption--all of it was shipped overseas. Although Congress has been considering a ban on horse-slaughtering, a court ruling on agricultural inspections closed up the Illinois plant.

There is a belief that former Speaker of the House Dennis Hastert kept the plant open and kept the anti-slaughter bill bottled up in the House.

More from AP:

It is legal in all states for owners to shoot their unwanted horses, and some Web sites offer instructions on doing it with little pain. But some horse owners do not have the stomach for that.

At the same time, it can cost as much as $150 for a veterinarian to put a horse down. And disposing of the carcass can be costly, too. Some counties in Kentucky, relying on a mix of private and public funding, will pick up and dispose of a dead horse for a nominal fee.

But some jurisdictions, because of fears of pollution, ban it. Glue factory? Dead horses aren't used for glue anymore. Shelters? They're overwhelmed with unwanted horses.

Old strip mine areas of Kentucky are seeing growing heards of now-wild horses.

However, in other parts of the country, say where I live, it's not practical to release a horse to live off the land.

What's going to happen to all of these unwanted horses? Some pollyannas think the market will sort itself out. Possibly. However, the way I see it, criminals, whether they are a part of organized crime, or perhaps a group of goofy meth-heads, will offer up there services to "take care" of the problem of unwanted equines. Those horses will be buried (maybe), burned, or dumped in ponds.

Nature abhors a vacuum. So does a free market.

As for the workers at the horse-meat processing plant in Illinois, unless an appeals court steps in quickly to reverse the lower court's decision, they'll lose their jobs.

But the people behind the horse slaughter ban mean well, and to them, that's all that matters.

To comment on this post, or to vote in the Pajamas Media presidential straw poll, click here.

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Tuesday, March 27, 2007

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.”

    Read more...

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