Letter on Gross Receipts Tax

(Guest post: Letter from my friend Tom Sparks, posted with his blessing. Reference is made in the letter to a study of school spending needs by a group of experts, which Mr. Sparks questions, outlined in this series in the Tribune.)

Friends,

I am writing you all just to keep you apprised of the latest initiative from our Governor and many of the State's pols: namely the Gross Receipts Tax.

The gist is that many activists and special interests have sought more tax money for schools for years, but they could never get a higher sales tax or tax swap done politically. The idea now being floated is basically a VAT tax of 1%. Every transaction will be taxed at 1%. The guy who grows hardwood will pay 1% when he sells to the lumber yard; the lumber yard will pay 1% when it sells boards to a cabinet maker; the cabinet maker will pay 1% when he sells his cabinets to the wholesaler; the wholesaler 1% when she sells to the retailer; the retailer 1% when he sells to the remodeler; the remodeler 1% of her net business on the project. You can see how this is both hidden (and thus easy to raise over time) and will serve to drive prices of everything higher. This is projected to raise $13B; They propose scaling back the sales tax, but still plan on net additional taxes of about $4B, with $3B for most school districts. The "correct" funding # was calculated by some group of "experts"; interestingly, almost no district in the State spends this number, including Glencoe, so I can't see how they got this #.....

I would note that ILL currently spends $20B on schools, so this is a 15% increase. It assumes that spending money is the answer to all ills. It assumes that the State of ILL is a lean mean spending machine, ie, there's no fat to cut. In essence, they are asking ILL taxpayers to do with less because they can't do more with the same amount. (As has every business in the country in the last 20 years; you've all experienced the fun of increase productivity/efficiency). It also assumes that other taxes will be repealed and that no extra spending will be crammed onto this change.

FWIW, I oppose this tax increase, and in particular, its form. It's a hidden tax that will be VERY easy to quietly raise over time. You never see it, like you do sales taxes or income taxes. Prices just keep going up and your dollar doesn't go as far, but, folks are more apt to blame the service provider.

If you support higher taxes, I would suggest you write your Rep to tell them to just raise the Sales or income tax. It's cleaner and, more importantly, visible.

My suggestion is that the State reevaluate its spending; ban tax credits and tax deductions that are really off-balance sheet Enronesque spending in the dark. If something is so important that it needs taxpayer funding, then it can and will be funded in the sunshine by a direct appropriation from the treasury, not some hidden credit or deduction. There simply has to be pork that can be taken away from special interests. The State should voucherize its school spending for the bottom 1/3 of districts, and, any money saved by eliminating pork should go to bumping up the value of the vouchers. The beauty of this idea is that school districts that work, like ours, will not be impacted. Those that have issues, which some blame solely on a lack of tax money, will get more tax money. The politicians will have to decide between their buddies and the bottom 1/3 of school districts. Vouchers will allow parents who value education to find each other and free their children from the cycle of poverty that has been so intractable. Currently, the parents that care are sentenced to schools with parents who dump their kids on the school. Vouchers will force the same efficiencies and innovations onto underperforming schools as businesses have been doing for years.

The politicians are asking you to do with less, by taking more of your money; I would put the shoe on the other foot, and ask them and their bloated cronies to do with less, and give it to those who they claim need it.

Whether you agree with me or not, I just wanted to make sure all were informed. I would be happy to discuss this further with anyone interested.

Tom Sparks


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