Thursday, February 8, 2007

Gross Receipts Tax

There has been a number of rumors that Governor Blagojevich will call for the creation of gross receipts tax in Illinois. A gross receipts tax is a tax on the revenues of a business, not there profits, meaning that depending on the form that the tax would take a company would be taxed on the amount of money even if the company is losing money, meaning its cost are greater than its revenues. This would be horrible for the economy of the State of Illinois in the long run, the state economic climate would become even worse and more hostile to business The gross receipt tax would be added on top of the existing state sales tax and business fees that are already charged by the states. The these added taxes would be passed on the public in the form of higher prices and a higher general price level in the state of Illinois. The rising price level would have the large effect on the poorest section of the state population since they spend the majority if not all of their income, they would be the most effected by the price increases and would see their real income fall by the largest percentage. While middle and upper class families that usual save and invest some of their income and don’t spend it all would be less directly affected by the tax.
By raising the prices of the goods in the state would lead to people to go to neighboring states in order to make large and expensive purchases when ever possible, since those business would not have to pay the gross receipts tax and would by able to sell their goods for a lower cost. Along with this it the tax will lower the profits of business based in Illinois and their rate of return, which means that will have less money to expanded, and if business here expanded at a slower rate, that means that they will higher new employees at a slower rate. This will mean fewer new jobs for the citizens of Illinois and will slow economy growth even more.
What Illinois needs right now is not to make it business climate more hostile, but to make Illinois a more welcoming place to business. The state needs to reign in spending, lower business fees, balance the state budget and invested in capital expansion projects in order to prompt economic and job growth in Illinois. This will help the people of Illinois, not an added anti-business take in order to fun more government programs

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