Monday, February 26, 2007

A GRT is bad for eveyone

The Gross Receipts tax a bad idea for everyone More papers have been running articles on the rumored Gross Receipts Tax that Governor Blagojevich may propose. It pretty well known that this tax would be bad for business Illinois, giving the state a more negative economic climate, make marginal business unprofitable, make goods and services produce in the state more expensive and encourage businesses to relocate to neighboring state. For more on the negative business effects look at my previous post on the GRT. The GRT would also have negative effects on the public in general, with a sales tax the cost of the tax is split between the business and the consumer but with a GRT most of the cost of the tax would be embedded in the price of the final good or service and would be pasted on to the consumer. The reason for this is that a GRT would be placed on the entire value of a good not just the profits a company earns off of a good sold and the good would be taxed multiple times, for a example if a company sells a piece of steel for 5 dollars to a factor that used to a make a good that is sold for 10 dollars, that piece of steel would be first taxed on the the whole 5 dollars that it was sold for and then the factory would be taxed again on that 5 dollars plus the additional 5 dollars that they sold it for it. For this reason most of the cost of the tax would be embedded in the price of the good and paid for by the consumer. The tax burden would fall heavier on the poor, who spend most of not all of their income on the goods and services and less on the middle and upper class that save more of their income. Along with this a GRT would hurt economic growth in the State which would mean fewer new jobs and make manufactured goods for the state less competitive with those from other states and countries.
For all of these reasons and more everyone would should write their state representive and senator and tell them to oppose any attempt to enact a Gross Receipts Tax in Illinois.

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