Monday, March 19, 2007

The Gross Receipts Tax is Bad for Long Term Economci Growth in Illinois

I already talked about how a Gross Receipts Tax would hurt the consumer, business and the economic climate in the state of Illinois, now I will mention another way that it will hurt longer term economic growth in the state. The Gross Receipts tax will lower business profits by raising the cost of doing business in the state even thou the majority of the cost of the tax will be passed on to the consumer, it will still hurt business’s profits throe two thing, one the direct way, they will ended up paying a portion of the tax themselves, and the second way indirect way, higher prices mean consumers will be able to buy fewer goods which will lower revenues and profits. If business’s in the state are earning lower profits they will have less retained earning to invest in capital goods and expanded production in the state. Investment in capital goods and expanded production facilities means that business will higher more labor and produce more and less expensive goods, which raise everyone standard of living, makes us all richer and increases the State’s rate of economic growth. Less investment means that’s the states economy will grow slower and that their will be fewer new jobs. Indirectly the Gross Receipts Tax will hurt investment because it will discourage companies that are not based or do not currently directly do business in Illinois from investing in the state. The reason is that companies base investment decision based off what the expected rate of return on their investment would be in that state compares to what would be earned in other location and the Gross Receipts Tax would reduce what companies would be able to earn on their investments in Illinois and make over place more competitive when it comes to attracting business investment. Which is another reason that the Gross Receipts Tax is just plan bad.

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