Friday, March 23, 2007

More Oppotion to the Governor's Tax Hike and the Payroll Tax

There is more opposition coming out against the Governor’s tax increase, with Lt. Governor Pat Quinn, Comptroller Dan Hynes and State Treasurer Alexi Giannoulias have all come out against the tax increase, what makes this interesting is that they are all Democrats and that the Democratic Majority leader of the Illinois State House of Representatives has also made negative comments about the Governor’s plan. So it seems that Governor Blagojevich can not even get the leaders of his own party to sign on to his tax hike.

The other part of the Governor’s tax increase that has been largely ignored by the attention that Gross Receipts Tax has gotten is his call for a 3% payroll tax. A payroll tax is a tax that is placed on companies based on the number of employees they have and how much they pay those employees. So under the Governor’s tax, a company would have to pay 3% of the salaries of each employee they have to the State Government. This tax like the Gross Receipts tax would be bad for the states economy as a whole and bad for workers. The payroll tax comes an extra cost that is add to business when they higher more employees, so the cost of an employee that has a salary of 60,000 dollars a year would be $61800 a year, the cost of the salary plus the tax, assuming everything else is held constant. In reality part of the tax will end up being paid by the companies employees throe lower salaries, for example that 60,000 dollar a year employee might end up being paid only $59100 a year if half the cost of the tax is passed on to the employees. By raising the cost of hiring workers, this tax would lead to fewer new jobs being produced in the state of Illinois each year as labor would become more expensive. For example if a company has a hundred employees with the average salary of 40,000 dollar a years and assuming they pay half the cost of the tax, or 1.5, that company would end up paying 60,000 dollars a year in payroll taxes, or more than the price of one more employee. A company with the same features but with a 1000 employees would pay $600,000, or enough money to pay 15 new employees.

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