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Illinois House overwhelmingly rejects business tax proposal

Thursday, May 10, 2007

The Illinois House overwhelmingly rejected the idea of a massive new business tax Thursday, dealing a potentially fatal blow to the plan and creating more uncertainty about how to balance the state budget.

Not a single lawmaker voted for Gov. Rod Blagojevich's $7.6 billion tax, while 107 opposed it in a test vote meant to reveal whether the plan had any support.

The complete rejection left lawmakers wondering where else they could find money for schools, health care, transportation and the state's many other needs.

Raising income and sales taxes are two options, although Blagojevich has promised to fight them relentlessly. Expanding gambling and cracking down on companies that avoid paying income taxes are other options mentioned by lawmakers.

The vote was on a resolution sponsored by House Speaker Michael Madigan, D-Chicago. It asked House members whether they would be willing to support the "gross receipts tax" on business transactions.

Blagojevich sought to minimize the vote's impact. Beforehand, he suddenly asked lawmakers to vote against his plan as a signal that they think it's too soon to take a firm position.

Lawmakers of both parties scoffed, calling the request an attempt to put a positive spin on what would otherwise have been a clear-cut defeat. Only one lawmaker, a close ally of Blagojevich, suggested the vote was not a referendum on the tax itself.

Republicans displayed signs saying "'No means no,' governor!"

"This probably wouldn't have gotten 20 votes anyway," said Rep. Marlow Colvin, a Chicago Democrat and chairman of the House's black caucus. "The governor and those folks aren't stupid. They knew it was going to fail miserably."

Madigan for the first time took a clear public position on the tax, which would be the largest in Illinois history. He called it a regressive tax that would hurt the poor and damage the state's business climate.

Still, Blagojevich said he is sticking with his tax proposal and can pass it despite the "ups and downs" of the legislative process.

He renewed his vow to veto any income or sales tax increase.

"We're not going to raise taxes on people on top of high gas prices and on top of electric bills that people can't afford to pay," Blagojevich said.

His gross receipts tax would apply to business transactions. Basically, every time a company took in money, it would pay a small share to the state.

Companies with under $2 million in annual revenues would be exempt. The first $5 million in revenues for larger companies would not be taxed. Blagojevich's office says the result is that 90 percent of Illinois businesses would pay nothing under the new tax.

Blagojevich wants the money, along with $1 billion from a new payroll tax, to pay for programs that would ensure everyone in Illinois has access to health insurance. It also would provide more money for schools and $1 billion in local property tax relief.

Business groups predict it would force them to raise prices or cut jobs. Some advocates for the poor argue it would be a bigger burden on the needy than the rich. Lawmakers are nervous about supporting such a large increase.

The House heard eight hours of testimony on the tax Wednesday, including a personal pitch from the governor. Blagojevich spokeswoman Abby Ottenhoff said the hearing produced good questions and suggestions, so a test vote shouldn't have been taken until the administration had time to respond.

Madigan said he would meet with House Democrats next week to consider other revenue possibilities. He would not answer reporters' questions after the debate.

Rep. Frank Mautino, D-Spring Valley, said he expects Madigan's staff to lay out the state's many expenses and the size of the tax increases that would be needed to pay them. Then Democrats will attempt to reach some consensus on what they support.

Mautino said he sees general support for an income tax increase, even if it means a battle with Blagojevich, so long as the money is used for schools and other long-standing needs.

"I do believe the will is out there to increase taxes. I just don't believe it's there to create new programs with that money," Mautino said.

Another possibility is passing a budget that holds spending at current levels, which would mean dropping the health insurance programs Blagojevich has proposed.

Senate President Emil Jones, D-Chicago, also backs the gross receipts tax, although his chief priority is education funding, not health care. After the House vote, Senate Republicans called on Jones to conduct a vote in the upper chamber so the tax could be defeated once and for all.

He ignored the request and challenged Republicans to spell out what tax proposals they'd be willing to support. He later told reporters he doesn't consider the tax dead yet.

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The resolution is HR402.

(Copyright 2007 by The Associated Press. All Rights Reserved.)

(Copyright ©2014 by The Associated Press. All Rights Reserved.)

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