The Daily Parker

Politics, Weather, Photography, and the Dog

Gov. Blagojevich's gross-receipts tax proposal

My accountant, Linda Forman, sent me this note on the Illinois Gross Receipts Tax proposed by Gov. Blagojevich. Now, I voted for the man twice, and I voted for my state senator (who also supports the proposal) twice, but if they go ahead with this proposal I'm not sure I will continue to support them:

The Gross Receipts Tax Proposal
There are thoughtful people in the political arena mulling over the proposal of a gross receipts tax and the prospect of health care coverage for the uninsured employees in Illinois.
While debate goes on, I would like you to visit with a company or two that could be a composite of many small business clients.
The Service Company
Currently, a service company employs 40 people and provides health care and life insurance, fringe benefits and a generous profit sharing plan.
It funds the fringe benefits and profit sharing with some of the $300,000 in profits it realizes on its $6,000,000 in service sales.
Oh, did I mention that the business owners would like some income each year from their capital investment in the company. That usually is a 9% return, or $90,000.
So the $300,000 in yearly profits is put to good use – excellent employee benefits and a reasonable rate of return on capital invested. This is a growing company. It pays taxes on its net income, pays various business taxes to the state and community and keeps 40 people on the tax rolls. It also uses the services of other Illinois businesses, contributing to a vital economy.
Under the gross receipts tax proposal, the $6,000,000 gross income will be taxed to the tune of $300,000. So there goes the profit that funded employee retirement plans and kept investors happy. BUT now, other businesses that provide service to this company have also raised their rates to cover the gross receipts tax, so this company is now operating at a LOSS. And it has lost its competitive pricing edge.
When companies operate at a loss, their usual options are:
  • Lay off employees
  • Cut benefits
  • Move to a more business friendly area
And this helps Illinois’s economy HOW??
  • More unemployment compensation payments.
  • More uninsured workers? Loss of tax revenue from income taxes.
  • Loss of a productive business if it moves out of state.
Raising “prices” may work for government, but in this global economy, it is often NOT an option.
The Widget Company
The Widget Company competes with other widget makers, striving to make a good quality product at a competitive price. It has made a commitment to stay in Illinois, even though the state has hiked fees in the past. The corporate income tax is 7.3% of net income, certainly a significant tax but bearable, since net profit is only 4% of gross receipts of $6,000,000; the tax is approximately $17,000.
The company’s margins on its product lines cover the administrative and sales overhead. If it had to raise prices 5% to cover the gross receipts tax, it would lose business in a market where customers are swayed by even the slightest rise in price.
If the company has to pay a gross receipts tax of 5%, it would have to pay $300,000!! But its net profit is only $240,000 so it would be $60,000 in the hole. This is a company that is going to MOVE out of Illinois to a warmer climate in a state where business is appreciated. What other choice does it have – it can’t pass along the costs to consumers while dealing in a global marketplace.
My thoughts
The gross receipts tax idea is just that - GROSS. It will repel new business and seriously impede current business growth. There has to be an analysis of WHY some large corporations are not paying tax, since the formula for paying Illinois taxes is based on a factor of Illinois sales to total sales. And there has to be a corollary analysis of what other taxes big business is paying to Illinois, since other fees on businesses have risen sharply in this administration.
I have clients who will be severely impacted by a gross income tax - and attempts to remain in Illinois and deal with the tax will only result in loss of jobs and benefits for their employees.
There has to be an intelligent game plan - and we need more information from the governor before we can assess where the issues are.
AND, with regards to an expanded Illinois health care plan, I think a good health plan needs to be national in scope and administered like Medicare - and that the state of Illinois, in its precarious financial position, can't take on health care while it has to correct huge pension and other funding deficits. And given the historically poor reimbursement payment rate and lateness of payment, where will Illinois find the health care providers to accept families covered by the proposed health insurance plan?
Linda Forman, CPA
Evanston, Ill.

By the way, no, Inner Drive Technology is not the service company she mentioned, as much as I might wish for $6 million in revenues.

Update, 8:49 am: Linda adds the following:

The gross receipts tax rate may have lowered in discussions since this was first written, but the concept is still there, along with the health insurance issue. Actually many companies are toying with the idea of dropping their coverage and only paying the state's 3% rate, which will cause a larger population to be in the state's insurance fund - another negative result of this proposal.

Unhappy anniversary

Four years. We weren't even in World War II for this long. I can't add anything really profound to the debate, but I will repeat something Garry Trudeau had on today's Doonesbury Daily Dose:

"America has been conducting an experiment for the past six years, trying to validate the proposition that it really doesn't make any difference who you elect president. Now we know the result of that experiment."
—Gen. Tony McPeak (retired), member of the Joint Chiefs of Staff during the Gulf War

I would also like to point out that the recent spate of confessions from people our government has tortured might carry more weight if the men hadn't also confessed to assassinating the Archduke Ferdinand.

Finally, not that this should surprise anything, the New York Times is reporting today the White House watered down government reports to influence the debate on climate change:

In a hearing of the House Committee on Oversight and Government Reform, the official, Philip A. Cooney, who left government in 2005, defended the changes he had made in government reports over several years. Mr. Cooney said the editing was part of the normal White House review process and reflected findings in a climate report written for President Bush by the National Academy of Sciences in 2001.

No more than 672 days, 2 hours, and 44 minutes remain in the Bush Administration.

MSNBC spell-check sadness

MSNBC reported overnight that U.S. troops have entered Sadr City in Baghdad. That's newsworthy in itself, but they added an extra level of irony by running their nightly headline-roundup email through an over-zealous spell check:

U.S. troops enter Sadder City
Hundreds of U.S. soldiers entered the Shiite stronghold of Sadder City on Sunday in the first major push into the area since an American-led security sweep began last month around Baghdad.
http://www.msnbc.msn.com/id/17450016/

Sigh.

How green is my apartment?

At least one of my friends (ND-D) would be proud of me: as of tonight, all 21 of the lightbulbs in my apartment are compact fluoroescent, and in some cases of lesser luminosity than the ones they replaced. All told, if every light bulb in the place is blazing away, I'm still using less electricity than if only my kitchen and bathroom lights were on before replacing the bulbs.

Plus, unless I live here 20 years, it's unlikely any of them will ever need replacing.

It's a little thing, but if everyone did it, we'd use a lot less energy.

Actually, it is easy being green

Princeton economist and New York Times columnist Paul Krugman (sub.req.) points out that serious energy conservation does not equal economic disaster:

[T]he assumption, explicit or implicit, that any substantial cut in energy use would require a drastic change in the way we live...is false. Let me tell you about a real-world counterexample: an advanced economy that has managed to combine rising living standards with a substantial decline in per capita energy consumption, and managed to keep total carbon dioxide emissions more or less flat for two decades, even as both its economy and its population grew rapidly. And it achieved all this without fundamentally changing a lifestyle centered on automobiles and single-family houses.
The name of the economy? California.

About this Blog

I'm David Braverman, this is my blog, and Parker is my 8-month-old mutt.

Here are the main topics on the Daily Parker:

  • Parker, my dog, whom I adopted on September 1st.
  • Biking. I ride my bikes a lot. Last year I prepared for two Century rides but, alas, my gallbladder decided to explode a week before the first one. I might not have a lot to say until later in the spring, but I have big plans in 2007.
  • Jokes. All right, I admit: when I'm strapped for ideas, sometimes I just post a dumb joke.
  • Politics. I'm a moderate-leftie by International standards, which makes me a radical left-winger in today's United States. Less than 701 days remain in the worst presidential administration in history, so I have plenty to write about.
  • Software. I own a small software company in Evanston, Illinois, and I have some experience writing software. I see a lot of code, and since I often get called in to projects in crisis, I see a lot of bad code. Posts in this blog about software will likely be cross-posted from the blog I'm about to start, Inner Drive Software.
  • The weather. I've operated a weather website for more than seven years. That site deals with raw data and objective observations. Many weather posts also touch politics, given the political implications of addressing climate change under a President who's beholden to the oil industry.

This is public writing, too, so I hope to continue a standard of literacy (i.e., spelling, grammar, and diction) and fluidity of prose that makes you want to keep reading.

So thanks for reading, and I hope you continue to enjoy the blog.

Molly Ivins

The smartest person in Texas, Molly Ivins, died yesterday at age 62. She knew Dubya better than he did. She will be missed.

If there was one thing Molly wanted us to understand, it's that the world of politics is absurd. Since we can't cry, we might as well laugh. And in case we ever forgot, Molly would remind us, several times a week, in her own unique style.
[T]here was more to Molly Ivins than insightful political commentary packaged in an aw-shucks Southern charm. In the coming days, much will be made of Molly's contributions to the liberal cause, how important she was as an authentic female voice on opinion pages across the country, her passionate and eloquent defense of the poorest and the weakest among us against the corruption of the most powerful, and the joy she took in celebrating the uniqueness of American culture—and all of this is true. But more than that, Molly Ivins was a woman who loved and cared deeply for the world around her. And her warm and generous spirit was apparent in all her words and deeds.

Bush signs new order to politicize...everything

The President (for no more than 721 days and 13 hours more) signed an executive order that puts a political office in each executive department for the purpose of clearing what the department publishes. In other words, factual reports generated by the government will have to go through a political hack for approval before publication, instead of just being published by the generally apolitical civil service as they are today:

In an executive order published last week in the Federal Register, Mr. Bush said that each agency must have a regulatory policy office run by a political appointee, to supervise the development of rules and documents providing guidance to regulated industries. The White House will thus have a gatekeeper in each agency to analyze the costs and the benefits of new rules and to make sure the agencies carry out the president’s priorities.

Now for the laugh line:

In an interview on Monday, Jeffrey A. Rosen, general counsel at the White House Office of Management and Budget, said, "This is a classic good-government measure that will make federal agencies more open and accountable."

Let's not forget, the Administration wants to reduce the credibility of government. This may be a good way to do just that.

Federal agency white-washes Wikipedia

Via Talking Points Memo, this reminder that on the Internet, nobody knows you're a dog...but they do know what terminal you're using:

In late August, someone with an IP address that originated from the National Institutes of Health drastically edited the Wikipedia entry for the National Institute on Drug Abuse, which operates within NIH. Wikipedia determined the edit to be vandalism and automatically changed the definition back to the original. On Sept. 18, the NIH vandal returned, according to a history of the site's edits posted by Wikipedia. This time, the definition was gradually changed, presumably to avoid the vandalism detector.

People forget about this quite a bit. On the Internet, your browser must send a request to a Web server to get a Web page. In order for the Web server to respond, it has to know where to send the page; ergo, every time you hit a Web site, you tell that site who you are. Wikipedia uses this simple fact to help determine the value of contributions. In this case, it worked perfectly.