Politics

Blagojevich Fights For Gross Receipts Tax

At State House Hearing, Governor Says Sales, Income Taxes Won't Be Raised

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SPRINGFIELD, Ill. (CBS) ― Gov. Rod Blagojevich warned lawmakers Wednesday that he will never agree to raise income or sales taxes, so the only way to come up with more money for schools and health care is to approve his plan for billions in new business taxes.

Speaking to the Illinois House, which had gathered for a rare all-day hearing on the tax plan, Blagojevich did his best to slam the door on raising other taxes as an alternative to his plan.

As CBS 2 Political Editor Mike Flannery reports, the governor took to the House floor to defend his proposal for the largest tax increase in Illinois history.

"I will not raise taxes on people. I won't do it today. I won't do it tomorrow. I won't do it next week, next month, next year," Blagojevich added. "I believe it's wrong and this is not an issue I'm prepared to horse trade."

He added later: "I oppose an income tax and a sales tax. If you pass it, I won't sign it. If you pass it, I will veto it. It's an unfair burden on people. It's regressive, and people already are paying too much."

The Chicago Democrat also offered a grim picture of what might happen if lawmakers do nothing to increase state revenues. Spending would have to be cut by $1 billion, he said.

"It means cuts in education and health care and police protection. It means cuts in mass transit. It means cuts in funding roads and bridges -- the sorts of things that matter to people," he said.

Blagojevich even warned that uniforms for high school football players would be threatened, a claim that prompted hoots and calls of "Come on!" from the audience.

"The choice is really do we do this or do we do nothing," Blagojevich said. "And a do-nothing budget is a do harm budget. School teachers may be laid off, football teams may not get uniforms for their high school football games because we don't have the money that we ought to have for our schools."

As the legislators' loud groans indicated, the governor encountered hostility, with some accusing him of spurning all compromise.

"You say, 'well I'm here to compromise, but the only thing I'll talk about is the GRT,'" said Rep. Lou Lang (D-Skokie).

"Now, if you guys have ideas, you have some alternative ideas, I'm happy to hear 'em," Blagojevich said. "The only one I'm taking off the table is the income tax or sales tax on people."

Predictably, union leaders spoke for the governor's plan, business leaders against it. Even before he left the House chamber, the governor heard his own lieutenant governor rip the gross receipts tax.

"Ben Franklin did not say that it's inevitable to be taxed to death, and that is the problem we have here today," said Lt. Gov. Pat Quinn. "It's a soak-the-middle-class tax, in my opinion."

The governor's 22-minute address represented an important chance to sell skeptical lawmakers on his plan for a new $7.6 billion tax on businesses' gross receipts -- the largest tax increase in state history.

The proposed gross receipts tax would be based on total sales figures – regardless of whether the companies make profits. Blagojevich hopes to use it to help fund a plan for health care assistance for all those who are uninsured.

House Speaker Michael Madigan, D-Chicago, announced that the House will vote Thursday on a resolution on whether the members support or oppose the tax.

"Are you for or against the imposition of the gross receipts tax in the state of Illinois? And that resolution will be called before the House of Representatives tomorrow," said House Speaker Michael J. Madigan (D-Chicago).

The plan has gotten a cool reception since Blagojevich unveiled it in his March budget address. Blagojevich has faced sharp criticism for the plan from several leaders, including Madigan, House Republican Leader Tom Cross, and Mayor Richard M. Daley. Lt. Gov. Pat Quinn has also come out against it.

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 to the needy than the rich. Lawmakers are nervous about supporting such a large increase.

But the tax also has support from some powerful groups, including teachers. Members of the Chicago Teachers Union say they are in favor of any tax plan as long as it brings in money for education. They headed down to Springfield on buses Wednesday morning to show support from the governor's plan.

A majority of the House has already signed up to co-sponsor a resolution rejecting the new tax.

Madigan convened the "committee of the whole" so that everyone in the chamber can hear both sides of the tax debate and ask questions.

"I hope by the end of the week it will be apparent to everyone that the gross receipts tax is a terrible idea," Douglas Whitley, president of the Illinois Chamber of Commerce, said Tuesday. He was to speak at the Wednesday hearing.

In the Senate Tuesday, the Executive Committee approved a new version of the gross receipts tax. The revisions would raise the top tax rate to 2 percent, from 1.85 percent, and give smaller businesses a credit for everyone they employ.

The administration says the effect would be that companies with less than $5 million in revenues -- more than 90 percent of all businesses -- would pay no gross receipts taxes.

Blagojevich wants the tax, along with an additional $1 billion tax on payrolls, to pay for a major expansion in health care. The state would create several programs to ensure that everyone in the state has access to some form of health insurance.

The governor says he wants to enact the gross receipts tax to take the burden off taxpayers and force major corporations to pitch in.

"They are not paying their fair share," Blagojevich said. "They are avoiding their responsibilities to fund health care, to provide funding for our students, to pay for the police protection that keeps all of us safe, and to pay for the things that government is required to do to solve problems for people."

The tax would also pump billions of dollars into schools and provide money for local property tax relief.

Madigan has said a tax hike will still be necessary.

"I think that when we get down to budget-making that a majority of the legislature is going to recognize that we need a tax increase," Madigan said last week.

Right now debate on the vote is expected to start around 2 p.m. Thursday.

The governor's spokespeople are insisting that no matter how the House votes, the issue will not be dead. He will keep the general assembly in session until the plan is passed.

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