Tax Development Mar 09, 2007
During his 2007 budget address on March 7th, Governor Blagojevich announced his intention to impose new taxes on businesses, estimated to raise $7 billion, to fund a comprehensive health care plan labeled “Illinois Covered.” Effective January 1, 2008, the Governor is proposing a new gross receipts tax similar to Ohio’s Commercial Activity Tax. Under the proposed plan, all service businesses would pay a 1.8% tax on receipts. Manufacturers, wholesalers, retailers, and construction firms would pay a 0.5% tax on receipts.
Some businesses would be exempt from the tax, such as businesses with less than $1 million in gross receipts. Additionally, export sales and sales of food and drugs would be exempt from the tax base. Certain industries would also be exempt, such as insurance companies and gaming establishments. The Illinois Corporate Income Tax would be phased out, and a credit mechanism would be created to prevent double taxation.
In addition, a new payroll tax will be levied on businesses at the rate of 3% of all Illinois wages effective July 1, 2008. A credit against the tax will be available if the employer can demonstrate that the employer’s health insurance costs exceed 4% of wages.