Hard Times For Illinois Businesses?

I waited to blog about this until Gov. Rod Blagojevich announced his budget plans yesterday, though he was already hinting about what it involved. It was about what I expected and it is not good.

His budget plan, which is set to go into effect for the next fiscal year, pending approval from the Illinois legislature, calls for what is reported the largest tax increase in Illinois history by implementing a gross receipts tax. This gross receipts tax is the centerpiece of his budget plan, which Blagojevich believes will bring in $6 billion annually. It also calls for an initial outlay of $2.1 billion for health care coverage for the 1 million plus Illinois citizens with little or no health insurance. It also includes spending another $3 billion for education and the construction of new schools.

The budget plan also includes refinancing $16 billion in overdue pension debt with a bond issue paying lower interest.

For starters, there are some good intentions for what this budget tries to accomplish. Improving the quality of education is what I consider more of an investment in our community than some expense. Providing universal health coverage for those that need it helps with the quality of life. Everyone in this day and age should have access to quality and affordable health care. But this budget plan is horrible and will not achieve these goals. Instead, it will probably spill more red ink on the state's books and leave massive underfunded mandates to deal with.

Illinois businesses are already having a tough time in 2007. When the governor was campaigning last year, we already knew he wanted to raise the state's minimum wage. Business have dealt with this before and could do so again. Then at the start of the year, electricity rates skyrocketed well over what AmerenCilco projected it would be. Now Blagojevich wants to initiate a gross receipts tax, where basically the government wants its cut before a business owner can pay for his cost of goods sold, suppliers, overhead and employees. These are all too many hurdles for businesses to deal with in such a short amount of time.

Businesses are a big part of the state's economy. If businesses are strong and doing well, the economy will be doing well. A strong economy means low unemployment and more workers. Tax revenues will increase with a strong economy and accordingly opposite when times are bad. The state budget should be drafted to foster a positive environment to allow businesses, and individuals and families, to do well. It would be in the best interest of the state. However, this mess Blagojevich announced yesterday does not do this. What does he think that companies and businesses do with their money? If Illinois businesses leave the state or become financially weak, the state economy will falter and we'll have more problems because tax revenues will fall, not increase.

Who will get hurt the most from this debacle? Consumers and workers. As the government takes money right off the top, there will be less money for companies to pay their expenses. And companies will first pay suppliers, utilities and such before employees and/or their benefits. To make ends meet, prices will have to be raised, which Blagojevich knows that will just translate to more tax money coming in. Does this man even care about the people in this state? He's been holed up in his Chicago bunker for so long I don't think he knows what it's like to run a business or to be in the real world.

As for taking on these massive spending plans, the state of Illinois is in no fiscal and financial position to do so. As Blagojevich campaigned last fall, he contended that the budget was balanced and all was well. However, that is far from the real truth. The state was not paying any of it's bills and continued holding large amounts of pension debt. Comptroller Dan Hynes, a fellow Democrat, even criticized Blagojevich's actions.

I seriously doubt Blagojevich's plan as announced yesterday will ever go into effect. At best, his short speech received weak support. I think the gross receipt tax will turn out to be very unpopular with the citizens of Illinois and no legislator will touch it. The refinancing of pension debt I think is a quick fix solution that would save some money in interest expense, but it's still debt. I hope he doesn't plan to use that "band aid" for a long term solution.

Common Sense of it All: Many Republicans say that Democrats always tax and spend. Gov. Blagojevich is proving just that.