How Much More Concern For The Children Can We Take?
May 09, 2007
March 8, 1971. Madison Square Garden. Frazier verses Ali. "The Fight of the Century." On April 2, 2007, Gov. Blagojevich used that very phrase to describe the fight he "can't wait to have" with Illinois businesses over his proposed gross receipts tax.
Milorad Blagojevich vs. Illinois Businesses. Sure to blow out the Nielsen ratings.
In March, the governor asked for a 1.8 percent GRT on Illinois businesses, including law firms, to raise money for health-care insurance for sick children. One question I raised was whether the 1.8 percent gross tax would be enough to help all the sick children. More directly, should law firms fear that the 1.8 percent number might rise?
Bad news, Juris Doctors, it has.
Thirty days and one Milorad-Emil amendment later, we're at 1.95 percent. That little .0015 tweak will apparently allow for a billion dollars in property tax relief and "dramatically increase the funding for education," according to Blagojevich. So, apparently, the nudge wasn't just to have an equal offset through property tax relief. The state is taking more.
Let's recap how fast this has happened.
In February 2007, at the request of Illinois Assessor James Houlihan, a company named Program Analysis, Inc., prepared an Analysis of Gross Receipts Tax for Illinois. Called the Plan for Illinois 2007, it basically says that all sectors other than retail would be taxed at 1 percent, and that this would accomplish the tax reform goals.
So in February we're at 1 percent.
Come March, the governor ups it to 1.8 percent.
April, 1.95 percent.
Hard to believe how fast this number has almost doubled. It's happened in a, well, let's just say, a milorad.
Usually, elected officials are very careful about imposing new taxes, wary of a backlash. This one has the governor swishing his hair, drawing the sword, and saying, bring on the fight. Is it a Braveheart complex? No, the fearlessness comes from whom he says the fight is against. In the March 7, 2007, budget address, he made the following statements:
"The corporate business community ... wants me to raise the income tax and increase the sales tax. They want us to raise taxes on people," the governor said.
"I'm going to say again ... I will not raise taxes on people."
Ohhh. He doesn't want to tax people. Just corporations -- which we all know are run by animals. Or bugs.
Does he not understand what a corporation is? He did go to law school. Records indicate Pepperdine.
A corporation is an artificial legal entity created under the laws of a state. (Black's Law Dictionary 340 (1990)). A corporation is made up of a number of natural persons or other legal entities, while having a separate legal identity from them. (Wikipedia -- the handy source for everything). It is a group of people acting as one body. (American Heritage Dictionary).
This leads to one of two conclusions: either Pepperdine doesn't teach Corporations, or the choice to say we are taxing corporations versus "people" is a little political.
Well, then, it must be Pepperdine. There's just no way the governor would not tell people that corporations are ac-tually made up of people, who are alive and pay taxes, if he didn't understand this. So it has to be bad schooling.
While he may not understand that the taxes would actually be paid by people, one poll suggests Illinois residents get it. A March poll by Public Opinion Strategies revealed that only 34 percent of voters support a tax on doctors, lawyers, and other service providers. One reason may be the fear that the tax would be passed along.
Plaintiffs' lawyers could up their cut to 35.28 percent. Or maybe we all put "plus tax" on our legal invoices.
Better yet, maybe we take a cue from the airlines. They clearly identify that extra charge as an "Airport Security Fee." We can add to our invoice: "Healing the Sick Children of Illinois Fee."
This is our moral obligation, you know. That is the stated basis for the governor's pitch -- "a moral obligation." Glad he did, because for a second I thought it was about money.
The bottom line is that approval of the GRT means that millions will be extracted from lawyers and every person who hires a lawyer. How many millions and just how hard our profession is hit depends on how fast this GRT percentage rises. That will depend on what the actual costs are for health care -- something we have only heard about in generalities (a subject for another day).
But with the soaring projections for future health-care costs, "the fight of the century" approach, and demonstrated willingness to raise the percentage at any time, expect the worst.
This could go down as the legislation with the most profoundly negative effect on the Illinois legal profession in years.
But it won't affect people.
