Dan Pink had this interesting fact on his blog a while back.

Today's Washington Post reports that "married couples with children now occupy fewer than one in every four households -- a share that has been slashed in half since 1960 and is the lowest ever recorded by the census."

What's more the demographics of wedlock are changing. "As marriage with children becomes an exception rather than the norm, social scientists say it is also becoming the self-selected province of the college-educated and the affluent. The working class and the poor, meanwhile, increasingly steer away from marriage, while living together and bearing children out of wedlock."

Long term I think this is going to be huge politically, between the aging of the boomers and the other changes (people not getting married but living together and having kids). What the impact is I am not sure...

OneMan

There was a call from Zorn for questions about the new budget stuff, so here are some of mine.

Ok here are my questions. A lot of these have to do with the 'export' exemption.

1) Why not fix the current system if that system is broken?

2) How are services provided by in-state providers to customers who are out of state and in state to be taxed? For example lets say my firm does consulting work for a company that has an HQ in Illinois but the computer server we do work on is in Iowa (is that an exported service or not). Second example, I charge people to use a website to manage fantasy football teams, do I export a service just to users who give an address outside of state?

3) Does the state feel this will reduce capital spending by business? If not, why not. If so by how much?

4) If I sell parts to a company is the location I ship the parts to that determines if the parts are exported or where the parts are used?

5) For a car made at the Ford plant in Chicago does the tax just apply to cars delivered to dealers within Illinois?

What % of the corporations referenced that pay no taxes LLCs?

Thanks

OneMan

From Crains via Rich

House Speaker Michael Madigan offered a new twist in the electric rate debate Tuesday, proposing that Illinois get into the electricity business to help cash-strapped consumers.

Madigan, D-Chicago, introduced a measure to create a not-for-profit Illinois Power Authority that could buy, generate or sell electricity. Madigan spokesman Steve Brown says that setup could spur competition to drive down electric rates.

Yeah because the state needs to get into the power generation business. Because you thought it was hard to site a powerplant before, just imagine when the state runs it. Also I don't see how this has any impact for at least 10 years.

OneMan

Some more on the 3rd Ward race, was driving in some other parts of the ward it was about 4 X1 Kifowit signs over Nesbitt. But I can now say I have seen a Nesbitt sign outside of Hometown.

OneMan

Getting really local here for a second. We have a race in the third ward of Aurora and one of the candidates lives in a subdivision where you see a lot of his signs, however outside of the subdivision you don't see any of his signs. Is this tight of a focus a good idea? I am looking forward to looking at the D-2's in the race when it is over (or before if anyone has to file). However Jim Nesbitt did provide a party affiliation even though it is a non-partisan race.

The beacon also had a bit about technology in the third ward race. FYI, most packages will tell you what party's primary ballot you pulled in primaries. I would have to question the tactical wisdom of sharing how you are using technology before the election. Yeah it gives you some credibility but it also gives others some insight that does you no good, it also makes people a bit nervous about what you know about them.

OneMan

Crain's had an interesting quote about the GST which led me to the web site of N’Digo Magazine. Where the publisher had not only a good explanation about the tax but what it means in her opinion.

If this tax is passed in its present state, it is the end of the entrepreneur. The concept of small business needs to be reconsidered. A consideration should be given to grading business — small business, entrepreneur, corporate, and mega businesses. The margins of these businesses are drastically different. It is one thing for the Wal-Marts of the world to have a 5 percent margin, and another for the small grocer to have a 5 percent margin.

Entrepreneurs, as they exist in the State of Illinois, are on the way to extinction if this tax is enforced as it is currently stated. By the time you pay income tax, state tax, federal tax and payroll taxes, it just isn’t worth it. The entrepreneur’s operation is stifled, and literally the various governments become hidden business partners that most do not want.

Go read the whole thing, it is quite good and offers a decent explanation.


OneMan

A recent outbreak of salmonella in Kane County might be related to illegally manufactured cheese according to the Beacon News.

Not to go all Dave Barry but Illegally manufactured cheese would be a great band name.

OneMan

I have seen some items that the Wachowski Brothers are going to be making a live action (as much as a Wachowski Brothers movie can be) version of Speed Racer, with the guy from The Girl Next Door as Speed and Vince Vaughn as racer X.

Two things pop into my head, first that spin thing they did with Speed jumping out of the Mach 5 in the opening should be interesting for the Wachowski's to do and secondly, it better have Chim-Chim (yes he has his own wikipedia entry).

Actually Wikipedia has some interesting history about the movie, in 1994 it was almost made with Henry Rollins (now that would have been entertaining)


OneMan

Some more on taxes....


Jack Lavin, director of the Illinois Department of Commerce and Economic Development via the PJ Star.

"While (small businesses) paid more, the wealthiest corporations in our state have paid less and less. Over 50 percent of (Illinois) corporations don't pay a dime of taxes," he said.

Well Jack, my first question is how many of those corporations were LLC's, since LLC's generally are treated as pass through organizations for tax purposes. That is the revenues are treated as income by the owners/shareholders and any earnings (after deductions) are treated as individual income for tax purposes. How many corporations are there in Illinois, what are the revenues on average (as reported to the state) of those that don't owe tax?

I guess the question I haven't heard an answer for is why these corporations are not paying any taxes. Is it due to things in Illinois tax law such as differences in how things can be deducted over federal tax law? Is it a rate thing? Is it fraud,? If the tax system doesn't work then why not fix the existing system. Don't create a new one. If your leg hurts you try and figure out what is wrong with your leg, not start walking on your hands.

The problem with any change be it a gross receipts tax or anything is companies can and will find a way around it. It could be getting the law modified to their advantage or becoming a host of entities that each take in less than 1 million dollars. I still think when all is said and done if this happens the biggest winners are not going to be school kids, but accountants, attorneys and lobbyists.

Oneman

The Beacon has a story about a reception honoring Lillian Perry for her services to the residents of Aurora. All I have to say is, right on. I have had the honor of working some elections with Ms. Lillian during the counts and our discussions were always interesting and informative (at least for me). The city is blessed to have a resident like her.


OneMan

I was at a Jazz show at the CSO last night when one of the performers recognized and pointed out that Louis Farrakhan was in the audience. There was some applause and some silence when she shared this information.

Just wanted to get that out there before Sneed did.

OneMan

I think one of my ReplayTV units died yesterday. I haven't had a chance to try all of the tricks to bring it back but you don't know how much you miss a DVR until it's gone.


OneMan

I was driving in Hometown today (taking a new short-cut) and I had noticed these Jim Nesbitt signs on what appeared to be unoccupied residences in Hometown.


He is from Hometown and there are a ton of his yard signs in front of home in that subdivision. So I guess I am not that surprised.


OneMan

The Return of OneAdMan....

Basically two ads that show that $1,000,000 in gross revenue does not make you a big business.


"Big Business"

Man Walking around a small machine/job shop.

Man: We make parts for the auto industry, we make a couple of pieces that go into seat belts for a major US Automaker. I have about 12 men and women working for me, from the folks who run the punch presses (points to punch press in the background) to the guy who drives the forklift to help bring the steel in and the put the finished parts on the truck. I pay a fair wage offer some benefits. I do ok, I am not getting rich, but we have built something here, a place for folks to work so they can make a living, have a nice place to live, send their kids to school, the whole American dream.

Video continues of man walking around a small plant.

But since my gross revenue is over $1,000,000 , that's how much money I take in, before I pay a single employee, or play for a single roll of steel, I now need to pay a 1.8% tax on that money, heck I spend 70% of my gross revenues on raw materials and another 20% on salaries and benefits. So that leaves me with 10%, but I haven't paid my electric bill yet or my property taxes on the plant, which trust me are a lot more than $150. When all is said and done that leaves me with about 6%, not the state wants almost a third of that. Hard to expand when almost a 1/3 of your profits go to the state.

Maybe my brother is right, I should hang it up and sell the equipment. It's getting to the point that it isn't worth it.


"Small Town Practice"
Doctor:
There are four doctors in the practice now, we have 7 nurses,
a receptionist and 2 people who do nothing but deal with insurance companies all day. What I get paid to see a patient is set by the insurance companies not by me, now the state wants to charge me a 1.8% tax on my gross revenues. That's the amount of money we take in, that's before I pay a single nurse, buy a single band-aid (video of doctor putting a bandage on a cute child), before we pay the mortgage or property taxes on this place.
However everyone who supplies me, from the company that sells us band-aids and crutches to outfit that washes our scrubs is going to have to pay this tax too, odds are they will pass the costs along to us as well. So it's going to end up costing us more than 'just 1.8%' and we can't pass the costs along. So what can we do, I still have to pay my medical school loans. I guess I can try to see more patients, spending a little less time with each. But that's the reality. I am not Wal-Mart, I am just one doctor in a small practice who is going to have to figure out how to make it work.


More to Come


OneMan

Illinois Resident who powers his car using vegetable oil gets a visit from Illinois Department of Revenue about back taxes he owes in using the recycled vegetable oil as a fuel. The state wants to charge him motor fuel tax and make him get some permits.

David Wetzel wonders why hybrid cars, which rely on electricity and gasoline, are not taxed for the portion of travel when they are running on electrical power. He said he wants to be treated equally by the law.

Don't worry David, they will... Got to get those taxes.

I guess Rod is in favor or gas alternatives as long as the state gets it's cut.

OneMan

Some more impacts and questions about the Gross Receipts Tax

From the PDF (page 32)

Alternative taxes - Gaming and insurance activities will be exempt from gross receipts taxation. Insurance products are subject to retaliatory taxation, and gaming activities are subject to other existing taxes, so that the receipts derived from these activities will not be subject to gross receipts tax. State tax rates on riverfront gambling will be modified, and a franchise fee assessed on license renewal. In addition, the taxation of utilities will be amended to clarify its treatment under the gross receipts tax.

The Lottery Sale
So the first thing that comes to mind, is the state lottery considered gaming? Is a store that sells lottery tickets subject to the tax if their total receipts are over $1,000,000. Would the party that leases the lottery be subject to the tax as well. This is going to have an impact on what someone is willing to pay to lease the lottery.


Is it software or a service and regardless how do I figure out what is exported?
Now a case where it gets more than a bit confusing, lets say for example you are 37 Signals a company that has software that you pay for by the month to use. Is that a service taxed at 1.8% or does it fall under the 0.5% rate? If the party paying to use the software is from out of state is the service considered an export then and if so do they not have to pay tax on that even if the hosting machine is in Illinois?

What if I provide services to someone like United but send my consultants out to Denver to do the work, is that an export? How about if my consultant works from his basement but remotes into a server in Cleavland is that an export? How about my consultant who works from Wisconsin and remotes into a server in Chicago?

Home Sales:
First would new construction that is sold be subject to the 0.5% tax, I am guessing it would. However that is just the tip of the tax iceberg on a new home. If I use subcontractors, I am guessing they would be subject to the services version of the tax if I am not buying materials from them and their annual revenue is over $1,000,000 so now my subs are facing a 1.8% tax on labor.

Then I go to sell my house later, Casa Du OneMan does not sell for $1,000,000 so I don't have to pay the 0.5% but if the broker I use grosses $1,000,000 a year they would have to pay, right? That's the broker, not the agent.


Delivery Service:
So if you are UPS how does this work. It's a service, so you are subject to the tax on all intrastate revenues (I ship from Aurora to Springfield), however how about interstate, is only part of the revenue subject to the tax or just all shipments that originate from Illinois. If the shipment is from out of state how does that work, is it just the intrastate portion?

For Profit Education and Training:
If I attend a Microsoft training class in Springfield that is taxed at 1.8%, it's a service right? What about tuition at a for profit college like DeVry or the University of Phoenix is that a taxable service? What if I attend an on-line seminar (that costs money) is it my location that determines if it is taxable?


Still more questions to come, I just hope I am not the only one asking....


OneMan

Well the Tribune has the budget document as a PDF

Reading the document, it appears that medical practices with two or more doctors will be subject to the tax and that the food and pharmaceuticals exemption only applies to Illinois Residents.

Starting around page 31 of the PDF there is some details about the Gross receipts tax

The gross receipts tax meets each of these principles
of tax fairness. The gross receipts tax would apply
only to businesses that have revenues in Illinois over
$1 million per year, and will be assessed at only two
low rates:
• A 0.5 percent rate for all agriculture, mining,
manufacturing, construction, wholesale and retail
activities; and
• A 1.8 percent rate for all services activities.
Manufacturing, wholesale and retail industries will be
assessed at a lower rate to offset the impact of
multiple levels of taxation on the production of
finished goods. Taxation of services will be assessed
at a higher rate to take into account the current
narrower base of taxation of the service industry.

Then there is this little nugget which I think is huge

Essential products and services - Given the historic policy of maintaining access to food and pharmaceuticals, the retail sale of food and pharmaceuticals to Illinois residents will not be subject to gross receipts tax. In addition, state Medicaid payments to practitioners will also be exempt from the gross receipts tax, providing an incentive for doctors and dentists to enroll
Medicaid-eligible patients.

-- So we are going to start taxing health care delivery if the provider is part of a practice that generates more than $1,000,000 in revenue. So any decent size practice with even two doctors or providers will likely be subject to the tax at 1.8%. Also the 'exemption' is just for medicaid, not for KidsFirst, the two new plans or medicare. So we are going to tax providers, who really have no option to pass the cost along to their customers because their rates are in large part dictated by insurance reimbursement. So if you see a doctor who is part of a practice with two doctors odds are the state is now going to tax them, tax them with a tax that can not be passed along to you.

Also arguing that the Medicaid exemption is a incentive to enroll Medicaid-eligible patients does not take into account that the state is so slow to pay these claims now, that 1.9% would not even cover the cost of money for the time it takes the state to pay.

Also it says ' pharmaceuticals' not medical devices, so glasses (taxed), wheelchairs (taxed), insulin pumps (taxed), replacement hips (taxed) if I understand this correctly, a big if I grant you.

Finally the language (emphasis mine)
"Given the historic policy of maintaining access to food and pharmaceuticals, the retail sale of food and pharmaceuticals to Illinois residents will not be subject to gross receipts tax."

So if you sell someone food or pharmaceuticals you have to ask them if they are a resident? That's the way I read it, if a drug store in Calumet City fills a prescription for someone from Indiana it is subject to the tax. Same thing if someone buys a burger in downtown Chicago, oh you are from out of state, I have to pay tax on that. That would be a management nightmare.

Much more to come....

OneMan

You want a tax plan.... Every tax payer that agrees to pay 1% more in income taxes for the next 10 years, locks in that rate for their kids. So when everyone else has to pay an arm and a leg to retire all this debt we are going to end up with some folks who parents had the foresight to pay extra now will be able to pay less later.

(Yes at some level I am kidding)

OneMan

We are going to take out more debt to try and fix the pension system. From Crains

Aides to the governor said Monday he wants to issue $16 billion in so-called Pension Obligation Bonds, a move similar to a $10-billion POB four years ago. The proceeds would go to the state’s employee pension funds to invest in the stock and bond markets.The move effectively is a bet that financing costs, estimated to be about 5.8%, will be less than can be earned by investing in the markets.

Because the long term answer to the pension funding issue is to make it our kids proble. Is this administration ever going to face the issues related to pension debt or will it borrow and recalculate so it can spend the money on 'cool stuff' instead. At what point to we finally say enough to debt in this state. Also what happens if the market does not average 5.8% over several years?

But wait, we are going to sell the lottery to help the pension system as well. There are no risks with that plan.

So let me get this right, more debt that the state in the future will have to deal with, a lottery in private hands that the state will have to let operate for decades to come. That's leadership? Pushing the problems down the road? Heck why not just take out even more debt and just double state spending for a couple of years, the kids will have to pay for it, not us.


OneMan

So we are now doing the Lord's work...

"If you're sick and your next-door neighbor is sick, but you can see a doctor and he or she can't, that isn't how God intended it to be," Blagojevich said from the front steps of the Fourth Presbyterian Church, where he attended morning services with his wife and two young daughters. "Everyone -- everyone -- should have access to affordable, quality healthcare."

and

"We are all God's children," the Democratic governor said. "He intended for all of us to have an equal opportunity to live good, quality lives and to have equal opportunity to have access to things like fundamental quality health care."

So you want to bring God into this argument, eh. Then I have a few questions...

• Do you think the Lord wanted you to raise over 20 million dollars and spend over 16 million of it running for Governor instead of spending it to help the poor? Is that what you think God intended?
  
• Do you think the Lord is happy with the way you seem to take forever to address clemency requests? Is your backlog what God intends? Is this a way to treat God's Children?
  
• Do you think the Lord is happy with the way education is funded in this state, is that moral? Is the poor education kids get in this state what God wants? Remember you have had 4 years now to do something about it.
  
• Do you think the Lord is happy with the way we depend on the lottery to fund education. Is that what God intended, to pay for education with taxes from games of chance and state run games of chance?
  
• Do you think the Lord is happy with the death penalty in this state?

I have to agree with Zorn on this, we can have this debate without trying to figure out what's God's will on the subject. I even have to agree with Arch on this, you can use your faith as a guide to say we need to do this, but not as the reason for doing it. You can make access to health care a priority based on a moral argument you don't need to drop 'God's will' into the mix.

If you really feel this is what God's will is, then have the courage to ask the taxpayers of Illinois to pay for it, that would include you Governor. It's easier to talk about doing God's will with other people's resources.

The problem is you can't just drop God into an argument when it works for you and ignore him the rest of the time when what his will might be does not match your will is.

OneMan

New Taxes or the Lobbyist Employment Plan of 2007.

First let me say I have nothing against lobbyists they serve a role in the system and a role I think needs to be served. That is to push forward the agenda of a group and as long as it stays legal and ethical there is nothing wrong with that.

The development of the new gross receipts tax is going to be really entertaining to watch as every group under the sun is going to work to either get out of the tax entirely at best or have their tax rate defined as low as possible. Since the system is going to have different tax rates as well as different thresholds for payments based off of industry every industry is going to have a very real interest in protecting themselves.

It will be a really good chance to see when all is said and done, who's efforts to mitigate impact were the most effective. Once you see who was effective in mitigating impacts you will be able to look at what methods they used to be successful. Was it using the best lobbyist, did having members of the industry/trade group call their local state reps work, did grassroots or astro-turf campaigns help?

Developing a effective plan for mitigation and implementing it and then being able to demonstrate the success is going to help some lobbyist firm(s) for years to come. Someone is going to be in a position to point out how the widget sellers avoided dealing with the tax and how they helped that happen.

One thing I would suggest someone try to push is a requirement that the Department of Revenue break down how much money is generated by each industry from the gross receipts tax. Also how many companies in each industry end up having to pay the gross receipts tax instead of the standard income tax. I would also hope that the legislature asks for estimates from the Department of Revenue on how much the expect to collect from each industry group and then look at how much the actual numbers end up being.

Looking forward to the show.

OneMan

Taxes, Taxes and More Taxes.

First the 3% insurance tax. Ok as always OneMan has a bunch of questions.....

From the press release.

Any small business with 25 or fewer employees that agrees to subsidize at least 70
percent of its employees’ premiums may purchase group coverage through Illinois
Covered Choice at cheaper prices than they currently get for comparable good quality
coverage.

Cheaper guaranteed? I wonder if that's the case. Also is that 25 employees period or 25 full timers?

Secondly

Consumers need and deserve more accountability, transparency and better information to
make informed choices when addressing their health care needs. The State will build
upon recent efforts to improve patient safety, promote electronic medical records,
improve access to information on quality of care and reduce administrative costs.
Everyone will benefit from these improvements.

How will the state 'build upon' recent efforts? I have had some involvement in electronic medical record systems and that process is costly, disruptive and time consuming for a practice of any size to implement. Is the state going to offer a tax break, offer better payment schedules?

The big question here kids is going to be if the state is going to do a better job paying the bills of the new plans on time than they do the current plans. As we have seen with Kids First and other state medical programs, it can take the state forever to pay. Leading providers to either opt out of the plans or face financial hardships if they chose to participate. Are things going to be different this time?

OneMan

Well off the normal subject for a minute. A couple of resturant reviews.

First 2Toots Steam Whistle Grill in Downers Grove, OneMan took OneSon (he will be 6 in a couple of weeks) there for lunch on Saturday, a bit of a crowd but the wait wasn't too bad. Basically this restaurant delivers your food via toy train. A lot like the Choo Choo in Des Plaines.

The food was good and the shakes were good, in fact OneSon wanted me to give them $1,000 for the shake it was so good. It was good, not $1,000 good but good all the same. Also unlike the Choo-Choo is Des Plaines all of the seats were on the track in some way. All in all a decent value and a good place. We will be back and I would recommend it to others.


Secondly, Ci Ci's Pizza Buffet. Yes I know you are seeing the word buffet and you are rolling your eyes. But I have to say that their pizza is amazingly good for the price. It's in expensive enough (around $5.50 for an adult) that you don't feel you need to eat a ton to get your moneys worth. I have to say the pizza was really good and they had a big variety almost California Pizza Kitchen-esk in some ways. Also the location we went to in Plainfield on Rt 59 has been open for over a year but the folks working there had the sort of 'just opened' enthusiasm that you really don't see much anymore anyplace.

OneMan

I am glad to see Sneed is on top of the breaking news....

$$$$$: Sneed has learned Gov. Blagojevich and his staff are considering proposing a Gross Receipts Tax.
• Translation: The tax would be levied against all Illinois businesses, including law, engineering and architectural firms and other service delivery entities.
• The hit: It's estimated to generate $5 billion.
• The haul: Most of the proceeds would go to fund education and address the long-term state pension shortfall.
• The chance: Such a tax initiative will likely face hard scrutiny from the Legislature . . . and potentially the courts.

Really, Mike. Where could you have heard that? (FYI, the last one is from her own paper)

OneMan.

You know I may be a Republican but man....



He makes a valid point.

OneMan