Illinois Gov. Rod Blagojevich proposes a gross-receipts tax as a way of cracking down on large corporations, which, despite high sales margins, pay little or no state-income tax. Blagojevich claims the $7 billion generated by the tax is needed to fund needed education and health-care projects.

But heres the rub: Illinois doesnt have a revenue problem.

The Tax Foundation recently reported that: Illinois has also enjoyed strong revenue growth due to the robust national economy. In fact, the governors FY 2008 budget shows an increase in state general fund revenue of 4.7 billion since just FY 2006. However, the governor has decided not to take advantage of this extra revenue and this opportunity to increase Illinois competitiveness by cutting taxes as so many other states have.

Almost all of the Fortune 100 companies file income-tax returns in Illinois. More than a third of them pay no state income tax. Apparently, Blagojevich wants the state to capture a larger share of companies not paying.

Some questions:

Is Blagojevich so shortsighted as to believe that employees of those companies also pay no income taxes?

Does he believe that those same workers arent paying assorted taxes when they shop?

Does he really think that his state will be better off by punishing companies that provide so many jobs to Illinois workers?

The Tax Foundation reported that Blagojevichs proposal represents a tax increase equivalent to a full 1 percent of the Illinois economy. Measured that way, the tax increase represents the largest for any state during the past decade.

Lawmakers in Kentucky failed to repeal a nasty gross-receipts tax during this years legislative session after merely tinkering with it a bit last year.

Kentucky doesnt have a revenue problem, either. Spending remains the problem, as it does in Illinois and many states.

A repeal of Kentuckys gross-receipts tax met with a dollar-for-dollar cut in spending would give business taxpayers a break and offer workers solid hope for a stronger economy down the road.

Sources:

Governor Blagojevichs Gross Receipts Tax Plan Represents Largest State Tax Increase This Decade by Jonathan Williams, The Tax Foundation, March 19, 2007.

Truthy Claims About Gross Receipts Taxes by Chris Atkins and Brian Phillips, The Tax Foundation, March 14, 2007.

Vocal opponents of new tax are giving gov the business by Rich Miller, Chicago Sun-Times, April 13, 2007.

Governors Gross-Receipts Tax Proposal Gets Worse for Ag by Cherry Brieser-Stout, Prairie Farmer, April 10, 2007.