Illinois sales tax
IllinoisGov. Bruce Rauner won election last year on a platform of reducing the tax and regulatory burden on business. Yet he has also proposed what would be the nation’s only sales tax on business advertising. In an effort to “modernize” the Illinois sales tax system – and address a $4 billion budget deficit – Rauner has proposed eliminating exemptions for a variety of previously untaxed services, including billboards and radio and television advertising. In his budget blueprint, Rauner argued, “Illinois lags behind all of its neighboring states when it comes to the tax treatment of goods compared to services.”
Yet no state currently collects a sales tax on business advertising. Florida attempted to do so in 1987, but abandoned the effort after only six months when national advertisers boycotted the state, according to an editorial in the Quincy Herald-Whigarguing against Rauner’s proposed tax. The editorial further noted, “The advertising industry alone accounted for $267 billion in revenue in 2014, or 17.3 percent of Illinois’ economic activity.”
Not surprisingly, the advertising industry – which includes the state’s newspapers and television stations – have quickly mobilized against the governor’s proposal. A group called No Ad Tax Illinois has published a website and video decrying the impact an advertising tax would have on small businesses. “From the family owned and operated car dealership in Joliet to the real-estate agent in Chicago, small businesses rely on advertising to drive sales,” the group argued, adding less advertising “will mean less sales and people will lose their jobs and their businesses.”
An advertising tax also raises constitutional issues. The Northwest Herald noted advertising revenue “makes it possible to finance our journalistic work to keep the community informed.” A tax might therefore run afoul of the First Amendment’s protection of freedom of the press.
Rauner has already modified his proposal in the face of criticism. Originally, he proposed a 10% advertising tax, which he claimed would provide the state with approximately $10 million per year in additional revenue. According to the Herald, the governor has since lowered the proposed tax to 6.25%, which would match the Illinois sales tax rate statewide.
Ultimately, the proposed advertising tax is just one part of a much larger political dispute. Illinois has operated without a budget since the start of its fiscal year on July 1. Rauner, a Republican, has been unable to negotiate a new budget with the Democratic-controlled state legislature.
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog PrivyCouncil.info
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