Political Rewind: State’s Tax-Break Deal Hits a Wall

Editor's Note: This article was created by aggregating news articles from Illinois Statehouse News that were written by various Illinois Statehouse News reporters.

Congress could help states collect online sales taxes

Illinoisans who buy the latest best-selling book as a Christmas gift on Amazon.com will pay $12.99. Buy the same book at a local bookstore and they’ll pay an extra 81 cents. The bookstore isn’t charging more. It’s collecting Illinois’ 6.25 percent sales tax, which online retailers without a physical presence in the state don’t have to collect.

This tax loophole is costing the cash-strapped state $170 million every year, according to an estimate from the Illinois Department of Revenue.  A 1992 U.S. Supreme Court ruling said only sellers with a physical presence, such as a warehouse, in a state must collect sales tax. That same ruling also said Congress has the power to change this. 

Several plans are moving through Congress to allow states to force online and catalog retailers to collect sales tax on intrastate sales. In Illinois, residents are required to pay sales tax on all online purchases, even if a retailer doesn’t collect it. In an attempt to collect some of the missing sales tax, Illinois now has a line on its income tax form where people can self report and pay what they owe.   

However, very few consumers follow, or are even aware, of this law, according to the state Department of Revenue. Brick-and-mortar shops in the state say online retailers use this to their advantage.  

“Our local retailers are severely hampered by the competitive advantage that retailers who don’t have a physical presence here in Illinois have over those paying property taxes, who hire people in our community, who are supporting the local little league,” David Vite, president of Illinois Retail Merchants Association, a lobbying group for retail stores in the state, said during a Thursday conference call on the issue. 

Lawmakers want tax fairness, not one-at-a-time relief

If Illinois lawmakers are going to help one or two businesses in the Chicago area deal with high tax bills, some lawmakers say they should help businesses in the rest of the state as well.

Tuesday night's defeat of a $325 million tax relief package for CME Group and Sears Corp. came amid complaints that all Illinois businesses — not just those with big names or big-name lobbyists — should get some help. 

The tax proposal began as a means to keep the company that owns the Chicago Mercantile Exchange and the Chicago Board of Trade, CME Group, and Sears from following through on threats to leave the state if Illinois doesn't lessen their tax burdens by the end of the year. 

The companies said they'll to move to states  with better tax incentives.

Illinois’ tax-break deal hits wall

Proponents of some version of a tax-relief package for businesses and low-income households watched Tuesday as their efforts once again hit a legislative brick wall.

Lawmakers have been working on a measure that began as a means to keep the company that owns the Chicago Mercantile Exchange and the Chicago Board of Trade, CME Group, and Sears Corp. from following through on threats to leave the state that if Illinois doesn’t do something by the end of the year to lessen their tax burdens.

The companies said they’ll to move to states that are offering better tax-incentive deals. 

A $325-million measure that included $85 million in annual tax breaks for CME Group and $15 million in tax breaks for Sears over the next decade passed the Illinois Senate by a 36-18 vote Tuesday, but suffered a crushing defeat of 8-99 in the Illinois House. 

“At this point in time we have reached a temporary impasse … We are prepared to come back as soon as there is an agreement,” state Rep. John Bradley, D-Marion, who sponsored the legislation in the House, said. 

The House Revenue and Finance Committee, which Bradley chairs, approved a $250-million measure Monday similar to the Senate’s version, except with smaller tax breaks for low- and moderate-income families.

That measure was not given a vote. Bradley said he only had 35 legislators, all Democrats, who were willing to vote for the House version.

Prisons, mental facilities saved; Quinn friendlier on budget

Illinois’ seven endangered prisons and mental health facilities will stay open for at least the next six months after lawmakers gave Gov. Pat Quinn the power to shift nearly $300 million inside the state budget. 

But more importantly, lawmakers also said they sent the governor this clear message: He must not threaten to close state facilities to get what he wants from the state budget.

Lawmakers on Tuesday approved this new spending authority for Quinn. The House approved it with a 92-20 vote and the Senate with a 50-5 vote.

The money, which was taken from Illinois’ regional superintendents, school transportation accounts and the Medicaid budget by delaying payment on more Medicaid bills, will keep the seven sites open through the end of June.