Champaign County Farm Bureau

Proposed GRT unfair and hidden

Governor Rod Blagojevich wants to provide health care to everyone in Illinois and increase school funding, but the state of Illinois is billions of dollars in debt. His proposed solution to this problem is levying a gross receipts tax (GRT).
A GRT requires a business to pay a tax every time it receives money for a good or service. It is a tax on all income received by a business without any deductions for the cost of doing business. Therefore, GRT’s are not based on ability to pay, but are owed whether or not a business is profitable.
In the few states that have a gross receipts tax, the rate is typically lower than a corporate income tax rate due to the much larger tax base. The most recent proposal by the governor calls for a .85% gross receipts tax on the transfer of personal property including construction, as well as a 1.95% gross receipts tax on services. Businesses whose gross receipts total less than $2 million are exempt from adding the tax onto their goods and services. However, each time the tax is imposed on a product throughout the supply chain, the cost of the tax will be passed on to the next purchaser. Therefore, even businesses who are exempt from adding the tax to their goods and services will still feel the effect as they pay higher prices for their supplies.
The agriculture industry, including farmers, will also be affected in this way. For example, according to numbers provided by leading agricultural industry organizations, as increased costs are passed down from input suppliers to farmers, corn producers will pay an extra $5.29 per acre for fertilizer, seed, chemical and custom application. In the same way, soybean producers will pay an additional $2.74 per acre. Using 2006 USDA production figures, these calculations mean that Illinois corn and soybean producers would spend an additional $87,451,000 a year to put a crop in the ground.
As grain elevators are taxed, they will pass along their costs to corn and soybean producers in the form of lower prices paid. Assuming $4 per bushel corn and $8 per bushel soybean prices, farmers would receive 4 cents less per bushel of corn and 7.4 cents less per bushel of soybeans. According this scenario and using 2006 USDA production figures, Illinois corn and soybean producers would receive an estimated $108,395,600 less each year at the elevator.
Soon after Governor Blagojevich announced his proposal, the Illinois Farm Bureau Board of Directors voted unanimously to oppose the GRT.
“Taxing gross business receipts represents bad fiscal policy – bad for Illinois farmers and for the business climate in this state,” said Illinois Farm Bureau President Philip Nelson. “It is unfair because it is not based on the ability to pay and the tax is imposed whether a business is profitable or not,” Nelson said.
Due to the potential impact of this proposed tax, it is important for Farm Bureau members to communicate their opinion on the GRT to their legislators. Though most legislators representing Champaign County have expressed their opposition to the proposal, it is important for them to hear from their constituents.