Can’t be Worker Friendly while being Business Unfriendly

I thought that maybe the bus drivers were staying at the Hampton Inn in Quincy, when I saw Governor Blagojevich’s bus sitting in the front parking lot. He was on a bus tour around the state of IL promoting his Gross Receipts Tax (GRT), which would put a 0.5% to 3.0% tax on virtually every medium sized and larger manufacturer and service business in the state. I firmly believe that such a non-means based tax is the most business unfriendly one possible, especially for commodity type businesses that are working on low margins.

I asked the front desk clerk where the Governor was staying and a guy standing next to me said, “He’s staying here.” I asked him, “Are you his bus driver?” I quickly realized it wasn’t one of my better moments, when he said, “No, I’m Rich Miller of Capitol Fax.” Rich is the best known political commentator in the state. He willing agreed to hand deliver a letter I wanted to write to our governor and later wrote a funny blog about my question.

Here is the letter that I hand wrote to Governor Blagojevich that night and gave to him with one of my books.

Governor Blagojevich:

I am staying at the Hampton Inn in Quincy tonight and saw your bus out front of the hotel. I asked a person in the lobby if you were staying here and learned
that he was Rich Miller of Capitol Fax who confirmed that you were. I
asked him to personally give you this letter as you drove from Quincy to the
Metro East in the morning.

I am in Quincy to do the keynote address at the Tri-State Development Summit in Canton, MO on Wednesday morning. I will be talking about my research and book BoomtownUSA: The 7 ½ Keys to Big Success in Small Towns. I do about 100 talks/year around the USA on the subject of economic development in rural America.

I am a small business owner and have been involved in trying to recruit in
manufacturing and high tech companies into small towns. We started in Effingham and have expanded to over 12 states, having done over 50 projects and helping to facilitate approximately 5,000 jobs, many of those in Illinois. We currently have manufacturing and distribution projects under construction in Effingham and Taylorville that will employ 300 people.

I am extremely concerned with the direction the state is taking with the Gross Receipts Tax. We already encounter great difficulty in trying to recruit in new businesses to Illinois because of our much higher workers compensation, state fees and other costs of doing business in Illinois. This new tax will be devastating in trying to recruit in new businesses and I’m afraid, will cause an exodus of small businesses from the state.

One example, is a company that we have been working with for over six months to move a manufacturing plant to Illinois. They were looking at buying an existing building for $1 million, creating about 50 new jobs, mostly in the areas of welding and assembly. However, they calculated that this new tax would cost them $200,000 per year and are now reevaluating such a move.

Unfortunately, this is one of many such examples that you could find around the state. I urge you to not implement this new tax for the good of the citizens of Illinois. If you have any questions, please feel free to contact me at anytime.

Sincerely,

Jack Schultz

The next day I delivered the keynote address at the Tri-State Development Summit (more on their great group tomorrow) and when I got to a point in my talk where I was talking about the impact of 100 new manufacturing jobs, I told them of my writing the above letter to our governor and asked them why anyone would come to a state with new jobs when it was going to cost them an extra $200,000/year to do so. I was interrupted with thundering applause when I mentioned the letter, something that happens rarely in my talks. Evidently, I had hit a raw nerve with others from the region.

During the summit I met an economic developer from the neighboring state of IA who told me she was being inundated by companies looking to flee IL because of the prospects of this new tax. Just as people can vote with their feet, so can companies which are being over-taxed.

In talking with small business people around the state, they are particularly concerned about the precedence of this new tax. They are concerned about the initial proposal and the longer term ramifications of continuing to raise the tax rate and lower the thresholds for implementation (original proposal was $1 million in sales, current version is $2 million with higher rates). The general feeling is that it will be a lobbyist’s field day and the larger, better represented firms will find loopholes around the new tax. Already the Chicago Board of Trade and Mercantile Exchange are exempted, even though the governor has touted the tax on big business. They don’t get much bigger than the CBT and Merc in Illinois!

Politicians like our governor have to realize that you can’t be worker friendly by being business unfriendly.