Martire: A service tax would generate $2 billion in annual revenue

 *  In May, I asked the governor if he’d be open to a tax on services in Illinois.  Rich wrote about it in his newspaper column...

As you may know, the Chicago area’s mass transit agencies are facing a $730 million “fiscal cliff” in 2026. The federal government’s COVID-era subsidies will expire that year. While ridership has declined as service worsens, operating costs have increased and average fare prices have fallen. […]

So, my associate Isabel Miller (who contributed to this column) asked Pritzker during an unrelated media event if he wanted to take any state taxes off the table before the talks heat up, including the service tax. 

 “I have never been in favor of that before,” Pritzker said of the service tax. He has indeed opposed the tax all the way back to his first 2018 gubernatorial campaign, often calling it regressive.  

“There may need to be a source of revenue here,” Pritzker said, “but that’s not something that I have favored in the past.”

As far as specifically ruling out a service tax, however, the governor said: “I really don’t want to start saying, ‘We’re not going to do this, we’re not going to do that.’ At this point, there are just so many pieces of this that we have to look at before we’re going to pay for what’s necessary here as we come off of support from the federal government and making sure we’re restoring transit services.”

* Executive Director for the Center for Tax and Budget Accountability Ralph Martire on Friday…

It’s politically difficult to get tax policy right for one simple reason: No one really enjoys paying taxes, so most politicians disdain the subject. Paradoxically, sound tax policy is the only sustainable path to ensuring adequate investments can be made in the very core services — like educating children and caring for vulnerable members of society — that help build prosperous communities.

For proof, look no further than the projected $3 billion revenue shortfall facing the state’s General Fund next year. That shortfall means Illinois will be hard pressed to maintain its current investments in education, health care, human services and public safety, which collectively comprise over 94% of all General Fund spending on services. […]

Unfortunately, Illinois taxes less consumer spending than any other state with a general sales tax. That’s because Illinois’ sales tax applies primarily to the sale of goods, not services. That’s a loser proposition, considering about 74% of Illinois’ economy — and around 68% of all consumer spending — are transactions involving services, not goods.  

Simply expanding the state’s sales tax base to include the same consumer services already taxed in our neighboring states of Iowa and Wisconsin would generate over $2 billion in annual revenue for Illinois. That’s good tax policy, which would go a long way toward eliminating Illinois’ structural deficit.

Thoughts?