9-13-11; Murdering the Golden Goose and kicking it down the nearest alley—should we really tax services in Chicago or IL? Is the challenge to see how fast services will move to other cities...

We recently saw a blurb about Chicago Mayor Rahm Emanuel thinking it may somehow be a good idea to stop taxing mostly real estate and the sales of goods and to start globally taxing services. We are growing sick of hearing our elected leaders finding new fertile places to levy taxes rather than cut bloated budgets.

We urge all vendors and basically everyone in the service industry of the workers’ comp arena to contact your favorite politician and tell them to stop the madness. Most of us are less than thrilled to see the State of Illinois bump up the income tax and jump the cost of riding on our tollways to record high levels—do they really have to add even one more insult to all the current and painful tax levels?

Please note almost every vendor in the Illinois workers’ compensation milieu may be subject to new service taxes—insurance carriers/TPAs, brokers, nurse case managers, physicians and other healthcare givers, surveillance operatives, vocational counselors and attorneys on both sides may be brought into the mix. None of them want to have to charge our Chicago or Illinois clients an additional vigorish for the services we provide. We hope Mayor Emanuel and other politicians understand how fast everyone who provides such services can and will move from your bailiwick. The last law firm to leave may or may not turn off the lights, as our clients can call and email/text us in other cities and/or states, as easily as they call and email/text to Chicago.

From recent press coverage, it appears Mayor Emanuel is considering transforming a silly campaign sound bite into reality. While specifics are wholly unclear, what Emanuel was talking about is an idea kicked around like a bad tin can for a long time in Illinois—taxing both purchases of goods and adding services that represent a fast-growing segment of the Illinois economy.

The underlying concept is supposed to be a trade-off, sort of like the silly concept of instituting tolls to build toll roads to then cut them off when the roads are paid for—that didn’t seem to work, now did it? Mayor Emanuel asserts sales tax rates will come down across the board—sure, we are happy to trust that concept, as Illinois tolls are being just about doubled. He also asserts government won't be broke as long as most services are taxed, as we indicate above. We can hardly wait to see the political battlefield unfold with every trade association and professional group fighting to bribe the right alderman to leave their members out of the mix.

At present, the State of Illinois relies on sales tax revenue to pay about one-fourth of its day-to-day operations. At present, the City of Chicago relies on sales tax for 16 percent of its budget.

The sales tax is a hot button topic and hardly in a good way. Many retail shoppers across Chicago, Cook County and across our state are furious about having purchases taxed at 9-9.75% which is a rate among the highest sales tax rates in the U.S.. Sales tax rates in many Chicago suburbs aren't far behind Chicago’s record high rates. As you may have read, retailers and other businesses have turned to creative but controversial ways to route transactions through far-flung communities where sales tax levies are lower. For some reason, Mayor Emanuel doesn’t think the phenomenon will apply to services.

At the same time, Illinois' heavy reliance on the sales tax as a major revenue source has come under growing criticism as unfair, a drag on commerce and a tool that makes it harder for government bodies to cope with economic downturns. A key problem, as many tax critics view the situation, is Illinois has been far slower than other states to recognize our citizens spend an increasing share of their dollars on simple purchases for services such as lawyers, landscaping, nail care and recreation. Illinois is very much a service economy, as the retail sector has moved to the internet whenever possible.