Editorial: Expanding sales tax to advertising is a bad idea
Bruce Rauner ran as a pro-business, pro-growth candidate for governor. And today, despite being faced with a budget stalemate with the legislature that could lead to a government shutdown, he says he is working to get Democrats to approve measures that would make the state friendlier to business.
That's why it's confusing to us and media companies throughout the state that Rauner has floated a proposal to expand the state sales tax to include advertising -- along with many other services. According to the Illinois Press Association, which is actively fighting this idea (www.noadtaxillinois.com), the advertising industry helps generate $267 billion (17.3 percent) of Illinois' economic activity and helps produce more than 900,000 jobs.
The fear is that this proposal would drive revenue and jobs to neighboring states which do not have taxes on advertising. In fact, according to the IPA, no other state in the nation applies a sales tax to advertising. To do so would be devastating to the state.
For businesses like the Daily Herald, the tax more than likely would have to be passed on to advertisers and/or subscribers. Advertisers would more than likely pass the tax on to customers who buy their goods and services. And we're not just talking about big retailers. Local businesses that dot the main streets in suburbs from Libertyville to Arlington Heights to Elgin to Naperville all would feel the negative consequences of either having to pay to market their services or not market to new customers at all.
Yes, we acknowledge that as a business that would be affected, we've got a vested interest in the outcome of this debate. But the problems with this idea are bigger than our stake in it.
It's clearly a proposal that is the opposite of pro-growth and pro-business. But those considering it -- and there are proponents on both sides of the aisle on this along with liberal and conservative think tanks -- would do well to look to Florida, one of the few states to have tried such a maneuver.
According to the IPA, Florida saw a loss of 50,000 jobs and $2.5 billion in personal income due to lost advertising revenue. Florida saw 12 percent of ad purchases decrease and go to neighboring states, resulting in a loss of $100 million in advertising revenue. And the costs to administer the tax exceeded tax revenue -- forcing Florida legislators to repeal the tax six months later.
A lot of criticism, rightly so, falls on Illinois for its woeful fiscal condition. And that does need to be resolved by the governor and legislators. But here is an idea proven not to work. Even if there are short-term revenue gains, the long-term effects surely will negate them.
This tax is only one idea in a host of many Rauner and Illinois legislators are considering to get the state back on track. We urge both the governor and the General Assembly to drop this idea and look only for ways to raise revenue that are proven to be beneficial in the long run.