Observations and comments about state government by State Representative Robert W. Pritchard.
June 15, 2010
High Court Increases Fines; Helps Local Government
One of the bills that passed the legislature this spring caught a lot of local units of government by surprise. Senate Bill 3695 created a source of revenue to pay state police and avoid the layoff of over 460 state police staff. Not many realized that the revenue came from reducing fines that go to local units of government.
The bill now waiting for the governor’s signature directs $15 of fines assessed to defendants in any felony, traffic, misdemeanor, local ordinance, or conservation case to a special fund to pay the troopers and avoid closure of almost 25% of the Illinois State Police’s district headquarters. This may not sound like a lot of money per case but it adds up to a third of the revenue from such tickets that would have gone to local police departments, circuit court clerks, county budgets and state revenue.
On June 3rd, the Illinois Supreme Court issued a ruling increasing the maximum fine amount to $120, effective September 15th. Prior to the ruling, counties could only charge $75 as a maximum fine for traffic violations to individuals that pleaded guilty and did not appear in court. The Supreme Court ruling directs that the $50 increased maximum fine go to issuing police department, counties and the state.
SB3695 will help assure enforcement of laws by keeping state police on duty and the court ruling makes certain the law does not detract from needed local government revenue.
Sales Tax Receipts Fall
With the depressed economy and reduced sales activity in many areas, those that depend on sales tax revenue are feeling the pinch. The Commission on Government Forecasting and Accountability reports that sales tax revenue last year fell by 6 percent and this year will see a further decline.
The reduced sales activity and resulting drop in tax revenue in Illinois is the largest decline in over 60 years. Feeling the loss are the state’s general fund which receives 80 percent of the sales tax revenue, and cities and counties which receive the remaining 20 percent. In 2009, over $14 million in sales taxes went to Ogle County and its municipalities. Over $78.6 million went to DeKalb County and its municipalities. Revenue is shared on the basis of where sales occurred.
Illinois has one of the highest sales tax rates in the nation, tied for 10th place among states. Four states do not impose a sales tax. In our state, the sales tax is primarily a tax on real property. Very few services are taxes. Only 19 of the 168 types of service transactions are taxed in Illinois. That low number is why some are calling for expanding the sales tax to more services as a way to balance the state budget.
The list of exemptions and reductions in the rate of tax on sales continues to grow. Receiving some reduction in the 6.25 percent state tax rate are purchases for food and drugs, farm supply inputs, manufacturing equipment, and renewable fuels. Charitable organization purchases are also exempted.
The sales tax rate can be increased by home-rule communities and by referenda for public safety. The highest sales tax in a municipality goes to Rosemont with its 10.25 percent rate. Chicago and many nearby communities tax at the 10 percent level.
The Internet has greatly affected virtually all facets of economic activity, including the states’ sales tax revenues. Currently, online retailers are subject to Illinois sales taxes if they have a physical presence in the state. The Department of Revenue estimated that over $143 million of sales taxes related to online commerce went unpaid in FY2008. Uncollected taxes are expected to grow to $163 million this year.
Illinois is participating in the Streamlined Sales Tax Project to simplify and modernize sales and use tax collection and administration. The goal is to substantially reduce or eliminate the costs and burdens of sales tax compliance for businesses through simplified laws and administrative policies.
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