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Close Corporate Tax Loopholes

Abuse of tax loopholes inflicts a price on taxpayers, who must pay more taxes- now, or in the future- to cover the government’s revenue shortfall, or must deal with cuts in government services. In Chicago, we are facing a $635 million budget shortfall for next year. Certainly, big corporations should be paying their fair share.

The Chicago Sun-Times agrees. Here is an excerpt from today’s editorial:

“On Tuesday, the Regional Transportation Authority — which gets half its money from the sales tax — sued the Downstate communities of Channahon and Kankakee, seeking to put a stop to [tax diversion]. Chicago filed a similar suit.

They were right to do so.

Illinois levies a 6.25 percent tax that is popularly called a sales tax but is technically a retailers’ occupation tax. Of that, 5 percent goes to the state, 1 percent goes to the local municipality and 0.25 percent goes to the county. The RTA, which funds the CTA, Metra and Pace, and some other Chicago area local governments tack on levies of their own, driving up sales taxes to 9.75 percent in Chicago, for example. The extra funds pay for government services.

But the RTA and Chicago say some large businesses such as oil companies are taking advantage of a rule that says the taxes are imposed where a company is located, not where the sales take place. The allows the companies to route their sales through sham offices Downstate, where sales taxes are lower.

In effect, sales tax revenue is siphoned out of the Chicago area. The RTA and Chicago want that to stop.

The issue also has been debated in the General Assembly, which has been unable to agree on a solution. Fixing this mess legislatively must be done carefully.

But in the meantime, pretending that a huge amount of sales are taking place in an office that’s little more than a mail drop is clearly an abuse of the system, and the courts should put a stop to it.”

You can read the full Sun-Times Editorial here.

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About Celeste Meiffren

Celeste Meiffren is Illinois PIRG's Field Director. You can contact her at celeste@illinoispirg.org

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