Rep. Hamos on Blagojevich's Gross Receipts Tax and Mass Transit: Cable and Streaming
State Rep. Julie Hamos [D-Evanston]: Well, you know what, if they [law firms] are now charging $300/hour, they might charge their clients $303. One percent [more]. [At the time, it was thought that services would be taxed at 1% under Blagojevich's proposed GRT; it turns out that he proposed 1.8%; Also, partners at large loop law firms are generally billed out at more than $300/hour].
Jeff Berkowitz: Yeah, but they are already raising their rates [or trying to, with many large law firms raising annual salaries for first year associates from $135, 000 to $145,000]. So, now they are going to have to try to raise them more.
Julie Hamos: Well, they might charge $303/hour and blame it on this. But, it’s really one percent, that’s all it is.
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Berkowitz [quoted from the blog post, below]: Remember-- corporations or partnerships don’t pay taxes, people do. Corporations and partnerships simply collect the taxes. And, the cost is borne in part by the shareholders or partners, in part by the employees and in part by the clients.
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Tonight's City of Chicago edition of "Public Affairs," airing through-out the City at 8:30 pm on Cable Ch. 21 [CANTV], features State Rep. Julie Hamos [D-Chicago] discussing Gov. Rod Blagojevich's Gross Receipts Tax, the impact of that tax, Mass Transit and much, more with show host and legal recruiter Jeff Berkowitz. You may also [Go Here to watch tonight's City Edition show with State Rep. Hamos, this week's suburban edition show with former State GOP Chairman Gary MacDougal, as well as other shows with such notables as Obama, McCain, Giuliani, Barrett, Chico and many others on your computer; Don't let the "Listen," prompt fool you-- you can watch and listen to the show; you can drag the dial on the bottom of the screen to watch only certain portions of the thirty minute shows; trouble accessing our cinema page on your computer? Try I-Tunes: the same Public Affairs shows are also available there].
******************************************
The "Public Affairs," cinema page gives you a choice of more than twenty-five episodes of “Public Affairs," to watch on your computer including tonight's City show with Rep. Hamos. The cinema page also has this week's suburban show with former State GOP Chairman Gary MacDougal and many recent shows. Soon to be posted on the page is a hot show we taped yesterday with Cook County Commissioners Peraica [R] and Quigley [D]. The Peraica-Quigley rumble will air in the suburbs next week. Already posted are interviews, discussions or remarks with or by U. S. Senators John McCain and Barack Obama, former NYC Mayor Rudy Giulianiand many, many more pols on our video podcast page[Go Here to Watch the Shows on your computer; you can drag the dial on the bottom of the screen to watch only portions of the thirty minute shows].
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Go here for more about State Rep. Hamos, tonight's show topics and another partial transcript of the show.
******************************************
Governor Blagojevich’s proposed Gross Receipts Tax, discussed-- among other topics-- with tonight’s featured guest, State Rep. Julie Hamos, on the City of Chicago edition of Public Affairs [See partial transcript, below], raises a number of interesting tax law, economics and political issues.
First, tonight's show was taped three days before the Governor’s State of the State and State of the Budget speech in which he set out his proposal in somewhat more detail. And, as everyone knows, the devil is in the details.
Second, we have since learned that Blago is not proposing [at least so far] a reduction in the state portion of the sales tax--as a partial offset to his broader base for his gross receipts tax [most services are included].
Third, there is a pyramiding effect to his tax, i.e., intermediate steps in the production process are taxed all along the way. This is not a value added tax.
Fourth, the ultimate seller essentially pays a tax on multiple taxes, as well as a tax on the goods or services being transferred.
Fifth, the Blago proposed services tax is 1.8 %, not 1%, as was reported at the time we taped our show with Rep. Hamos.
Sixth, we discussed, on tonight’s show, the impact of the Gross Receipts Tax on law firms in Illinois. Because much of the impact on law firms will be similar to other corporations or partnerships, we will stick with that example for this analysis. Five of the top one hundred gross revenue firms listed in the May, 2006 American Lawyer are based in Illinois, all in Chicago-- but with additional offices around the country. The top revenue generator is Kirkland & Ellis at almost a billion dollars, as of the 2006 report, and certainly over a billion as of the upcoming May, 2007 report. Will K&E pay Illinois 18 million dollars in the form of a gross receipts tax, or will K&E only pay taxes on the services performed for Illinois headquartered clients, or for services performed by attorneys located in its Illinois offices, or what?
Seventh, if an Illinois based law firm is competing in a national market, can it expect to “pass-on,” most or even much of the cost of its new tax to clients, as suggested by State Rep. Hamos? Probably not--unless the tax is structured so that the great majority of law firms not based in Illinois are taxed by Blago’s tax, as well, and to the same extent as the Illinois based firms. And that’s not likely because the Gross Receipts Tax is not that gross.
Eighth, if an Illinois based law firm is competing in a Illinois [or more localized] market, can it expect to pass on most or even much of the cost of Blagojevich’s Gross Receipts Tax to clients, as suggested by State Rep. Hamos? Some of that tax can be passed on, but almost surely not completely-- as was suggested by State Rep. Julie Hamos. Some of the cost will be born by the partners [or shareholders], some by the clients and some by the employees [associates and non-professional staff]. It all depends on the elasticities of supply and demand. Remember-- corporations or partnerships don’t pay taxes, people do. Corporations and partnerships simply collect them. And, the cost is borne in part by the shareholders or partners, in part by the employees and in part by the clients.
Ninth, Watch the show tonight with Rep. Hamos. It’s a good one. We saved most of the Econ 101 for the blog. Even Berkowitz can’t make the “dismal science,” interesting enough for prime time.
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State Rep. Julie Hamos [D-Evanston]: …in out sales tax, we have a very narrow base…the gross receipts tax would expand that. Everybody would pay a little and what I think is good for [the] consumer, again I haven’t heard the details, just leaks so far, is that I think a portion of the sales tax would be reduced—the state portion, so … right now if we pay 9% sales tax, we would pay 3% or 3.5 %, but these other small taxes might add to the overall cost.
Jeff Berkowitz: Well, of that 9% that we pay now, how much is the state portion?
State Rep. Julie Hamos: I believe it is 6.5%.
Jeff Berkowitz: And, you are saying basically the Governor is going to propose taking out the state tax portion of the sales tax?
Julie Hamos: Again, we don’t have the details, but that’s the early version of this. Yes. It is going to be a benefit for consumers, a benefit for businesses who pay that and consumers who have to pay that. But, then there would be this very small 1% of everyone’s receipts—would go into a fund and that generates a lot of dollars.
Jeff Berkowitz: It does. You know if you are a law firm with revenues of 100 million dollars and we have a few of those around town—
Julie Hamos: Do we?
Jeff Berkowitz: More than a few. [at least a dozen].
Julie Hamos: A hundred million?
Jeff Berkowitz: A hundred million dollars
Julie Hamos: So they would pay a million dollars. Okay.
Jeff Berkowitz: That’s a lot of bread.
Julie Hamos: Well, you know what, if they are now charging $300/hour, they might charge their clients $303. One percent [more]. [At the time, it was thought that services would be taxed at 1% under Blagojevich's proposed GRT; it turns out that he proposed 1.8%].
Jeff Berkowitz: Yeah, but they are already raising their rates [or trying to, with many large law firms raising annual salaries for first year associates from $135, 000 to $145,000]. So, now they are going to have to try to raise them more.
Julie Hamos: Well, they might charge $303/hour and blame it on this. But, it’s really one percent, that’s all it is.
Jeff Berkowitz: And the doctors, they’re also going to have to pay this tax?
Julie Hamos: Again, I don’t know the full details.
Jeff Berkowitz: But, you would expect that. That [medical care] is a service.
Julie Hamos: I think so.
Jeff Berkowitz: And, you get your car repaired, that’s a service.
State Rep. Julie Hamos: And, again, I think almost every state has a broader sales tax than we do and they do put taxes on some services, not all. So, I don’t know if doctors are included. Healthcare is included. I just don’t know how it all fits.
Jeff Berkowitz: But, if all those things were included that I mentioned, that you just mentioned, does this sound like something you would support?
Julie Hamos: I really don’t know.
Jeff Berkowitz: Too early, because you haven’t seen it?
Julie Hamos: Way too early, yeah.
Jeff Berkowitz: You’re not going to commit.
State Rep. Julie Hamos: I would be foolish to say yes without knowing any of the details.
***************************************************
State Rep. Julie Hamos, as is airing tonight [8:30 pm on Cable Ch. 21, CANTV] on the City of Chicago edition of Public Affairs. The show was recorded on March 4, 2007. You may also[watch the show with Julie Hamos here].
***************************************************
Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search can be reached at JBCG@aol.com
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Jeff Berkowitz: Yeah, but they are already raising their rates [or trying to, with many large law firms raising annual salaries for first year associates from $135, 000 to $145,000]. So, now they are going to have to try to raise them more.
Julie Hamos: Well, they might charge $303/hour and blame it on this. But, it’s really one percent, that’s all it is.
*****************************************************
Berkowitz [quoted from the blog post, below]: Remember-- corporations or partnerships don’t pay taxes, people do. Corporations and partnerships simply collect the taxes. And, the cost is borne in part by the shareholders or partners, in part by the employees and in part by the clients.
*******************************************************
Tonight's City of Chicago edition of "Public Affairs," airing through-out the City at 8:30 pm on Cable Ch. 21 [CANTV], features State Rep. Julie Hamos [D-Chicago] discussing Gov. Rod Blagojevich's Gross Receipts Tax, the impact of that tax, Mass Transit and much, more with show host and legal recruiter Jeff Berkowitz. You may also [Go Here to watch tonight's City Edition show with State Rep. Hamos, this week's suburban edition show with former State GOP Chairman Gary MacDougal, as well as other shows with such notables as Obama, McCain, Giuliani, Barrett, Chico and many others on your computer; Don't let the "Listen," prompt fool you-- you can watch and listen to the show; you can drag the dial on the bottom of the screen to watch only certain portions of the thirty minute shows; trouble accessing our cinema page on your computer? Try I-Tunes: the same Public Affairs shows are also available there].
******************************************
The "Public Affairs," cinema page gives you a choice of more than twenty-five episodes of “Public Affairs," to watch on your computer including tonight's City show with Rep. Hamos. The cinema page also has this week's suburban show with former State GOP Chairman Gary MacDougal and many recent shows. Soon to be posted on the page is a hot show we taped yesterday with Cook County Commissioners Peraica [R] and Quigley [D]. The Peraica-Quigley rumble will air in the suburbs next week. Already posted are interviews, discussions or remarks with or by U. S. Senators John McCain and Barack Obama, former NYC Mayor Rudy Giulianiand many, many more pols on our video podcast page[Go Here to Watch the Shows on your computer; you can drag the dial on the bottom of the screen to watch only portions of the thirty minute shows].
***************************************************
Go here for more about State Rep. Hamos, tonight's show topics and another partial transcript of the show.
******************************************
Governor Blagojevich’s proposed Gross Receipts Tax, discussed-- among other topics-- with tonight’s featured guest, State Rep. Julie Hamos, on the City of Chicago edition of Public Affairs [See partial transcript, below], raises a number of interesting tax law, economics and political issues.
First, tonight's show was taped three days before the Governor’s State of the State and State of the Budget speech in which he set out his proposal in somewhat more detail. And, as everyone knows, the devil is in the details.
Second, we have since learned that Blago is not proposing [at least so far] a reduction in the state portion of the sales tax--as a partial offset to his broader base for his gross receipts tax [most services are included].
Third, there is a pyramiding effect to his tax, i.e., intermediate steps in the production process are taxed all along the way. This is not a value added tax.
Fourth, the ultimate seller essentially pays a tax on multiple taxes, as well as a tax on the goods or services being transferred.
Fifth, the Blago proposed services tax is 1.8 %, not 1%, as was reported at the time we taped our show with Rep. Hamos.
Sixth, we discussed, on tonight’s show, the impact of the Gross Receipts Tax on law firms in Illinois. Because much of the impact on law firms will be similar to other corporations or partnerships, we will stick with that example for this analysis. Five of the top one hundred gross revenue firms listed in the May, 2006 American Lawyer are based in Illinois, all in Chicago-- but with additional offices around the country. The top revenue generator is Kirkland & Ellis at almost a billion dollars, as of the 2006 report, and certainly over a billion as of the upcoming May, 2007 report. Will K&E pay Illinois 18 million dollars in the form of a gross receipts tax, or will K&E only pay taxes on the services performed for Illinois headquartered clients, or for services performed by attorneys located in its Illinois offices, or what?
Seventh, if an Illinois based law firm is competing in a national market, can it expect to “pass-on,” most or even much of the cost of its new tax to clients, as suggested by State Rep. Hamos? Probably not--unless the tax is structured so that the great majority of law firms not based in Illinois are taxed by Blago’s tax, as well, and to the same extent as the Illinois based firms. And that’s not likely because the Gross Receipts Tax is not that gross.
Eighth, if an Illinois based law firm is competing in a Illinois [or more localized] market, can it expect to pass on most or even much of the cost of Blagojevich’s Gross Receipts Tax to clients, as suggested by State Rep. Hamos? Some of that tax can be passed on, but almost surely not completely-- as was suggested by State Rep. Julie Hamos. Some of the cost will be born by the partners [or shareholders], some by the clients and some by the employees [associates and non-professional staff]. It all depends on the elasticities of supply and demand. Remember-- corporations or partnerships don’t pay taxes, people do. Corporations and partnerships simply collect them. And, the cost is borne in part by the shareholders or partners, in part by the employees and in part by the clients.
Ninth, Watch the show tonight with Rep. Hamos. It’s a good one. We saved most of the Econ 101 for the blog. Even Berkowitz can’t make the “dismal science,” interesting enough for prime time.
************************************************
State Rep. Julie Hamos [D-Evanston]: …in out sales tax, we have a very narrow base…the gross receipts tax would expand that. Everybody would pay a little and what I think is good for [the] consumer, again I haven’t heard the details, just leaks so far, is that I think a portion of the sales tax would be reduced—the state portion, so … right now if we pay 9% sales tax, we would pay 3% or 3.5 %, but these other small taxes might add to the overall cost.
Jeff Berkowitz: Well, of that 9% that we pay now, how much is the state portion?
State Rep. Julie Hamos: I believe it is 6.5%.
Jeff Berkowitz: And, you are saying basically the Governor is going to propose taking out the state tax portion of the sales tax?
Julie Hamos: Again, we don’t have the details, but that’s the early version of this. Yes. It is going to be a benefit for consumers, a benefit for businesses who pay that and consumers who have to pay that. But, then there would be this very small 1% of everyone’s receipts—would go into a fund and that generates a lot of dollars.
Jeff Berkowitz: It does. You know if you are a law firm with revenues of 100 million dollars and we have a few of those around town—
Julie Hamos: Do we?
Jeff Berkowitz: More than a few. [at least a dozen].
Julie Hamos: A hundred million?
Jeff Berkowitz: A hundred million dollars
Julie Hamos: So they would pay a million dollars. Okay.
Jeff Berkowitz: That’s a lot of bread.
Julie Hamos: Well, you know what, if they are now charging $300/hour, they might charge their clients $303. One percent [more]. [At the time, it was thought that services would be taxed at 1% under Blagojevich's proposed GRT; it turns out that he proposed 1.8%].
Jeff Berkowitz: Yeah, but they are already raising their rates [or trying to, with many large law firms raising annual salaries for first year associates from $135, 000 to $145,000]. So, now they are going to have to try to raise them more.
Julie Hamos: Well, they might charge $303/hour and blame it on this. But, it’s really one percent, that’s all it is.
Jeff Berkowitz: And the doctors, they’re also going to have to pay this tax?
Julie Hamos: Again, I don’t know the full details.
Jeff Berkowitz: But, you would expect that. That [medical care] is a service.
Julie Hamos: I think so.
Jeff Berkowitz: And, you get your car repaired, that’s a service.
State Rep. Julie Hamos: And, again, I think almost every state has a broader sales tax than we do and they do put taxes on some services, not all. So, I don’t know if doctors are included. Healthcare is included. I just don’t know how it all fits.
Jeff Berkowitz: But, if all those things were included that I mentioned, that you just mentioned, does this sound like something you would support?
Julie Hamos: I really don’t know.
Jeff Berkowitz: Too early, because you haven’t seen it?
Julie Hamos: Way too early, yeah.
Jeff Berkowitz: You’re not going to commit.
State Rep. Julie Hamos: I would be foolish to say yes without knowing any of the details.
***************************************************
State Rep. Julie Hamos, as is airing tonight [8:30 pm on Cable Ch. 21, CANTV] on the City of Chicago edition of Public Affairs. The show was recorded on March 4, 2007. You may also[watch the show with Julie Hamos here].
***************************************************
Jeff Berkowitz, Show Host/Producer of "Public Affairs," and Executive Legal Recruiter doing legal search can be reached at JBCG@aol.com
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