Blagojevich strikes deal on $7 billion tax plan to include property tax relief

SPRINGFIELD, Ill. -- A new version of Gov. Rod Blagojevich's plan to fund health-care coverage and education increases a proposed tax on businesses by $1 billion to provide property-tax relief.

Blagojevich's revised plan, filed Friday night after legislators left the Capitol for a two-week break and forged in discussions with Senate President Emil Jones, includes a tax on business gross receipts that would bring in $7 billion annually, up from $6 billion in the original plan.

The extra money, which would come from increasing the rate of a proposed tax on business revenue, would give people who own real estate in areas with high property values up to a $200 million reduction in taxes paid to local schools. Another $600 million would go to areas with lower property values and higher property tax rates.

Proponents say the tax would do a better job at gathering revenue as the state economy shifts from manufacturing to services.

"The package dramatically boosts education spending, gives every person in Illinois access to affordable health care, ensures property tax relief for homeowners around the state, invests in important infrastructure projects -- and makes all of that possible by asking wealthy corporations to finally pay their fair share," said Blagojevich spokeswoman Abby Ottenhoff.

But business groups say the new plan will drive up consumer prices and discourage companies from doing business in Illinois.

Gregory Baise, the president and CEO of the Illinois Manufacturers' Association, called the new proposal "unbelievable."

"The kind of negative reaction to this tax increase will only be compounded by this lunacy," Baise said. "This governor wants to tax too much. He wants to spend too much on his way to ruining the Illinois economy."

The new plan increases the tax rate to 0.85 percent on the revenue of manufacturers and 1.95 percent on revenue from firms in the service industry. The original plan's rates were 0.5 percent for manufacturers and 1.8 percent for the service industry.

One change in the proposal benefits smaller businesses. The new proposal affects businesses with more than $2 million in gross revenue. The original affected companies with more than $1 million in gross revenue.

Blagojevich plans to hit the road Monday to build public support for the tax plan. He has scheduled a four-day bus tour starting in Chicago and taking him to Rockford, Moline, Alton and Marion, among other places.