"The State of Illinois' finances have reached a flashpoint," Hynes said. "It is my hope that as lawmakers weight the various revenue and spending options available to them for Fiscal 2008 and beyond, that this in-depth look provides a useful tool for evaluating the state’s current tax system and the changes that have occurred during the last several decades."

Highlights from this issue include:

O Growth in state source tax revenues deposited into the General Funds has been consistent with increases in Illinois' Gross State Product since 1976, largely due to strong growth in individual income tax collections and ongoing changes in tax policy that have expanded the state's tax base.

O Corporate income tax collections and sales tax collections have not grown at the same rate as the state's economy in the last thirty years.

O Growth in Illinois' corporate income tax collections has lagged growth in individual income tax collections since 1973 and maybe primarily attributable to changes in corporate tax policy and to relatively strong growth in partnerships, S Corporations, and Limited Liability Companies which pay income tax through individuals instead of as corporations.

O If corporate income tax collections had mirrored growth in individual income tax collections since fiscal year 1980, this would have generated approximately $632 million in additional General Fund revenues in fiscal year 2006.

O The Gross Receipts Tax is a corporate taxation model that has been used in several other states with mixed results. In many states with a GRT system, it is in lieu of other taxes such as property taxes or sales taxes.

O Illinois ranked 40th among the states in 2005 in state tax revenue collections as a percent of personal income. If local tax revenues are included, Illinois moves to 25th among the states.

O Illinois' sales tax rate of 6.25% is the 9th highest sales tax rate, while 5 states have no sales tax at all.

O Over the last 10 years, the state's revenues from so called "sin taxes" have increased from $1.693 billion in FY97 to $2.609 billion in FY06, an increase of $916 million or 54.1%, primarily due to growth in riverboat gaming taxes and cigarette taxes.

Hynes has already stated his opposition to the GRT and has criticized the Governor's spending proposal for failing to address a $2 billion funding deficit in the Medicaid program. Nevertheless, the Fiscal Focus presents an objective analysis of current state revenues and the GRT in an effort to provide legislators with the information they need to consider the proposals and pass an FY08 budget.

The May edition of Fiscal Focus is available on the Comptroller's web site at www.ioc.state.il.us. Additional copies are available by calling 217-782-6000.