Chesney’s Weekly Roundup- week ending October 5, 2019

TAXES

Illinois tops the list of least tax-friendly statesKiplinger magazine ranked Illinois as the least tax-friendly state in the United States. Illinois property taxes are second-highest nationwide among the 50 states when calculated as a percentage of market value, with homeowners routinely forced to pay more than 2% of the market value of a house annually. 

Kiplinger stated that “Illinois’ economic woes are one reason why the Prairie State tops our list of the least tax-friendly states in the country. The state ranks #50 in the latest ranking of states’ fiscal health by the Mercatus Center at George Mason University, and residents are paying the price with higher taxes.

The state’s 4.95% flat income tax rate actually isn’t that high when compared to other states…but it goes downhill fast for Illinois residents when you look at all the other taxes they have to pay.”

Illinois’ burden of state and local sales taxes also subtracted from Illinois’ overall rank. To the state sales tax rate of 6.25% are added numerous add-on levies by local governments.  Purchasers of taxable goods in the city of Chicago are forced to pay sales taxes to the State of Illinois, the Regional Transportation Authority, Cook County, and the city of Chicago. The total burden is more than 10%, one of the highest sales tax rates in the United States. 

AGRICULTURE

Partial recovery in crop conditions for 2019 corn, soybean season.  Production of Illinois’ two big staple crops was negatively affected by extremely wet field conditions during planting time and into the season.  Late May and early June is normally the time when planted seeds are germinating, breaking the surface, and developing into healthy seedlings.  Wet weather killed plant growth, however, in some low-lying sections of Illinois farm fields this spring.  Other fields could not get planted at the usual times, and had to be planted as the “window” of 2019 summer planting time was closing. 

Based on these conditions, many observers saw a 2019 Illinois crop failure as a real possibility.  Good conditions in July and August, however, helped many Illinois corn and bean fields regain some health.  The U.S. Department of Agriculture, which conducts weekly surveys of Illinois crop conditions, now reports that more than half of Illinois fields are in “fair” or “good” condition.  The very slow start to the growing season meant that harvest work was seriously held back, with only 4% of corn harvested as of September 29 as compared to a 5-year average of 30% for this date. 

Illinois corn and soybeans are desirable commodities around the world.  Last week, the state’s Department of Agriculture joined Illinois farm groups in announcing the sale of $2.2 billion in Illinois-gown corn and soybeans to the East Asian nation of Taiwan.  Although international diplomatic conditions continue to be a challenge, East Asia is developing increased consumption demands for corn and soybeans to use for vegetable oil, animal feed, and other purposes familiar in the United States.   

BUDGET

September 2019 revenue report filed.  The Illinois revenue report for September 2019 was compiled by the Commission on Government Forecasting and Accountability (COGFA), the General Assembly’s nonpartisan budget-monitoring office.  Income tax receipts continued their healthy trend, with personal income tax payments reaching $2.02 billion in the thirty-day month.  This was an increase of $195 million, or 10.7%, from the $1.825 billion brought in through this pathway in September 2019.  Overall tax revenue was up $257 million on a year-to-year basis, and total revenues were up $757 million.  The substantial increase was paced by increased federal reimbursements, including Medicaid matching funds. 

Non-income-tax lines of recurring revenue, by contrast, were flat in September 2019.  Sales revenues were down $1 million (essentially unchanged on a year-to-year basis), and other taxes on goods and services such as cigarettes, alcohol, insurance policies, and rental cars also showed flat trendlines.  Overall economic trends showed a healthy, mature economy marked by high consumer debt levels, with Illinois residents having borrowed an average of $47,380 from lenders.  Expensive housing costs and heavy mortgage payments could cause Illinois consumer spending to shrink and sales tax revenues to drop in the next economic pause or downturn.

CHICAGO

Museum of Science and Industry gets $125 million donation from Ken Griffin.  In response to the gift, the museum’s governing board has stated that the facility will rename itself in Griffin’s honor.  The 600,000-square foot museum, the United States’ premier facility honoring private-sector technology and economic culture, occupies part of Chicago’s Jackson Park near the lakefront. 

The museum’s board announced that the gift will be placed in the museum’s endowment, with income from the endowment earmarked to create new exhibitions, renovate existing exhibit space, and modernizing the museum building’s massive footprint.  The iconic museum will become the Kenneth C. Griffin Museum of Science and Industry.  Ken Griffin, a Chicago hedge-fund financier and philanthropist, has made major donations to cultural and educational institutions such as the Art Institute of Chicago.

HEALTH

Federal CDC issues vape warning for Illinois.  The warning from the Centers for Disease Control and Prevention (CDC) covers e-cigarette use, and other vaping, in Illinois and Wisconsin among persons with associated lung injury.  In recent weeks, many patients have been diagnosed with respiratory illnesses associated with electronic cartridges, some resulting in death.  As of September 30, four states – Massachusetts, Michigan, New York, and Rhode Island – have enacted partial or total public health bans on e-cigarette products.  Coming under particular scrutiny are so-called “flavored vapes,” products made enticing with menthol or some other flavoring chemical.  Flavored vapes are especially popular with teenagers and young adults.

Federal CDC public health investigators talked to 86 patients in Illinois and Wisconsin to find out more about the outbreak.   More than seventy of the interviewees confessed that they had consumed e-cigarette cartridges illegally loaded with THC, a family of chemicals derived from marijuana, with more than 50 patients reporting using cartridges sold under the name of “Dank Vapes.”   Law enforcement does not know where these prefilled THC cartridges come from, nor what cutting agents and adulterants may have been added to the chemicals to make heating and breathing them attractive and desirable.  The CDC recommends that while this investigation is ongoing, persons “consider refraining from using e-cigarette, or vaping products.”  This recommendation is redoubled for cartridges containing THC chemicals.

HIGHER EDUCATION

Engineering school at University of Illinois at Urbana-Champaign gets big affiliation.  The investment by Foxconn Interconnect Technology, a division of Foxconn, will complete the financing required to build a $100 million artificial-intelligence lab at Urbana-Champaign.  The lab center will be connected to the Grainger College of Engineering, located on the U of I’s flagship Downstate campus.  Personnel at the new Center for Networked Intelligence Components and Environments will be able to turn their hands to a wide variety of cutting-edge challenges, including robotics, nanotechnology production processes, and fuzzy-logic data processing.

The U of I side of the Center’s investment is being fronted by the University’s Discovery Partners Institute, an Urbana-and-Chicago-based high-tech University affiliate.  Foxconn Interconnect Technology and the U of I pointed to Grainger’s nationwide ranking as the #6 engineering school in the U.S., which puts them in a top-10 ranking along with institutions such as Stanford and M.I.T.  Foxconn, the Taiwanese-based global technology giant, is making a major series of investments in the central Midwest, including commitments in Wisconsin.     

MANUFACTURING

Helping manufacturers thrive in Illinois.  Friday, October 4th is Manufacturing Day. Held annually on the first Friday in October, Manufacturing Day helps show the reality of modern manufacturing careers by encouraging thousands of companies and educational institutions around the nation to open their doors to students, parents, teachers and community leaders.

Manufacturing is one of Illinois’ largest economic engines, providing more than 592,000 jobs across the state and accounting for twelve percent of the Gross State Product.

This year, House Republicans led the charge to modernize and make permanent the Manufacturer’s Purchase Credit (MPC) to save Illinois manufacturers more than $40 million and help them thrive in the Land of Lincoln. Under the new law, manufacturers will not pay state or local sales tax on consumables used or consumed in the manufacturing process. These include things like fuel, solvents, coolants, oils, adhesives, hand tools, protective apparel, and fire and safety equipment.

Some of the biggest improvements made to the MPC:

  • It is permanent and modernized. The new law provides certainty as the previous MPC had been turned on and off several times.
  • It exempts manufacturers from paying both state and local sales tax, whereas before it only applied to state tax. 
  • It is simplified – manufacturers simply will be exempt from paying taxes on these consumables. The previous MPC was a very convoluted process where companies “earned MPC” for buying machinery and equipment. That MPC could then be used to offset the cost of these consumables. Now that MPC is part of the Manufacturing Machinery & Equipment (MME) it is much simpler and straightforward making it easier for companies to use.

ILLINOIS HERITAGE

“Eternal Indian” landmark sculpture to get much-needed facelift.  Sculptor Lorado Taft (an Illinois native and alumni of Illinois Industrial University, the forerunner of the University of Illinois) created the 48-foot-tall “The Eternal Indian” statue as a tribute to Native Americans.  It was inspired in part by the life of Black Hawk (1767–1838), a leader and warrior of the Sauk.  Sited atop a bluff in Illinois’ Lowden State Park, it looks down on the Rock River valley for which Black Hawk fought in 1832.  The statue was dedicated in 1911 and was listed on the National Register of Historic Places in 2009.

The sculptural monolith, erected more than a century ago by Taft and his team, has been affected by freezing and thawing cycles as water trickled into the concrete.  For many years, the crumbling sculpture has been protected with a plastic tarp.  A partnership of contributions from generous private donors, and funds from the Illinois Department of Natural Resources (IDNR) as custodian of the state park, are now combining to bring “The Eternal Indian” back to life.    

“The statue is such an iconic site for the communities of Oregon, Ogle County, and all of Northern Illinois,” said Rep. Tom Demmer, whose district includes Lowden State Park.  “To see the statue up there, but covered in shrink wrap every winter for the last several years to protect it from further erosion and damage, it’s a reminder that what’s underneath there is something everybody really looks up to.”

The renovations, when finished, could also boost tourism in the area.

“There’s a couple of state parks in that area that generate a significant amount of tourism for the community,” Demmer said. “A huge number of visitors who come to town for outdoor activities. Really, the Black Hawk statue is the crown of the area.”