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News Wednesday March 3rd, 2010, 6:26pm

Moody's Endorses Expanding Sales Tax To Services

In their latest "economic forecast" report compiled for the Illinois Commission on Government Forecasting & Accountability, Moody's endorsed a longstanding Democratic proposal to extend the state sales taxes to various services (currently it only applies to goods).  An excerpt:

A proposal by the State of Illinois to raise taxes through a broad-based services tax would garner $3.6 billion to $7.3 billion in revenues. The proposed tax, designed to improve the state's revenue generating capacity, will help lift the state from its current fiscal woes, which have nearly doubled the average time the state takes to pay accounts payable and led to several rounds of downgrades for the state's bond rating, which has in turn raised the cost of borrowing. A services tax is aimed at drawing revenues from some of the state's fastest-growing and most dynamic industries and relieving some of the burden from historically strong but contracting industries such as manufacturing. Fears that services taxes will push away critical industries may be misplaced; other states with strong financial and corporate headquarters industries such as South Dakota and Delaware also heavily tax services.

House Bill 174 -- which the Senate Democrats passed last spring and which the Responsible Budget Coalition is currently pushing in Springfield -- would apply the sales tax to numerous services.  A COFGA report (PDF) released last fall contemplated expanding the tax to a broader range of services and that's likely what Moody's was referring to in the passage above.

You can peruse the full report below (the excerpt above can be found on page 32):

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