Although I avoid commenting on the goings-on in states other than the one in which I live, I like observing the coverage of my state in out-of-state publications. In this case the editors of the Wall Street Journal are quite critical of Gov. Pritzker’s new taxes. They remark:
Mr. Pritzker boasts that the budget increases spending on welfare programs, “all without raising taxes on working people.” How does he define “working people”? The broad-based digital taxes are sure to whack most of the state’s 12.7 million residents.
Start with a new progressive tax on social-media platforms that is levied based on their number of active monthly users in the state. The murky legislative language could sweep in Yelp, Nextdoor and Substack. Platforms with at least one million users would pay a top marginal rate of $6 a year per Illinois user, while smaller platforms would pay $1.20 for each user.
The tax will encourage companies to put more services behind paywalls, reduce creator monetization opportunities and raise prices on in-state advertising. “It turns the internet into more of a ‘walled garden,’ since free accounts become increasingly costly to provide,” the Tax Foundation says. Illinois residents will pay the tax one way or another.
I wonder whether the governor’s office asked companies such as Facebook or Yelp how they would respond to taxes of this sort. Businesses rarely absorb new costs indefinitely; they change prices, change services, or change where they do business. It is also worth asking how the administration would respond if some companies simply chose not to offer free services in Illinois or restricted access altogether. That would hardly help if Gov. Pritzker eventually seeks national office.
There are more:
The budget also includes a new 10% gross receipts tax on providers of targeted digital ads in the state. The tax is aimed at the likes of Google, Meta and TikTok, but it will invariably be passed along to businesses that buy ads. Think the mom-and-pop taqueria, bike shop or dry cleaner.
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The state is also imposing a first-of-its-kind 0.2% tax on digital asset transfers in the state. Sell $10,000 in Bitcoin, and you will owe $20. Expect the tax rate to grow as Democrats scrounge for more revenue. Ditto a new 1.75% tax on sports bets made on prediction markets, and a 15% tax on receipts of fantasy sports operators.
Here’s the editors’ interpretation of these actions:
Democrats in Springfield like these digital taxes because they apply to activity that is less mobile than income or corporate taxes. They also figure that most voters won’t notice since they will occur on transactions mediated by business. But they tell you what Mr. Pritzker’s priorities are as he prepares to argue that Illinois policies are right for the entire country.
His priorities seem clear enough. Faced with growing expenditures, the administration has chosen to expand the tax base rather than restrain spending. On a side note Gov. Pritzker frequently notes that he has balanced the budget every year he has been in office. The Illinois Constitution requires him to do exactly that. I’ve never thought to list the misconduct I didn’t commit on my résumé but perhaps I’ve been underselling myself.
