SPRINGFIELD – To the relief of the agriculture community, Senate President Emil Jones, D-Chicago, announced on Thursday that the proposal to start charging sales tax on farm feed, seed, fertilizer and chemical purchases was "off the table" in state budget negotiations as far as he was concerned.
"The hardship that the repeal of these state tax exemptions would place on Illinois farmers and farm communities far outweighs the additional revenue it would bring to the state," Jones said in a written release.
Gov. Rod Blagojevich proposed the tax in his budget for the year beginning July 1, saying he could save as much as $29 million by closing what he called a "loophole" in the tax code.
Current law provides a sales tax exemption to all farmers purchasing those kinds of products, but the governor wanted farmers with a gross agricultural income of more than $1 million to start paying the tax.
"The governor supports the budget he outlined," Blagojevich spokeswoman Rebecca Rausch said on Thursday. "That's how he envisioned to best balance the budget and fund our key priorities. Since then, the governor has heard some specific concerns, and so the administration is working right now to try to address those concerns as they relate to this tax on farm feed, seed and chemicals."
Many in the agriculture community have questioned the governor's revenue estimate, saying that large farms would either split up into smaller operations to stay below the $1 million in income, or buy their feed, seed, chemical and fertilizer out of state.
Jones said the hardship the tax would place on the agriculture industry "far outweighs" the revenue it would generate.
Budget negotiations are not final, and House Speaker Michael Madigan, D-Chicago, has yet to take a position on the proposed tax, but his spokesman, Steve Brown, said Jones' position will certainly have an impact.
"I think it's a pretty strong statement," Brown said. "When a leader says no, that usually means it's done."
State Rep. Shane Cultra, R-Onarga, whose district includes 52 rural East Central Illinois towns that are mainly supported by agriculture, said Jones' statement was good news.
"That's great," Cultra said. "Considering agriculture is the No. 1 industry in this state, it only makes sense that this would happen."
He said the governor's proposal has been a top concern of many who live in his district.
"Even farmers who do not qualify now worried that the income limit would soon be lowered to include them," Cultra said.
The Illinois Farm Bureau has been fighting the tax plan, contending that since the purpose of the Illinois sales tax is to tax the final retail sale of goods, charging sales tax on inputs farmers need to produce their goods is essentially double taxation.
The bureau estimated the tax change would increase affected farmers' costs for corn by about $7.63 per acre and $4.59 per acre for soybeans, which would in turn drive up costs for livestock farmers by as much as $3.37 per pig and $91 per dairy cow.
"Farmers throughout my district have contacted me on this issue," said state Sen. Gary Forby, D-Benton. "I've received hundreds of calls and letters. This doesn't just impact family farms; it impacts every small business, every school, every corner grocery store."
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