Illinois State Tax Revenues Drop Following Affiliate Nexus Tax
17th March 2012
Illinois had an optimistic outlook when it passed House Bill 3659, which was the state’s affiliate nexus tax. Bill co-sponsor Senator John Cullerton anticipated the new would generate an additional $150 million in much-needed revenues. As the Chicagoist reported today, the reality looks far more grim.
January thruough June 2011, the months before the law went into effect saw the Illinois Department of Revenue collect approximately $139 million use tax. From July 2011 through the end of the year, Illinois collected $127 million in use tax. That’s right, Illinois collected less use tax after their affiliate nexus tax went into effect.
Politicians just don’t grasp that people respond to incentives. The see a stream of money going by and figure that if they start wetting their beaks (hell, dipping out big bucketfuls) the stream will continue as if nothing is happening. This is like thinking that a dog will run just as fast pulling you as it will by itself.
Amazon.com and Overstock.com, two of the biggest affiliate programs online, terminated their affiliate programs in Illinois, just like they have in most other states, meaning they avoided the new tax law completely. That also has the side effect of reducing potential income tax revenue from affiliates.
FatWallet, Inc, a coupon site formerly located in Rockton, IL, moved to Wisconsin to avoid the taxes, taking over 50 jobs and any associated taxes with them.
My, what a surprise. Aren’t you surprised? I’m sure surprised.