Chicago Taxes Jump $530 Million to Pay for Mass Transit

Published April 1, 2008

A year after Illinois lawmakers began discussing a plan to bail out the Chicago region’s mass transit system, the final piece of the plan fell into place.

The Chicago City Council in February enacted a real estate transfer tax increase, proceeds of which are to go to the Chicago Transit Authority. The action came several weeks after state lawmakers approved an increase in the transit portion of the sales tax in Chicago, Cook County (which includes Chicago), and five neighboring counties.

In total the Regional Transportation Authority, which oversees the Chicago Transit Authority and the suburban commuter rail and bus systems, will receive an estimated $530 million of additional revenue per year.

Sales Tax Will Triple

The sales tax in Cook County will double from 0.25 percent to 0.50 percent. It will triple in DuPage, Kane, Lake, McHenry, and Will counties from 0.25 percent to 0.75 percent. The tax hikes take effect April 1.

Also taking effect April 1 will be the real estate transfer tax increase in Chicago. The tax, paid by property buyers, will rise from $7.50 per $1,000 of sale price to $10.50 per $1,000, a 40 percent increase.

The months-long fight over how to pump money into the Chicago and regional mass transit system involved open defiance of Gov. Rod Blagojevich (D) by lawmakers in his own party, including Speaker of the House Michael Madigan (D-Chicago), who refused to attend some special sessions the governor called.

As a January 20 deadline for cutbacks in service and fare hikes loomed, lawmakers finally reached agreement. In brokering it, Blagojevich broke a longstanding promise to oppose any sales tax hike.

Free Rides, Fare Hikes

Blagojevich also pushed through a provision allowing all senior citizens in the state free mass transit rides, regardless of their income or financial assets.

Barely one day after the deal was announced, Chicago transit officials acknowledged the free-rides-for-seniors provision would cost about $30 million–double the estimate the governor gave when pushing for the provision–and would force fares to be raised to cover the loss of revenue.

A deal to garner some suburban lawmakers’ votes steers half the sales tax increase in the suburban counties to the county boards.

Many suburban lawmakers and taxpayers fumed over that provision. State Rep. Jack Franks (D-Woodstock) promised to bring legislation to force each of the suburban county boards to vote to accept the additional sales tax money, or that portion of the sales tax hike would not go through.

To do otherwise, Franks argues, would mean county officials were imposing a backdoor tax hike on their constituents.

Almost Nothing for Suburbs

Franks’ counterpart on the Republican side of the aisle, State Rep. Mike Tryon (R-Crystal Lake), was likewise unhappy about the deal.

In a letter to constituents, Tryon pointed out the deal “increases our tax burden higher than Chicago’s, with only a small fraction of our residents using a mass transit system.”

Tryon added, “This tax increase will come with no expansion of services, no additional routes for McHenry County, no decrease in commuting time, and no road or infrastructure improvements in McHenry County.”

John Tillman, CEO of the Illinois Policy Institute, a free market-oriented policy organization, said, “Governor Blagojevich’s so-called ‘free rides’ for senior citizens illustrate his cavalier attitude and disrespect for taxpayers. He seems to think he is playing the role of Robin Hood. Unfortunately, he’s not stealing from the rich, but rather the poor and working class who bear the brunt of one of the nation’s highest sales tax burdens.”

Blagojevich sprang the free rides provision at the last minute, threatening a shutdown of some transit lines and service cutbacks on other lines unless lawmakers accepted the provision.

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Budget & Tax News.