Proposed Tax Hike Would Give Chicago Nation’s Highest Sales Tax Burden

Published September 26, 2007

Chicago would end up with an 11-percent sales tax rate, highest in the nation, if Cook County officials go through with a plan to more than triple the county’s portion of the area’s sales tax.

Cook County President Todd Stroger (D) has scheduled a special meeting of the county board for Oct. 1 to discuss the tax hike.

The proposal calls for raising the Cook County sales tax from 0.75 percent to 2.75 percent. That tax hike would be added to existing city, county, state and regional transit sales taxes that total 9 percent in Chicago.

The new 11 percent sales tax would come on top of a special restaurant tax that funds Chicago’s McCormick Place and Navy Pier, for a total tax of 12 percent on restaurant meals and beverages in downtown Chicago. Businesspeople, as well as some Cook County Commissioners, have come out against the tax hike proposal, which Commissioner Joan Murphy (D) introduced September 18. In an interview with the local ABC television news station, Murphy said she doubts the tax hike would affect local businesses. “Cook County is a destination place,” she said. “We have great conventions and conferences here. The sales tax is going up to two and three-quarters percent. That’s not a back-breaking increase.” Opposition Brewing “I can’t imagine having the highest sales tax in the nation would be good for anyone,” said Rob Karr, vice president of government and member relations at the Illinois Retail Merchants Association. He said such a high sales tax would give people more reasons to do business outside Chicago and Cook County. It would also raise costs for shoppers who continue doing business in the city and county.

“I will vigorously be opposing all tax increases,” said Cook County Commissioner Tony Peraica (R), who unsuccessfully challenged Stroger for board president in 2006. “I have a resolution pending right now to put a moratorium on all tax increases in fiscal ’08. I believe $3.1 billion [the current Cook County budget] is more than enough to meet our statutory and moral obligations.”

More Tax Targets Lined Up Commissioner William Beavers (D) has also proposed tax hikes on telephone service (wireless and landline) and utility services, but there is no hearing set for those tax hike proposals.

Peraica said he is especially bothered by the idea of raising taxes when Cook County government continues to allow large amounts of “waste and corruption” and “lack of accountability.” “I think these tax hikes all are unnecessary, counterproductive, and would harm low-income consumers who must purchase necessities,” Peraica said. “I find it ironic that as people [in county government] claim to want to protect the working poor and indigent, they are looking for ways to tax them to death.”

Earlier Tax Hike Hurt Sales Peraica noted that Cook County doubled its cigarette tax to $2 a pack in 2006 and has come up millions of dollars below revenue projections because smokers have cut consumption or are buying cigarettes outside the county. He said the same thing could happen with a higher sales tax that prompts people to shop outside the county.

County officials have not provided estimates of how much additional money they expect the sales tax hike to raise, but the current sales tax brings in about $300 million a year. The tax hike proposal is being made before the presentation of a proposed 2008 budget. So there is no official estimate of the county’s financial position.

“The president supports ways to increase revenue wherever possible,” Stroger spokeswoman Ibis Antongiorgi told the Chicago Tribune. “This would be a possible revenue source.”

Commissioner John Daley (D), a Stroger ally, serves as chairman of the Cook County Board’s Finance Committee. He is also the brother of Chicago Mayor Richard Daley. Mayor Daley’s office did not return calls for comment on the possibility the city would have the highest sales tax in the nation.

Further Tax Hike Possible Chicago’s sales tax could go higher still if state lawmakers follow through on a proposal to hike the regional transit sales tax. That plan calls for doubling the transit sales tax in Cook County from 0.25 percent to 0.50 percent and tripling the transit sales tax in suburban Cook and five other suburban counties to 0.75 percent.

All this talk of higher sales taxes worries John Maxson, president of the Greater North Michigan Avenue Association. The organization represents 740 members including some of the city’s premiere hotels, restaurants, and retailers in an area known as “The Magnificent Mile.”

Mag Mile Businesses Fear Harm “We feel this is another step to disadvantage a generous economic engine that has helped fuel Chicago and Cook County over the years,” Maxson said. “We compete with other venues around the country like Orlando, Las Vegas, and other streets where communities have invested in a premiere hospitality and retail venue like ours. We also compete with shopping malls outside Cook County borders.

“Once word gets out this is the highest-taxed area, it will be detrimental, particularly to attracting big conventions,” Maxson said. “When you’re spending millions of dollars in Chicago on destination-related things, the tax makes a big difference.”

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

In Other Words

[H]ere stands [Cook County Board President] Todd Stroger, having not yet proposed a 2008 budget, but scoping out how much new revenue he can collect. As if to say: Once we know how much we can get, we’ll let you know how we intend to spend it. Rather than the other way around.

A government whose house is not in order hasn’t earned the public’s trust. And without that trust, that government can’t ask taxpayers for more money.

As is, nobody trusts Cook County or the people who run it. And why should they?

Chicago Tribune editorial, September 26, 2007