Tax Burden Punishes the Poor, Kills Jobs

Published July 8, 2005

It’s time for a tea party, Chicago.

On July 1, the tax burden shouldered by city residents grew heavier, when merchants began to charge a whopping 9 percent sales tax. That is up from 8.75 percent–already one of the highest sales tax burdens in the nation.

Mayor Richard M. Daley and the city council pushed through the sales tax hike–one of many tax and fee hikes–in the budget that took effect January 1. They delayed the effective date of the sales tax hike until July 1 … ironically, just three days before Independence Day.

Residents of Chicago already suffer under a heavy burden of Cook County real estate taxes and excise taxes on cigarettes and alcohol. Now Chicago ranks as a national leader in the hiking of sales taxes against its own citizens. The increase places the sales tax burden in Chicago two percentage points higher than in Oak Brook and a quarter point higher than in Skokie.

Recently, a policy analyst at the Beacon Hill Institute at Suffolk University in Boston–home of the original anti-tax tea party–used an economic model to show that a sales tax increase of 1 percent would result in the loss of approximately 10,000 jobs in Illinois, with the retail sector showing the largest decline.

These jobs are often held by low- and moderate-income citizens, seniors, and students who already struggle on low wages. Not only does the increase in sales taxes kill jobs, it also substantially lowers disposable income for the lower-income groups, because each purchase they make, even of essentials, now costs more.

But that’s not the whole story about unfair higher taxation in the Land of Lincoln. A Chicago Sun-Times report ( finds Illinois also has the dubious distinction of having what Rob Carr of the Illinois Retail Merchants Association called the “the most complicated sales tax system in the country–hands down.”

A diaper for a newborn is taxed at taxed at 6.25 percent. A diaper for an incontinent octogenarian is taxed at 1 percent. From cradle to grave we are meandering in a maze of ridiculously complicated taxation. The Illinois Retail Merchants Association has expressed its surprise that we are not overcharged even more, since politicians often think the answer is to raise taxes on certain items whose buyers won’t protest too loudly.

Proponents of uniform sales tax rates for all items, including State Sen. Steve Rauschenberger (who considers a blanket 6.25 percent sales tax about right), say any tax increase that might result from such a reform should be offset by an increase in the personal exemption on state income taxes.

In the meantime, the left hand is taxing us while the right hand does not know what to do. The City of Chicago raises your sales tax rates, and the State of Illinois confuses the issue so badly that you rarely pay the correct sales tax amount. With leadership like this, we are all at the mercy of political whim and back-room dealing.

Care to join me at Monroe Harbor?

Ralph W. Conner ([email protected]) is public affairs director of The Heartland Institute and former mayor of Maywood, Illinois.