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THE
DAMAGING EFFECTS OF CHICAGOLAND’S LATEST TAX HIKES
Illinois Policy Institute
Chicagoans have been burdened with a slew
of new taxes and the full damage has yet to be felt. A state income tax
hike, like the one proposed in the Illinois Senate’s so-called “grand
bargain,” would only further harm struggling Chicagoans.
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 Chicagoans have been under heavy strain over the past decade. They’ve faced
increased violence, weak job growth and the incompetence of Chicago-area
governments, from Cook County to Chicago Public Schools. City residents continue
to face ever-higher taxes and fees – the highest in Illinois – as the
dysfunction gets worse.
That’s forced residents of all stripes – from millionaires to middle- and
working-class residents – to abandon the city in recent years. Not only did
Chicago’s population shrink from 2000 to 2010, but the entire Chicago metro area
has also shrunk for two years in a row. In all, Chicago’s population is at
levels not seen since 1920.
Unfortunately, things are about to get worse for city residents.
That’s because Chicagoans have yet to feel the full impact of the city and the
county’s recent attempts to tax their way out of their structural problems. And
if some in the Illinois General Assembly get their way, Chicagoans will have to
deal with a multibillion-dollar income tax hike from the state.
Cook County, Chicago Public Schools and the City of Chicago have passed a
laundry list of new taxes in the last three years. Their hikes were massive,
uncoordinated actions designed to paper over each individual government’s budget
crisis.
Unfortunately, all those new tax dollars come from just one place: overburdened
Chicagoans.
The 2015 Chicago property tax hike alone costs the average homeowner an
additional $500 a year. That’s on top of the city’s new utility taxes, garbage
collection fees and Cook County’s sales tax hike that are all pinching
Chicagoan’s strained wallets.
Once these new taxes takes full effect, the city will face a reckoning as
residents flee to places with that offer greater opportunities and smaller tax
burdens.
A deluge of tax hikes
- The City of Chicago enacted numerous tax increases over the past two
years. The city is hitting residents with a multi-billion dollar burden to
shore up Chicago’s broken pension systems, not to provide new services. The
city passed:
- A record $700 million-plus set of tax hikes in 2015, including:
- A property tax hike of $318 million in 2015 that will rise to a
total of $543 million a year by 2018. The tax is meant to partially
pay for the city’s virtually insolvent police and fire pension
funds.
- An additional $45 million in property taxes to pay for capital
projects at CPS.
- An additional $62.7 million from a new garbage collection fee.
- $60 million in new fees on taxis and ride-hailing services, such
as Uber and Lyft
- $13 million from higher building-permit fees
- $1 million from a tax on e-cigarettes
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- A $50 million increase on 911 fees, effective in 2015,
to pay for city laborers pensions.
- A new $12 million tax on plastic bags in 2017.
- A new $40 million “Netflix” tax on movie streaming and
other media in 2015
- A tax on water and sewer utilities that will raise $56
million in 2017 and nearly $240 million annually by 2020.
- Chicago’s Park District also hiked parking, harbor and
program fees by over a $1 million in 2017.
- Chicago Public Schools officials, trapped in a financial
crisis of their own making, have hiked taxes on Chicagoans as
well. CPS increased property taxes by $250 million in 2016 to
pay for teachers’ pensions. That doesn’t include the billions in
future taxes Chicagoans are on the hook for due to CPS’ massive
borrowing.
- Cook County has also hiked a number of taxes over the past
two years, including:
- A new $74 million sweetened beverage sales tax taking
effect in July 2017.
- A $474 million, 1 percent sales tax increase in 2016.
With the increase, Chicago’s combined sales-tax rose to
10.25 percent, the highest combined sales tax rate of any
large city in the nation.
- A new $16 million, 1 percent tax on hotels. The new tax
pushed the combined hotel tax burden in Chicago to 17.4
percent – among the top five highest rates in the nation.
- $6.5 million a year from new fees on e-cigarette liquids
and lawsuit filing.
- A new $750,000, 3 percent amusement tax on
ticket-reselling websites in 2016.
These tax hikes aren’t dedicated to creating better schools,
safer streets or a better jobs climate for Chicagoans. If they were,
residents might be more willing to stick around. Instead, the
overwhelming majority of the hikes are paying for the Chicago area’s
massive pension crisis.
And if the Illinois Senate gets its way, Chicagoans will have to
deal with a round of tax hikes from the state. The “grand bargain”
budget threatens to hit Illinoisans with billions in new tax hikes.
Another tax increase on top of what’s already been imposed will only
push more Chicagoans to flee the state altogether.
Politicians at both the state and city level think it’s easier to
pass the bill to taxpayers than to actually tackle the reforms
necessary to fix the fundamental problems in government.
But that’s shortsighted thinking. Chicagoans are fed up with their
high-tax environment. The more residents are burdened and feel like
they are getting a bad deal, the more likely those who can will
leave to find better opportunities elsewhere.
Chicagoans don’t need more tax hikes. They need spending reforms.
That’s why the Illinois Policy Institute has provided a reform road
map for Illinois government. The plan provides tax relief to
struggling homeowners through a comprehensive property tax reform
package, implements reforms that begin an end to the pension crisis,
and enacts major reforms to spending on healthcare and government
worker compensation.
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