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 It wasn’t quite the Boston Tea Party, but Cook County residents
revolted in 2017 after a penny-per-ounce tax hike on sugary drinks.
The infamous “soda tax” was barely a blip in residents’ total tax bills, which
are among the highest in the nation. But they felt abused, they called their
county commissioners and the tax hike was ultimately repealed. Some credit that
tax with ending Cook County Commissioner Toni Preckwinkle’s chance to become
mayor of Chicago.
Similar frustrations are brewing statewide with a tax hike set to drop Jan. 1.
While it’s not on a purchase as common as a Coke, the new scheme will set some
drivers back $1,000 or more.
Illinois will impose a new sales tax on vehicle trade-ins beginning New Year’s
Day. That’s why car dealerships have been running radio ads for weeks telling
Illinoisans to come on down before the ball drops.
 Here’s how it works.
Take an Illinoisan trading in her car valued at $20,000 to buy a new vehicle for
$35,000. Right now, she pays sales tax on the difference between the trade-in
and the new car: $15,000. Applying Illinois’ average state and local sales tax
rate of 8.74%, the sales tax on this deal is $1,311.
The sales tax bill on that same deal will go up nearly $900 next year.
Beginning Jan. 1, a maximum of $10,000 in trade-in value will be exempt from the
sales tax. So in our example, instead of paying sales tax on $15,000, she’ll
have to pay sales tax on $25,000.
“You already paid sales tax when you bought the vehicle the first time around,”
said Pete Sander, president of the Illinois Automobile Dealers Association.
And now you’ll be taxed when you sell it. This unfair double taxation is why
Illinois first exempted trade-ins from sales taxes in the 1950s.
The new tax is expected to raise $60 million for Gov. J.B. Pritzker’s capital
plan. The Illinois Policy Institute identified $1.4 billionof waste and pork in
that plan, including dog parks, swimming pools, snowmobile paths, pickleball
courts and a privately owned theater.
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Due to other tax hikes signed into law this year,
residents won’t just pay more to sell their car. They’ll also pay
more to drive it, park it and get a license plate sticker.
Keep that in mind as the governor promotes his
progressive income tax hike throughout 2020. Voters will decide in
November whether to axe the state’s constitutional flat income tax
protection in favor of Pritzker’s progressive income tax. He calls
his $3.4 billion tax hike proposal the “fair tax,” because
initially, Pritzker’s proposed income tax rates only hike taxes on
individuals making over $250,000 a year.
Everyone else’s income tax bill stays the same or goes down, the TV
commercials will say. And there will be a lot of them. Pritzker
dropped $5 million into a ballot committee promoting the tax earlier
this month.
Here’s what those ads won’t mention: Pritzker’s plan doesn’t even
relieve Illinoisans of the tax hikes he’s already passed.
Under Pritzker’s proposed progressive tax system, a married couple
in Illinois with two kids earning the $79,168 median annual income
and paying the average property tax bill of $4,157 would see $195 in
income tax relief.
But if that family has two cars, they’re in the red.
The registration fee for regular passenger vehicles will jump to
$151 from $101 on Jan. 1. When combining that $50 hike with the
doubled state gas tax, a typical family with two cars will pay $300
more each year just on their vehicles. That’s before adding in the
state’s new parking tax. And forget about the trade-in tax.
Pritzker has more than wiped out any promised savings. And unlike
the Cook County soda tax, voters have likely lost their chance to
repeal the trade-in tax, for now.
But they need only wait until November to voice their opinion on
Illinois tax hikes at large.
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