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 Remember the soda tax? It may go down as the shortest-lived tax
hike in Illinois history, lasting just four months in 2017.
The political ripple effects are still felt today. Some claim Toni Preckwinkle
would be Chicago’s mayor if not for her sugar sweetened beverage tax.
But new research shows her tax did exactly what it set out to do. And state
lawmakers should take note.
Researchers at the University of Illinois at Chicago School of Public Health
were able to get ahold of barcode-level sales data at stores across Cook County
and neighboring counties, and measure what happened when certain sugary drinks
got slapped with the one cent-per-ounce tax.
The report showed from August to November 2017, when the tax was in effect, the
amount of soda sold in Cook County dropped 27%. But there was a catch. The
report found a significant increase in cross-border shopping to avoid the tax.
When taking those sales into account, the decline leveled out to 21%.
It’s important to note this doesn’t mean Cook County got healthier. Other
studies have found that people who switch off of soda often substitute that
sugar elsewhere in their diet.
But there’s no doubt: the county taxed soda more, so people bought less of it.
It’s a simple lesson. So why doesn’t Springfield get it?
This week, personal finance website WalletHub ranked Illinois property taxes the
second-highest in the nation for the third year in a row. Residents here pay
nearly $4,300 in property taxes on the median home worth $187,200.
It wasn’t always that way. In the mid-1990s, Illinois ranked in the middle of
the pack nationally for its property tax burden. But absurd pension promises
changed that, diverting state money from classrooms into generous retirement
packages and forcing property tax hikes to pick up the slack. One example
recently surfaced in the wealthy Chicago suburb of Hinsdale, where a
superintendent who retired at age 55 is receiving a state taxpayer-backed
pension of $315,000. Pension costs have taken about 50 cents of every additional
property tax dollar during the past two decades.
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Just like the soda tax, higher taxes without better
services discourage buyers.
So it’s unsurprising Illinois home price growth was the slowest in
the nation last year, according to federal data.
Gov. J.B. Pritzker says his $3.7 billion
progressive income tax proposal will lower property taxes. So voters
should approve it in November. After all, his introductory new rates
only hike taxes on the top 3% of earners, meaning those who take
home $250,000 a year or more.
But Pritzker’s plan offers no guarantee of lower property taxes,
just words. A progressive income tax hike won’t lower property
taxes.
Need proof? New Jersey has one of the most progressive tax
structures in the country, yet it’s the only state with higher
property taxes than Illinois. Meanwhile, every state with no income
tax at all has lower property taxes than Illinois.
Here’s the other big problem: the top 3% are already the most likely
to leave.
IRS data show people earning more than $200,000 (the highest bracket
they track) are nearly twice as likely to leave the state as the
average Illinoisan, and more likely than any other income bracket.
New York was the only state to see a higher share of residents
making more than $200,000 leave in tax year 2018 than left Illinois.
New York Gov. Andrew Cuomo put it this way: “‘Tax the rich! Tax the
rich! Tax the rich!’ We did. Now, God forbid, the rich leave.”
California is taxing people out of the state as well. A recent paper
from Stanford University researchers showed wealthy Californians
were about 40% more likely to leave after a progressive income tax
hike passed in 2012.
Pritzker’s office doesn’t believe tax hikes change behavior. Not
even on the group that’s already most likely to leave.
Maybe the soda tax was misguided, but at least Cook County
politicians understood tax hikes have consequences.
Illinoisans should know the same.
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