Given the budgetary problems of the state of Illinois, Cook County, and the City of Chicago, it certainly looks as though tax increases in the form of increases in the sales tax, property taxes, and fees are in our future:
Now comes Daley with a $293 million bundle of tax, fee and fine increases, including the city’s largest-ever property tax increase, to finance an operation stinking with corruption and looting. Daley says blame the aldermen knocking on his “side door” for the goodies. Well, blame whomever; Daley is giving it away to somebody.
His 2008 budget would increase expenditures by more than 5 percent, and over two years by $700 million or 12 percent. Daley laughably suggests that Chicagoans should be happy with the higher taxes because they’ll get some new neighborhood libraries. More likely, the taxes will pay for such deplorable decisions as the 10-year labor contracts handed to 33 trade unions representing 8,000 city workers. Building-trade workers will continue to be paid the costly “prevailing wage,” while others will get annual raises averaging as much as 4 percent. Just coincidentally, the contracts would guarantee labor peace through the 2016 Olympics, in effect, imposing a hidden Games tax.
This piano-load of new taxes lands on Chicagoans and their visitors as they already are paying some of the nation’s highest taxes and fees. That’s thanks to the current $5 billion budget that imposed increases of about $75 million in taxes and $11 million in fees. How tempting it is to observe that the people who have driven the city, county and state governments into their worst financial smashup in memory are Democrats, raising the question of whether Democrats are congenitally incapable of governing. Are they mathematically challenged, having been denied the basic adding and subtracting skills by the touchy-feely education they so love? Are they so insecure that they can’t say no to anyone who wants a touch of our taxes, because they might be accused of lacking compassion?
One of the reasons Mayor Daley has given for the mammoth property tax hike is, as I have been predicting, that the city can’t expect automatic raises due to increased valuation the way it has for so long.
The tax increases are receiving some resistance:
After taking five days of heat from livid constituents, Chicago aldermen put Mayor Daley’s budget team on notice Monday: They’re not about to approve a $293 million tax package that includes the largest property tax increase in Chicago history.
The mayor’s tax plan came under siege from aldermen demanding alternatives to the $108 million property tax increase. Good thing Daley invited revenue suggestions. He got plenty of them.
They ranged from privatizing recycling, installing more red light cameras, taxing plastic bags, billboards and food handlers, to raiding Chicago Skyway funds and requiring the city’s 156 tax increment financing districts to reimburse taxpayers for city services.
One alderman even dared to propose cuts to a Chicago Police Department budget he claimed was laden with “fat.”
Aldermen drew a line in the sand against the record property tax increase even after Budget Director Bennett Johnson revised downward — from $100 to $80 — the annual impact on the owner of a $250,000 home, now that property tax assessment increases have been capped.
The Country’s favored approach is a hike in the sales tax:
Going to the store, filling up at the gas pump, parking downtown, talking on the phone or even warming up your furnace could cost more in order to help cover Cook County’s 2008 budget.
Board President Todd Stroger is set to unveil his $3 billion budget on Wednesday, but already commissioners are buzzing about what they say Stroger will propose.
In a series of meetings Monday, Stroger told commissioners what to expect.
Property taxes would be hiked to pay for the Forest Preserve District. To pay for county government, Stroger is considering doubling the county gas tax to 12 cents a gallon, doubling the downtown parking tax to about $40 for monthly users and possibly renewing a push for an increased sales tax, just weeks after commissioners shot down a 2 percentage point hike.
Already on the table are hikes to utility and phone bills. “Everything’s on the table,” Commissioner Mike Quigley said.
There are likely to be hundreds more employees added to the county payroll to meet public safety needs. “It looks like we’re off our diet,” Commissioner Tim Schneider said.
And while the deficit was pegged at $307 million, commissioners now say they’re facing a $230 million hole, thanks to some adjustments.
Adding a wrinkle to the budget debate is a critical presentation today from the health community concluding that the county hospital system has been so mismanaged, control should be put in the hands of an independent, medical panel.
One doesn’t know whether to laugh or to cry. This isn’t 1950. It isn’t even 1980. Sales tax increases won’t have the effects they’re hoping for and will have lots of effects they don’t want. Lots of retail businesses these days are operating on very narrow margins—2% or less. That includes computes and consumer electronics as well of dozens of other kinds of retail. An increase in the sales tax when your margins are that low means the difference between profitability and loss. The effect of a 2% increase in the sales tax will be to drive retail out of the county. They’ll go to neighboring counties but, more likely, to the sales tax-free Internet. If it doesn’t drive people to the Internet, it will drive people to literally drive longer distances to places with lower taxes. That’s one of the things I mean when I complain about subsidies to gas consumption.
Property taxes, on the other hand, at least in Illinois where there are triennial reassessments, are basically a tax on income you haven’t received yet. They fall hardest on those least able to pay—those in the lower income quintiles and those on fixed incomes who are, presumably, people that the Democrats in the state legislature, country board, and city council would want to help. Beware the unforeseen effects of exempting certain classes of people from property tax increases!
What won’t be considered is what’s really necessary: a signfiicant course correction in how government services are provided and a realignment in the relationship between government and government employees. These are reforms that private industry was compelled by the forces of competition to undertake decades ago but government has never needed to face.
