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  • Chicago Sales Tax Hike Proposed

    Posted by Carl from Chicago on September 27th, 2007 (All posts by )

    It is sad when two of my more depressing prophecy-type posts intersect…

    Cook County is the vast county within which the city of Chicago resides, along with a large number of affluent suburbs. Cook County has a population of over 5 million and is the 2nd largest county in terms of population in the United States.

    In this post from March of 2007 I discussed how a succession movement could be in the future of Cook County. Specifically, I noted how the huge expenses of maintaining hospitals was burdening the county and killing their ability to live within a balanced budget.

    In this post from December 2006 I went through sales taxes, which are among the most regressive taxes in the arsenal of tax tools and the fact that Cook County and the City of Chicago have one of the highest and most unfavorable sales tax regimes in the country.

    Now, in a single article in the Chicago Tribune titled “County Urged To Boost Sales Tax – City Total Would be 11% Under Plan” dated September 25, 2007 shows the likely intersection of these negative trends. Todd Stroger, the epitome of political nepotism, who campaigned on a plan to streamline the bloated Cook County work force, has done nothing of the sort and is now looking about for a revenue boost to cover the inevitable annual increases in expense growth.

    The line from Mayor Daley says it all – “A sales tax is a hard pill, but how do we fund three hospitals?”

    Chicago will have the highest sales tax rate in the nation (it is among the highest in the nation today, at 9%, before the 2% proposed boost). Sales taxes hit the poor particularly hard because they are applied to essential goods across the board (Illinois has few exceptions). The one (minor) benefit of sales taxes is that they do not distort most business activities, but there will be some opportunities for cross border shopping and some electronic commerce (where sales tax is not applied) will grow.

    Cook County shares layers of duplication with the City of Chicago and is famous for its hidebound work force. To its credit Cook County does run the hospitals that the indigent in Chicago rely upon (along with the ER’s of all other hospitals). However, the County does not make wise choices with its funding, generally favoring administrative positions over “line” positions, as the nurses in my Cook County post point out so clearly.

    The line not pursued by Daley in cleaning up the County (which is its own arm of government, but he was the one defending its proposed tax increase) would have been:

    1) reduce layers of administration
    2) close non-essential or overlapping services with the City of Chicago
    3) reduce the cost of benefits and pensions by reducing retirement benefits for workers to sustainable levels
    4) demand excellence from County institutions; Todd’s father the elder Stroger didn’t even go to the county hospital that was named after him for care after his stroke
    5) work to collect market based fees from those that patronize county hospitals where possible (generally they don’t even try to bill for services)

    The easy way, however, for a politician, especially one in as “blue” a city as Chicago, is to just propose raising taxes.

    And that’s sad.

    Cross posted at LIGTM

     

    8 Responses to “Chicago Sales Tax Hike Proposed”

    1. Hasasan.Com » Chicago Sales Tax Hike Proposed Says:

      […] Cowen wrote an interesting post today on Chicago Sales Tax Hike ProposedHere’s a quick […]

    2. Don Says:

      And…it has to be asked. How much of the expense involves the illegal population. I do recall the photos from the last series of ‘immigrant rights’ demonstration. My hang up really isn’t with the illegals per se. It is the Mexican ruling elite which avoids reform and revolution by dumping their unskilled, unemployed, and undesirables [notice how many are of mixed and indian blood and how few of pure Spanish blood] upon the US, aided and abetted by self righteous enablers who shut their eyes to the consequences for all of us in their need to feel good about themselves.

      Not only is the tax regressive and hit the ‘poorest’ the most, the middle and upper class can avoid expenses by ordering on line or over the phone. Instant 10 percent discount. Shakes head.

    3. Shannon Love Says:

      So how much of the actual budget goes to medical care for the indigent? I don’t doubt it could be significant but could it not also simply be the visible issue to hang a tax increase on?

    4. david still Says:

      Comments: 1. it is the fault of illegals. 2. It is a trick to increse taxes.
      golly–just perhaps expenses have gone up and services have gone up and money not coming in–perhaps they ought to start taxing education and church properties and organizations for the overall good!

    5. Shannon Love Says:

      David Still,

      A 2 cent sales tax increase is a pretty large one. That 2 cents on top of a 9 cent tax making it a 22% tax increase. That’s pretty hefty. Besides, the economy is growing, even in Cook county. Why doesn’t increased growth and increased tax revenue cover most of the bills?

      Its something of a puzzle to me why large cities have such higher tax rates than the surrounding communities. The concentration of taxable wealth there in the form of land and commerce is so much greater. It would seem that the same rates should pull in the same revenue. I suspect the cause is actually that a much lower percentage of the population owns property or owns businesses so they always think that someone else pays the higher taxes.

      A better question would be: How much of the burden for the areas indigent care does Cook county actually shoulder. If all the poor people live in one tax jurisdiction and all the rich live in another, then the first jurisdiction would require a higher tax rate.

    6. Carl from Chicago Says:

      Ok… well the post in the link actually discusses the burden of the medical system on Cook County and it is quite large. The Cook County hospital is enormous and virtually everyone who goes to the hospital is indigent, whether they are illegal or not. That is mainly a theory because Cook County hospital generally does not bill anyone so it is pure speculation who is indigent or not.

      As far as Mr. Still – I don’t know how to respond to a comment that makes no sense. I never mentioned illegal aliens in my post. It isn’t a “trick” to increase taxes, it is just the byproduct of a system that encourages featherbedding, political hires, and ignores all market signals.

      Have you ever studied the history of Chicago and its institutions?

    7. Anonymous Says:

      Cook county’s experience with operating just 3 hospitals has these unintended results 1) care at these hospitals is not the best in the nation 2) none of these hospitals is on the leading edge of innovation in medical care 3) sales taxes are sky rocketing because there is no effective limit on costs and no effective incentive to maximize cost benefit ratios.

      In other words, the typical result produced by state run medical care. Our system was built by free markets. Free market hospitals are the only hospitals on the leading edge of innovation in medical care.

      On the plus side state run medical care will help solve the rapidly growing problem of caring for the elderly by thinning out their ranks.

    8. Al Parinello Says:

      Coming from the Socialist State of New Jersey where we deal with usuary taxes on a regular basis, I find it amusing to read through these comments about the outragous Chicago 10.25% sales tax. The mayor asks what can we do? The answer is simple but first he needs to acknowledge that there is another side of this particular coin. He needs to cut spending! I know this is a shock to him. But, cutting spending is the answer and the good people of Chicago should insist on it.