If you like to go shopping in Chicago, beware! On March 1, the Cook County Board voted to raise the County portion of the sales tax from 0.75 percent to 1.75 percent. This action, which went into effect on July 1, has the cumulative effect of raising the tax on goods bought in Chicago to 10.25 percent. The County sales tax applies to clothes, furniture, alcohol, and restaurant food but not to cars, boats, groceries, and medicine.
This tax hike comes only three months after the Regional Transport Authority increased its sales tax by 0.25 percent. When the Cook County Board upped the levy on sales, it apparently counted on the visiting shoppers’ unawareness of the increased rate.
Sales taxes in some Chicago suburbs are not much lower than in Cook County: 10 percent in Schaumburg and Skokie, 9.75 percent in Orland Park. In the counties of DuPage, Lake and Will, however, sales taxes are only 6.5 percent. Hence, the tax on a $100 taxable purchase on Michigan Avenue would be $10.25 but only $6.50 in Waukegan.
Board President Todd Stroger claimed the sales take hike was badly needed, particularly for the county hospitals that accommodate ever more patients without insurance. Another important reason for the tax increase are the tax breaks Cook County is offering to attract businesses, such as recently Boeing’s Headquarters. A University of Minnesota study found that the Chicago metropolitan area now has 347,100 high-tech jobs, more than Silicon Valley.
The County’s aggressive economic development drive partly explains the huge hole in its tax base, shortfalls that have to be made up by higher sales and property taxes, as well as several kinds of fees. Now living expenses in Chicago are rising to a point when working and middle class employees can no longer afford to reside close to their work and therefore move into less taxed suburbs. Sales taxes in New York and Los Angeles are still below 8.5 percent. The next highest rate nationwide stands at 9.25 percent in Memphis, Tennessee.
Yet, even after the sales tax increase, Chicagoans total tax burden, including income and property taxes, is not (yet) the highest in the nation. A survey in 2006, reported in the April issue of Chicago Magazine, showed that a Chicago family of three making $75,000 annually paid an estimated 10 percent of its annual income in state and local taxes, with 43 percent of the $7,500 total tax bill going to property tax and income tax in roughly equal amounts. That places Chicago 17th among 51 U.S. cities. Equivalent families in Bridgeport, Connecticut, and Anchorage, Alaska, paid 20.4 and 3.8 percent, respectively, of their incomes in total taxes.
Of the $15,313 in total tax paid by the Bridgeport family, property tax took 68 percent, income tax 16 percent, and sales and auto taxes 8 and 7 percent, respectively. In Anchorage, where there is no income tax or sales tax, property tax accounted for 93.7 percent of the $2,817 tax expense, one of the smallest in the nation.
It was during the presidential election campaign of 1932 that no other than Democrat Franklin Roosevelt bemoaned the dangers of excessive taxation: “Taxes are paid in the sweat of every man who labors because they are a burden on production and can be paid only by production. If excessive, they are reflected in idle factories, tax-sold farms, and hence, in hordes of the hungry tramping the streets and seeking jobs in vain.”