Thursday, September 27, 2007

Chicago Sales Tax Hike Proposed

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 Chicago Boyz

1 comment:

Anonymous said...

The people who make the policy are elected. So the only thing your proposals would do, if implemented, would have the current cast of officals defeated at election and a new cast elected who would reimpose this legal form of incomptence. As the old French proverb goes: :The more things change, the more they stay the same."

Danny L. McDaniel
Lafayette, Indiana