Hey, Chicagoans, are you ready for a city income tax?

Chicago Mayor Lori Lightfoot delivers her budget address in City Council chambers. (Brian Cassella / Chicago Tribune)

Chicago Mayor Lori Lightfoot delivers her budget address in City Council chambers. (Brian Cassella / Chicago Tribune)

So it has come to this at last: Having exhausted every tax and fee in sight to balance its way-out-of-whack budget, will the city of Chicago, out of desperation, turn to the only new one left: a city income tax?

Chicago Mayor Lori Lightfoot didn’t mention an income tax in her 6,238-word prepared budget message Wednesday, but she faces a budget deficit of nearly $800 million for fiscal year 2020 and $1.2 billion for 2021. Much of that increase–$134.1 million–will be gobbled up by higher pension costs. The budget also includes $501 million in borrowing to help “balance” the 2021 deficit. Same old game.

Of course she turned to property taxes, beating down homeowners even more from the high levy. She praised herself for seeking only a “modest” 93.9 million in new property taxes. For the average  Chicago home valued at $250,000, that will add “just”  $56 additional dollars a year to the already high property tax bill. More property tax hikes would loom in the future, as each year an increase would be tied to the rate of inflation

Might she have any regrets that she was elected mayor now that the coronavirus pandemic has further crippled the city’s already existing financial crisis? As she explained in the budget address, Chicago has suffered staggering revenue collapses: hotel tax, down 77.5 percent; amusement tax down 49.5 percent; ground transportation tax, down 47.8 percent; parking taxes down 48 percent,and gas tax down 35 percent.

In her prepared budget speech, Lightfoot itemized savings by cutting personnel and renegotiating contracts. And this: “We are also seeking five furlough days from all non-union workers. I will take the five days myself.” All of that easier said than done, considering among other things the power of government employee unions.

Lightfoot optimistically held out hope for state and federal aid, but if it doesn’t come, what then?

The free-market Illinois Policy Institute raises the prospect of income taxes not just in Chicago, but also in other financially troubled cities, such as Peoria, Springfield, Alton, Kankakee and Danville. 

But even as a necessary last resort to avoid bankruptcy, imposing a hugely unpopular income tax would be difficult. The Institute describes the necessary steps to impose a local income tax, pointing out that there’s a  troubling link to Gov. J.B. Pritzker’s proposed graduated state income tax constitutional amendment on the November ballot.

The amendment, as originally proposed in the Legislature, would have prohibited local income taxes, according to an Institute press release. But once in the hands of lawmakers (i.e. House Speaker Mike Madigan and his toady Democrat super-majority), that prohibition disappeared. Things like this don’t just occur by happenstance in Illinois. That lawmakers removed a protection against a local income tax as the quid pro quo to the approval of a state income tax reveals the awful news: Someone (i.e. Madigan and his toadies) had a local income tax in mind and the door now is wide open.

When Lightfoot talks about getting help from the state, is this what she has in mind?

Oh, so tempting, when you look at what New York City gets from its graduated income tax whose  bottom rate is 3.078 percent for individuals earning less than $12,000 per year and top  rate is 3.876 percent for individuals earning more than $50,000. New York City Comptroller Scott Stringer reported that the city’s income tax take in  fiscal 2020 is $12 billion. Although Chicago would reap significantly less, it’s still enough to cause salivation in City Hall. 

Because 87 percent of Illinois municipalities face significant revenue shortfalls in 2020, according to an Illinois Municipal League survey, support for a local income tax might find support from several corners of the state. One difficult hurdle, according to the Institute, is the state constitution’s  Article VII that allows home rule units of government to impose a local income tax with the approval of the General Assembly, but the requirement that taxes be at the same rate for everyone has been a disincentive.

Adam Schuster, the Institute’s senior director of budget and tax research summed it up:

Illinoisans should be aware that stripping the Illinois Constitution of its flat tax protection could have far-reaching effects that would decimate communities: a progressive city income tax as a quick fix to cash-strapped budgets and an economic crisis. We’ve seen what happens when city leaders get access to new revenue streams – the middle class suffers.
 
Adding city income taxes to Illinoisans’ already high tax burden would damage struggling municipalities by dampening economic growth and job creation, driving out residents and making it even harder for small businesses to recover.

And, I’d guess, drive more people out of town.

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  • Dennis, you must be getting to know your new state, Florida. Why don't you write about its government and its corrupt governor? Feel free to criticize. Don't be afraid of the Proud Boys (?)

  • In reply to Aquinas wired:

    Does Dennis suggest rhyming couplets for your TDS blog?

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    In reply to Aquinas wired:

    Just curious....how afraid are you of antifa and BLM?

  • In reply to Aquinas wired:

    What is your obsession with FL? You’re not going to convince IL people not to move there. If you really live in IL or Chicago, aren’t you more interested in the schemes and corruption in IL? Would you rather Dennis write about FL and lose half his readers? Besides, the topic here is Chicago and IL income taxes. Can’t write about FL’s because there are NONE!

  • In reply to Aquinas wired:

    How is the governor corrupt?

  • In reply to Dennis Byrne:

    I didn't say he was. I'm suggesting you should take a look at his relationship with Lev Parnas and Igor Fruman who donated to his campaign for governor.

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    In her state of the city address Lori lamented that the union contracts prohibit her from terminating the ones with the most seniority (white folks) and keeping the ones "from the most diverse pool of employees this city ever had"....minorities. It's amazing how much covert racism the left can get away with help from their friends in the main stream media.

  • In reply to Ken Dietz:

    And yet she rolled over like a well trained dog for the Teacher's Union - so she doesn't care about taxpayers

  • Dennis, this is another of your red herrings. Earlier, you spooked everyone by suggesting that the graduated income tax would lead to taxing retirement income. Now, with the aid of the right wing Illinois Policy Institute, you are frightening us with the specter of a Chicago municipal income tax.

    Article VII of the Illinois Constitution has permitted the General Assembly to authorize municipal income taxes since 1970. No one has been interested. The administrative difficulties and the competitive disadvantages have made the regressive sales and property taxes more appealing.to cities. Witness the problems with the ill-fated Chicago employee head tax. The same has been true throughout the country. Few cities have an income tax, even where their state constitution or law allow it.

  • In reply to jnorto:

    The point is that the Fair Tax amendment would have prohibited municipal taxes, but that was deleted. The IL constitution prohibited taxing retirement income, Fair Tax does not specifically prohibit it the way the constitution does. The takeaway is that the door is now open to municipal and retirement taxes, no matter that they say they wouldn’t or haven’t in the past. They are NOT prohibited. Considering the financial damage from the pandemic, the loss of population, the tremendous pension and overall debt, you have to admit that all conventional solutions are off. Desperate situations may call for desperate measures. This is a financial hole never seen before.

  • In reply to Get out of IL now!:

    You are incorrect. The Illinois Constitution never prohibited taxing retirement income, at least since 1970. You are no longer in Illinois, but you can find our constitution online, Article IX, Section 3. Also, neither this section of the Constitution nor the Fair Tax Amendment talk about municipal income taxes.

  • In reply to Get out of IL now!:

    As if the Dems have EVER told the truth about taxes or lived up to their myriad promises - they make the promise, stiff the taxpayers, make the situation even WORSE, and then come back with yet another BS "solution" to the problem they've created

    Anyone voting for this amendment is stupid as it gets to believe Springfield (and now local government) wankers can be trusted

  • Whatever, the door is wide open to retirement and municipal taxes and IL pols never pass up an opportunity.

  • In reply to Get out of IL now!:

    "Whatever"? I gather that you are acknowledging that, as usual, you don't know what you are talking about. Enjoy your retirement wherever you are and let us proud citizens of Illinois solve our own problems.

  • In reply to jnorto:

    You can have your IL pride, I’ve cut my property taxes by $10,000 on a bigger house and cut my income tax to near zero. I didn’t leave to retire, I will still be teaching and will feel a lot more financially secure.

  • In reply to Get out of IL now!:

    Suum cuique.

  • In reply to Aquinas wired:

    Now you're making me look up Latin phrases. This has gone much too far.

  • In reply to Get out of IL now!:

    Go in prosperity and peace, Get Out. Many of us still find Illinois a place of opportunity.

  • Dennis:

    The following comment has nothing to do with this subject matter, but I'm putting it out there because it's been a major pain in my neck for a long time.

    Have you ever wondered what percent of those people who write letters to the editor, op-eds, etc., and post comments on sites like this one actually participate in their own democracy, i.e. hold their elected leaders accountable? Opinions are like belly buttons, everybody has one, and I do enjoy reading about what people are thinking. But here's the thing: How many of those who complain about whatever actually contact their state reps or members of Congress to share their concerns? Meet in person with these "law makers" when they are home in their local offices during the sundry legislative recesses? I mean, nothing is really accomplished when people do nothing but - to use that line from an old SNL routine - "Talk among yourselves." Do these folks understand what Lincoln was referring to at Gettysburg when he spoke of government "of the people, by the people and for the people . . ."? There! It's finally off my chest!

  • In reply to davegorak:

    Dave, glad I could help.

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