IN THIS ISSUE:
This Week In Springfield, IRMA testified in opposition to a legislative effort by the City of Chicago to shift the vast majority of a $550 million property tax increase onto City employers. Additionally, retailers were once again shown a complete lack of respect as the Retail Discount/Vendor Collection Allowance once again came under assault.
CHICAGO PROPERTY TAX SHIFT
During his budget address Tuesday morning, City of Chicago Mayor Rahm Emanuel proposed the largest property tax increase in Chicago history – $550+ million. The Mayor intends to use the revenues to make pension payments as well as close some of the City’s structural deficits. The City has reached a critical point and steps must be taken. Unfortunately, the Mayor’s proposal would shift the vast majority of this tax increase onto the backs of employers in the City. In order to do this, however, the Mayor must gain the approval of the General Assembly and either Governor Bruce Rauner’s signature or the super-majorities in the Assembly necessary to override a gubernatorial veto.
While a specific proposal has not yet been introduced, the House Revenue & Finance Committee held a subject matter hearing at which the Deputy Mayor of the City of Chicago, Steve Koch, presented the City’s case for the property tax increase and shift.
During his testimony, Mr. Koch noted that the city’s motivation is to protect the neediest residents of the city from the impact of this property tax increase. In order to do so, the Mayor wants to amend state law to change the homestead exemption to allow Cook County to hold all households under $250,000 in value from experiencing any tax increase. Those above that amount would still experience an increase but it would still be a smaller increase than if no change was made.
When the Mayor delivered his budget address, he cited the City’s “thriving business district” as proof that employers could afford to shoulder more of the burden. Mr. Koch built on that theme claiming the City has the fastest growing business district in the nation. While a clever attempt to justify their proposed tax shift, it fails on a number of levels.
First, Chicago employers already pay more than their fair share of property taxes. Under the classification system, which only Cook County has, employer property is assessed at 2.5 times the level of residential property. That means employers are paying their share as well as part of the residential share.
Second, in a further effort to mask the impact of their proposal, proponents claim the City has a lower tax rate than many other suburban locations. This is true but ignores the fact that due to the classification system, employers in the city pay FAR more in real dollars than their peers in the suburbs surrounding Chicago. Employers measure impact by actual expenses.
Third, the Mayor’s proposal does not just apply to the central business district. Every employer in every neighborhood of the city would carry the same burden. The effect would be to further hollow out neighborhoods and make it even more difficult to attract development to city neighborhoods. The progress made on food deserts during the Mayor’s first term will be reversed. Neighborhoods hungry for development will continue to struggle.
Fourth, the “Great Property Tax Shift” is not occurring in a vacuum. City employers are already struggling with the effects of an $10 minimum wage which will climb to $13, the highest sales tax in the nation, plastic bag ban, numerous permit and license fees the city has consistently raised, and the city’s well-earned reputation for excessive regulation. This does not include additional labor mandates (paid leave, scheduling, etc.) that the City is seriously considering imposing on employers.
There are reasons that over the last five years, the number of business taxpayers in Cook County have steadily fallen while those in the surrounding counties have increased substantially. The classification system is one and a complete lack of regard for employers is another. Assembly approval of this expansion of Cook County’s classification system will further erode economic development in the city and further stain Illinois’ economic reputation. The City will continue to struggle with the chronic unemployment that plagues most of its neediest neighborhoods.
If the city is going to impose a property tax increase, no property owner should be spared since all benefit from the services funded by the increase. The inequities of that system should not be made worse. Further, spending restraints must be imposed and the City must be saved from itself in terms of their propensity for imposing additional costs on employers. If Chicago is the economic engine of Illinois, then state government has a direct interest in ensuring Chicago government does not completely wreck the Chicago economy.
RETAIL DISCOUNT, HEALTH INSURANCE TAX & OTHER ANTI-JOB PROPOSALS
As the state faces its own structural budget disaster, some continue to rely on gimmicks as opposed to enacting real tax and spending reform. Sponsored by Rep. Jack Franks (D- Woodstock), HB 4300 proposes reducing the Retail Discount/Vendor Collection Allowance by over 57% from 1.75% to 0.75%. It continues to ignore the fact that the Discount is a reimbursement to retailers for the day-to-day costs they experience while serving as the state’s sales tax collectors and remitters.
In addition to the disrespect shown specifically to retailers, HB 4300 impacts Illinois employers of every type including retailers, manufacturers, transportation companies, etc. It also impacts Illinois consumers through more costly health insurance and higher prices at the gas pump.
IRMA will provide its members with a comprehensive overview of the legislation.
IRMA’s Annual Luncheon is Thursday, October 1st at the Palmer House Hilton in Chicago. Festivities start with a reception at 11:30 a.m. and the luncheon at Noon. We are pleased the Illinois Comptroller Leslie Geissler Munger will keynote sharing her unique insights as her office sits at the crossroads of the state’s budget crisis. We will also recognize the 2015 Illinois Retailer of the Year. Limited seats remain. Reserve your spot here.