Should Chicago have a city income tax? A columnist suggests that, plus Cullerton 'likes Illinois'

Apr 11, 2014

John Cullerton has a confession to make.

He likes Illinois.

That’s what the Senate President said in an op-ed he wrote for the Chicago Sun-Times. And, despite accusations being made that he’s too optimistic about the state, Cullerton says Illinois has made progress over the last five years even if everything is not “all rainbows and unicorns.”

Despite the optimism, Cullerton acknowledges there still is work to do, especially in the coming weeks when decisions on school funding and tax structure will take place. The tax structure Cullerton alludes to includes the state income tax, but if a Chicago Tribune columnist has his way, a future tax structure could also include a city income tax for Chicago.

Columnist Eric Zorn says in an ideal world, he would reject ideas about all taxes, but we live in the real world and, as a result, he believes instituting a city income tax might be the right way to go.

Writes Zorn:

The alternative now on the table is a $250 million city property tax hike, phasing in over five years, to address a shortfall in just two of City Hall’s four pension funds.

Other revenue-boosting alternatives include increases in so-called sin taxes, an expansion of sales taxes to cover services, casino gambling, financial transaction taxes, fee hikes, employee head taxes and more punitive fines for minor transgressions.

They all have their downsides. They all risk unintended consequences. They all stick in my craw, and probably your craw, too.

But if the alternative is a significant decrease in city services leading to a deteriorating quality of civic life, a city income tax is among the least objectionable options for balancing the books.

Here are four reasons why:

1. More than any other taxes, income taxes are most closely related to a citizen’s ability to pay.

Yes, wealthy people tend to own more valuable property and pay higher property tax bills than middle- and lower-income people, but the many political and social crosscurrents that affect property taxes and individual taxpayers often end up squeezing those who are already nearly dry.

Lose your job? End up on disability? Find your neighborhood rapidly gentrifying around you? The property tax collectors don’t care.

2. Income taxes can easily be tweaked to go easiest on low wage earners.

Either through graduated rates or exemption thresholds, income taxes can be designed to take a proportionally bigger bite from those on the high end of the income scale.

3. Income taxes are more transparent than property taxes.

The various bureaucratic bodies that collaborate to set your property tax bill and the deliberately byzantine formulas they use leave most of us baffled and glad that our mortgage lenders pay the county out of escrow accounts so we don’t have to think about it too much.

That likely explains this statistic, passed along by Ralph Martire, executive director of the Center for Tax and Budget Accountability in Chicago: “The rate of growth in property taxes in Illinois over the past 25 years has outpaced the rate of growth in median income by almost 20 times.”

I hadn’t noticed. You?

But we’d all notice that kind of creep in a city income tax, and we’d all know to hold the City Council — read: the mayor — accountable for it.

4. A tax on income earned in the city nicks suburban commuters for the services they use.

Chicago police and fire departments protect those who work in the city but live elsewhere eight hours a day and more. City crews keep the streets relatively smooth and relatively clean around their places of employment. And the city, for all its flaws, remains the social and economic hub of the region.

It’s not exactly a new idea. Philadelphia began imposing a city income tax in 1939, according to research published by the Tax Foundation in Washington, D.C., and it has spread to scores of municipalities around the country.

Critics, such as Laurence Msall of the Civic Federation and John Tillman of the Illinois Policy Institute, contend that a city income tax would drive businesses and residents out of Chicago, and that there are better alternatives to getting Chicago out of its pension pickle.

Click here to check out Msall and Tillman’s counterarguments.

While it is not a flawless proposal, Zorn believes it is an idea to consider rather than reject.

And here are more stories you should consider and read, rather than reject:

This infographic provides a snapshot of the scope of Chicago’s pension trouble.

Here’s more on why lawmakers in Springfield balked at the Chicago pension bill.

Resistance among public sector unions already had been building when Emanuel sent his bill to Springfield.

Here are the main points of union opposition to the state’s new pension law. 

How did pensions go from a path to retirement security to a national crisis? This graphic charts it over 200 years.

Related: Cartoon: Illinois credit rating headed toward the tank…. literally
Jul 24, 2014

Standard & Poor’s has downgraded the Illinois credit rating outlook to negative, citing concern about the budget approved by the General Assembly in May. Chicago Tribune cartoonist Scott Stantis gives…

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