January 23, 2013
On July 1, 2008, a one percent sales tax increase went into effect in Cook County raising the home-rule tax from 0.75% to 1.75%. The increase brought the City of Chicago’s composite sales tax rate on general merchandise to 10.25%, the highest rate among major U.S. cities.[1]The increase was the result of political negotiations between then-Cook County Board President Todd Stroger, who originally proposed a 2% sales tax increase with his FY2008 budget, and the Cook County Board of Commissioners. While President Stroger insisted the tax increase was necessary to fund county services, the Civic Federation opposed the budget proposal partly because the County did not first demonstrate the will and ability to contain spending before proposing increased revenues.
In December 2009, after previous attempts to repeal the sales tax increase, the Cook County Board agreed to override President Stroger’s veto[2] on a 0.5% rollback of the sales tax.[3] Proponents of the rollback noted their constituents’ support for decreasing the tax rate and the hope that the rollback would spur operational efficiencies and economic growth. Opponents of the rollback said that it would lead to drastic cuts in the County’s healthcare services.[4] The decrease, which took effect on July 1, 2010, brought the composite Chicago sales tax rate down from 10.25% to 9.75% which was still among the highest in the nation.
With the FY2011 proposed budget, the newly elected Board President Toni Preckwinkle committed to fully repealing the sales tax increase as part of her pledge to control spending, eliminate waste and find efficiencies. The County reduced the sales tax by a quarter percent in 2012 and a quarter percent in 2013. President Preckwinkle indicated that the full rollback would help ease the tax burden on residents and benefit businesses within Cook County.[5] As of January 1, 2013, the composite sales tax rate in Chicago has returned to 9.25%.
The following chart shows actual sales tax revenues for the County from 2007 to 2011, the most recent years for which audited financial data are available. The sales tax increase shows a significant bump in revenues, with a peak in FY2009 – the only full fiscal year with the one percent increase. In FY2009 sales tax revenues were $397.1 million higher than in FY2007. FY2010 reflects the half percent rollback for half of the year, while FY2011 reflects a full year with the lowered tax rate. We will not be able to see the full impact of the repeal of the sales tax increase until 2014 when the County releases its FY2013 CAFR. However, the County has estimated that the impact to its operating budget was more than $55.0 million in FY2012 and $86.0 million in FY2013.[6] (Click to enlarge.)
[1] Hal Dardick, “10.25% What you need to know about sales tax,” Chicago Tribune, July 1, 2008. The City of Chicago also has a composite sales tax rate of 2.25% on food and drugs.
[2] The County was able to overturn President Stroger’s veto partly because of a State of Illinois law that changed the veto override requirement for the Cook County Board of Commissioners from four-fifths supermajority – or 14 out of 17 commissioners – to three-fifths supermajority, which only needs 11 votes. To read more about the law, see the Civic Federation’s previous blog post.
[3] Hal Dardick, “Preckwinkle pledges to repeal sales tax hike by 2013,” Chicago Tribune, December 6, 2010.
[4] Hal Dardick, “Cook County Board votes to cut sales tax despite Stroger plea,” Chicago Tribune, December 1, 2009.
[5] Cook County, “President Preckwinkle, Business Leaders and Cook County Commissioners Herald Repeal of Stroger Sales Tax Increase,” press release, January 2, 2013.
[6] Cook County, “President Preckwinkle, Business Leaders and Cook County Commissioners Herald Repeal of Stroger Sales Tax Increase,” press release, January 2, 2013.