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OP-ED: (UN)HAPPY 81ST ANNIVERSARY, ILLINOIS SALES TAX…

July 02, 2014

On July 1, 1933, Illinois’ sales tax went into effect and served as the primary revenue source for state government until the addition of the state income tax in 1969. After a different version had been struck down by the Illinois Supreme Court earlier that year, it took six roll calls to secure passage – ultimately by a single vote. Initially levied at 2% (now 6.25%), the sales tax brought in $36.6 million in revenue its first year – the equivalent of some $650 million today.

Originally enacted in the depths of the Great Depression, it was billed as “not an additional tax but a replacement tax” that would “make financial provisions for relief needs” (government assistance programs) and fully fund the state’s portion of the public education tab. True that it did lead to the elimination of the state property tax, which had funded the functions of government since Illinois achieved statehood in 1818, but Illinoisans currently suffer from the second-highest property taxes in the country. And while it may have been a replacement tax at the time, it now serves as only one of several sources of revenue for the state (along with the personal and corporate income taxes, gaming, estate tax, etc.) and the more than $7 billion which the state reaps from the sales tax now accounts for a mere 20% of General Fund revenue.

According to the non-partisan Tax Foundation, Illinois’ 443 sales tax jurisdictions is the sixth-highest count in the country – more than six times Wisconsin’s 70 and far greater still than Indiana’s one – and account for 4.4% of the nation’s total.  In fact, an April Wall Street Journal editorial entitled “What’s the Matter With Illinois?” noted that Illinois sales taxes are 14% to 33% higher than in other Great Lakes states.

Counties, municipalities, transportation districts, water commissions and a park and recreation district also are allowed to place additional amounts on top of the state rate.  Famously, the city of Chicago once held the title of highest sales tax among major U.S. cities after a 2008 increase sought by then-President Todd Stroger brought the overall rate to 10.25%.  Repealed in 2013, “[p]roponents of the rollback noted their constituents’ support for decreasing the tax rate and the hope that the rollback would spur operational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,” as noted by the Civic Federation.

Illinois’ many woes are hampering not only our state’s recovery from the Great Recession but the economic freedom and well-being of individuals, as well.  Our state’s insatiable and relentless appetite for additional tax dollars is symptomatic of our lagging economy.  Considering that local governments across the state come to voters with more tax proposals every Election Day, it’s painfully clear Illinois politicians and bureaucrats don’t see things the same way.

Andrew Nelms is Director of Policy & Communications of Americans for Prosperity – Illinois

Source: http://illinoisreview.typepad.com/illinoisreview/2014/07/op-ed-unhappy-81st-anniversary-illinois-sales-tax.html

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