This article was published by The McAlvany Intelligence Advisor on Monday, July 11, 2016:
Chicago just experienced a great irony. Its bill for past extravagances run up by its corrupt politicians arrived over the July 4th weekend. It was of course then that Americans were celebrating Independence from British politicians seeking to impose taxes without representation.
With representation, Chicago taxpayers have allowed themselves to be saddled with taxes far exceeding those that triggered the American Revolution. The trouble is that the realization just hit home over that weekend.
The second half of 2016 property taxes was due on July 1st, and on Tuesday unhappy taxpayers were lined up outside the tax assessor’s door to complain. It was a little late. About two decades late.
William Phillips of Rogers Park (one of 77 communities on the far north side of Chicago) was at the front of the line, ready to complain to someone about his bill:
Our taxes increased fivefold. I was expecting it to go up maybe twice as much but not four to five times as much.
Right behind him was Cornes King of Chatham, who told ABC7 News: “My tax bill increased almost $1,200.” Next in line was Janelle Squire of Logan Square, who said her taxes “more than tripled. The city’s piece more than tripled!”
They shouldn’t have been surprised. For decades Chicago politicians have been making promises to unions that they knew couldn’t be kept in order to retain union support. Those promises are now being kept by taking huge swaths out of the hides of unsuspecting taxpayers.
Five years ago politicians installed a $31 billion tax increase in order to delay the day of reckoning. But it wasn’t enough. The unfunded liabilities of the city’s four pension plans for police, firemen, teachers, and city workers continued to balloon. When the Government Accounting Standards Board (GASB) forced actuaries to be more realistic about the size of those liabilities, the new number came in at $66 billion, nearly seven times the city’s annual budget.
Past efforts to cut benefits to beneficiaries failed when a judge ruled that they were unconstitutional. Those benefits were guaranteed. Shortfalls would have to be made up elsewhere.
And so they were. Last December Mayor Rahm Emanuel announced the package of tax increases that would be phased in over time. The first wave hit on Friday.
The total package of tax increases is staggering:
- The city’s property tax hike, which is projected to generate about $400 million the first year;
- An increase in the garbage collection fee: $63 million;
- New “Uber” and taxi fee hikes: $48 million;
- Netflix and “cloud” taxes: $40 million;
- Building permit fee hike: $13 million;
- “Vaping” tax: $1 million;
- Cook County sales tax increase: $474 million;
- Hotel tax hike: $15 million;
- Lawsuit fee hike: $5 million;
- Ticket-reseller tax: $750,000;
- Ammo tax: $320,000; and
- Increased fines for vehicle-boot removal, failure to remove snow from business sidewalks, and individuals driving without insurance: $2.2 million
Chicago politicians may have reached the limit of how much blood they can squeeze from the proverbial turnips posing as citizens. The taxpayer exodus has been ongoing for some time, setting a record of sorts last March when the Chicago Tribune reported that more than 6,000 residents left the Windy City – the largest population decline of any major metropolitan city in the country. More than 200,000 left between 2000 and 2010 as the city has become more and more unaffordable, thanks to increasingly higher taxes and declining education and healthcare services.
It’s also become unhealthy to live there, especially on the West and South sides of the city. The city is likely to set a record in the number of murders suffered by its citizens. Forty-seven percent of 20- to 24-year-old black men in Chicago were out of school and out of work in 2014. And so on.
The tax increases haven’t dampened politicians’ enthusiasm to continue to spend beyond their means. The city is projected to spend $84 million more this year than it takes in, while Cook County is planning to spend $500 million more than its tax revenues in 2016.
With structural problems like these, and intransigent politicians unwilling to face the problem square on, it’s increasingly clear that the only way out is the “Detroit” way: bankruptcy. The math makes it inevitable.
Chicago.com: Cook County property tax bills cause outrage
Chicago Business: Chicago on the hook for $24 billion net, triple a year ago
Chicago Tribune: 2016 brings tax hikes for Chicago, Cook County, city schools
Chicago Tribune: Are quality-of-life issues spurring Chicagoans to move out?
IllinoisPolicy.org: Busting the Myth that Chicago Taxes are Low