Cook County commissioners on Wednesday approved a proposal by the board president to raise the county sales tax by 1 percent, making Chicago's sales tax rate the highest in the nation.
The increase was approved by a vote of 9-7.
The move comes as Cook County faces rising pension costs, with Board President Toni Preckwinkle blaming state lawmakers for failing to approve a pension reform plan she says has been stalled in Springfield for nearly two years.
“We’re moving toward long-term financial sustainability for our system,” Preckwinkle said during a speech at Chicago’s City Club. “We can’t discuss expenditures without also discussing revenues. For 2016, we’re seeing decreases in a few specific revenue sources which make up half of the $198.9 million gap.”
Under the plan, the county's rate will increase from .75 percent to 1.75 percent. It also will lift Chicago's total sales tax from 9.25 percent to 10.25 percent, which would make it the highest sales tax rate in the country.
Preckwinkle has been pushing for the nine votes needed to pass her penny-on-the-dollar sales tax increase. She hopes to shore up the county's pension fund, which is $6.5 billion short of its obligation to retired workers, obligations which she says continue to grow at a rate of $1 million a day.
In an op-ed in the Chicago Tribune, Preckwinkle said “times have changed.”
“The irony of having to introduce this measure is not lost on me. I campaigned on rolling back the last of the penny sales tax put in place by my predecessor,” she wrote. “Times have changed. Back then, the revenue from those pennies did not go to meet growing pension obligations or to retire Cook County debt. And it was not invested in the county's infrastructure.”
Preckwinkle says during the first year of the tax increase, 90 percent of the revenue will go toward addressing the county government worker retirement system’s shortfall. The second year will see more than 70 percent go toward the pension fund. Remaining revenues for both years will be used for infrastructure and debt, she said.
The increase could generate more than $300 million a year, she said.
“To those who say ‘What's the rush?’ my answer is simple,” Preckwinkle wrote. “If we do not inform the state of Illinois of our sales tax rate by Oct. 1, the rate change cannot occur until next July 1, pushing the county's first receipts until October 2016. The pension fund's shortfall would then grow an additional $270 million of unfunded interest in the coming year. Time literally is money.”
Opponents worry the increase will mean fewer people spending money in the area.
"It's déjà vu all over again," said Rob Karr, CEO of the Illinois Retail Merchants Association. "This policy will drive local residents to purchase goods outside the county - or online - neither of which helps generate the dollars needed to fix the budget challenges."
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County Commisioner John Fritchey said he plans to file a sunset amendment if the increase passes, phasing it out over time.
“Hiking the county sales tax by a staggering 130 percent is not only a blatant retreat on the promises made to Cook County residents and businesses but given that we haven’t even seen President Preckwinkle’s proposed 2016 budget, it is a premature effort to burden our taxpayers with hundreds of millions of dollars in new taxes each and every year into perpetuity,” Fritchey posted on a Facebook. “I’ve made it clear that I oppose the planned sale tax increase but assuming the President has the votes to get the Toni Tax passed, I want to make sure that this regressive tax doesn’t become a permanent fixture on Cook County taxpayers’ shopping receipts.”
