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How The Luxury Tax Works In Other States

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How The Luxury Tax Works In Other States
How The Luxury Tax Works In Other States

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Mayor Rahm Emanuel’s proposal to expand the sales tax to services is a new idea for Illinois -- but not for most states.

According to a 2007 study by the Federation of Tax Administrators, only three states -- Alaska, New Hampshire and Oregon -- tax fewer categories of services than Illinois.

Most of Illinois’s non-goods taxes are on utility services, such as telephone use and electricity. We also have taxes on photo finishing, computer software downloads, and rentals of automobiles and airplanes. Illinois also has a fairly high tax rate, at 6.25 percent. The sales tax rate in Chicago is one of the highest of any big city in the nation, at 9.75 percent.

Compare our sales tax system to Hawaii’s. Hawaii has a low state sales tax rate of 4 percent, but spreads it around. Some of the services Hawaii taxes:

  • Pet grooming
  • Fur storage
  • Marina service
  • Travel agent service
  • Investment counseling
  • Exterminating
  • Window washing
  • Architects
  • Attorneys
  • Dentists


As a result, if you live in Honolulu, your sales tax rate is 4.5 percent -- less than half what we’re paying in Chicago.

Add it up. Which would you prefer? A system in which you pay an enormous tax rate on the necessities of life, such as toothpaste, dental floss and underwear, or a system in which you pay less because people who book European vacations and store their furs help carry the load? Emanuel may have a progressive idea here.

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