City Council subcommittee takes baby step toward raising new revenue

The Chicago City Council on Wednesday took the first step on a long road leading to new or increased taxes, amid a demand from one veteran member that cost-cutting come first.

A revenue subcommittee chaired by rookie Ald. William Hall (6th) met for the first time — seven months after Mayor Brandon Johnson created the panel — but the meeting was more like a budget and revenue-raising primer than a genuine discussion of the pros and cons of specific tax and fee ideas.

Alderpersons and top mayoral aides only scratched the surface of a debate on ideas that range from legalizing video gaming in Chicago to the perennial idea of taxing professional services that needs approval from state lawmakers and has never been brought to a vote in the Illinois General Assembly.

Chief Financial Officer Jill Jaworski made a rather compelling argument for the service tax. The city has hired a number of consultants to study that option in hopes of strengthening the argument for legislative approval.

“Only about 30% of consumer spending is on goods. Since that’s what we’re taxing, we have a shrinking base, and subsequently, we have a very high sales tax rate,” Jaworski told the subcommittee. “If we expand that base to services, it brings us an opportunity to lower our sales tax rate.”

Jaworski noted prior debates have brought a parade of service providers out of the woodwork to lobby against such a tax. By the time that fight was over, the list of those to be taxed included only “hairdressers and manicurists,” she joked.

“For it to really work, we need to expand it to a large number of services. … How do we increase the base so that it’s more stable, so that we capture the activity that upper-income people are engaging in?” the CFO asked.

“When I think about somebody who’s making $25,000 a year that has a child, and they’re spending their money on food, clothes and backpacks, almost all of their money is going to goods. They’re being taxed on almost all of their activity. That’s why the sales tax is so regressive.”

Budget Director Annette Guzman took a giant step back from the revived employee head tax that Johnson championed during his mayoral campaign.

She noted “reality has changed a lot” since a pandemic-induced shift dramatically reduced the need for office space. The head tax in particular relies on actual employees being in the city at a large volume. … We are not at full capacity. We have a lot of vacancies. We have corporations that are making decisions about whether or not they are going to stay hybrid, if they’re gonna be fully back in person. You have people who work at home now, even though the corporation is headquartered here.”

Ald. David Moore (17th) urged Johnson to restore the automatic escalator tying annual property tax increases to the rate of inflation, impose the grocery tax that the state eliminated and lift Chicago’s long-standing ban on video gaming.

Pat Doerr, director of the Hospitality Business Association of Chicago, agreed the city has “left tens of millions of dollars on the table” by not officially allowing the video gaming already occurring illegally in bars and restaurants.

Progressive firebrand Byron Sigcho-Lopez (25th) made a renewed pitch for the jet fuel tax that had been on Johnson’s preelection list, along with unspecified levies on millionaires and billionaires, and on the banking and insurance industries making “record profits.”

“We have people on disabilities, seniors, working-class families barely making ends meet. … This is not working for Chicagoans,” Sigcho-Lopez said.

Downtown Ald. Brendan Reilly (42nd) dismissed the entire conversation about where to find new revenue as premature.

“You start with efficiencies and cuts. And then, when you can’t cut or find efficiencies enough to balance the budget, then you have conversations about creative revenue streams and what we need to go and ask the taxpayer for,” Reilly said.

“It’s about personnel. It’s about every line item in an agency’s budget, starting from zero and justifying the head count, the supervisors, the ratio of supervisors to personnel and the spend," he said. "If that’s too difficult for the city of Chicago to engage in, shame on us. And frankly, the taxpayers should be pissed about that.”

After the nearly three-hour meeting, alderpersons were no closer to consensus on where Johnson should turn first to solve the city’s $35.4 billion pension crisis, let alone generate the $800 million in new revenue Johnson says he needs to help bankroll the $1 billion in investments in people that form the cornerstone of his plan to help deliver Chicago from violent crime.

Hall did not disclose results of the Google survey he sent to his Council colleagues, asking them to respond with “yes” or “no” to 16 potential revenue ideas.