revenue report summary - final
TRANSCRIPT
Revenue Options
Implementing the revenue options below would restore solvency to the City of Chicago’s four retirement
systems and the Chicago Teachers’ Pension Fund, together bringing the five systems to a healthy
funded ratio of 80% in 30 years using a level-dollar payment schedule.
None of these options involve making draconian pension cuts or hiking property taxes. Instead, they
focus on creating a tax code where those who can most afford it – the wealthy – pay their fair share.
Revenue Option Estimated Revenue
($ Millions)
Create a Graduated City Income Tax, Focused on Millionaires
The graduated city income tax would be implemented as a Fair Tax with a rate ranging from 0.5% to 1.5%, with the high rate applying to high earners. As a Fair Tax, it would largely exclude filers earning less than $100,000 and instead focus on those who can most afford it – filers earning $1 million or more.
$500
Create a Commuter Tax
Commuters use and benefit from Chicago’s public services every workday. This option applies a 1% income tax on nonresidents working in the City of Chicago.
$300
Broaden the Sales Tax to Include More Services, Like Luxuries
To modernize our tax structure, services – especially luxuries – could be subject to the sales tax. Service categories that could be taxed include finance, insurance, and real estate; business services; professional services; personal services; computer services; agricultural services; industrial and mining services; construction; transportation of services; storage; utility services; automotive services; admissions and amusements; leases and rentals; and fabrication, installation and repair services.
$437 - $1,425
Institute a Financial Transaction Tax (i.e., a “LaSalle Street” Tax) on Trading at the Chicago Mercantile Exchange, Board of Trade, and Board of Options Exchange
Wall Street’s bankers and traders crashed the economy and hurt pension funds in the process. Wealthy investors should share in the sacrifice to bring the retirement systems back to solvency. A financial transactions tax will also help to curb risky trading in derivatives and other exotic financial products that caused more harm than good during the Great Recession. A penny tax on each contract traded would generate $38.2 million. Alternatively, around $100 million in revenue would be generated if the tax were assessed on the total value of the contract. As a tax on trades, the tax primarily falls on big institutional investors, like hedge funds, investment banks, high-worth
$38.2 - $100
individuals, and others – not the exchanges themselves, meaning there is little incentive for them to relocate. Note: The Chicago Teachers Union recently proposed a similar “LaSalle Street” Financial Transactions Tax that would generate $10-12 billion by assessing $1 on agricultural futures and $2 on other derivatives.
Close Corporate Tax Loopholes
Corporate tax loopholes are wasteful and rarely reviewed, even though public expenditures on education, health care, social services, and other vital public needs are constantly under review. Furthermore, corporate welfare often benefits big businesses at the expense of small businesses. Revenue options in this category include:
• Subjecting foreign dividends to the state’s income tax ($7 million) o This loophole benefits out-of-state or even international/multinational businesses at the expense of businesses in our home state.
• Eliminating the retailer’s discount for the sales tax ($3.5 million) o This loophole benefits big retailers like Walmart more than Illinois’ small businesses.
• Eliminating the Economic Development for a Growing Economy (EDGE) tax credit ($700,000)
o This little reviewed loophole is of questionable value. • Repealing the tax break for the Chicago Mercantile Exchange and Chicago Board of Options Exchange ($1.9 million)
o This questionable corporate handout benefits investment bankers and Wall Street traders at the expense of vital services.
$13.1
COMBINED REVENUE ESTIMATE
$1,288.3 - $2,338.1
Additional Ideas
In addition to the revenue options above, several other ideas merit consideration, including:
• Issuing pension obligation bonds • Re-amortizing the pension debt on a level dollar basis, as advocated by the CTBA • Renegotiating City of Chicago and Chicago Public Schools bond swap contracts • Advocating that recently-closed sales tax loopholes remain closed (e.g., Hartney Fuel Oil
Company v. Hame)
For More Information
To view the coalition’s full report, visit http://www.weareonechicago.org/documents/We-Are-One-
Chicago-report.pdf