Politics

Sales Tax Hike In Effect; Will Shoppers Revolt?

Taxes In Chicago Now 10.25 Percent, Highest In Nation

CHICAGO (CBS) ― Chicago is no longer the "Second City" when it comes to the sales taxes. Thanks to a 1 percent sales tax increase that went into effect Tuesday, we're number one in the nation. Some shoppers are promising to revolt, but will they?

Michigan Avenue is known for its great shopping and, now, its increasing sales tax. Shopper Mary Kruel said, "Oh! It's ridiculous. What do you want me to say? The more we make, the more they take."

On Tuesday, Kruel had a coffee and lunch from McDonald's in hand, but she said she usually brings her lunch to save money.

In downtown Chicago on Tuesday, a cup of Starbucks coffee cost 2 cents more than it did on Monday. That may not be much of a difference, but consumers are noticing it anyway.

"I buy coffee every day, so it'll probably affect me in the long run," said Emily DeMarco.

The 1 percent increase hikes the sales tax in Chicago to 10.25 percent. By comparison, the sales tax in Lake and Will counties is 7 percent, and in DuPage County, it's 7.25 percent.

A sales tax of 10.25 percent is also significantly higher than the sales tax in other major cities.  New York, Los Angeles and Dallas all have a sales tax of less than 8.3 percent, Phoenix has a tax of 6.3 percent, and Denver's sales tax is only 3.6 percent. Birmingham, Ala., earlier this year passed a sales tax hike--to 10 percent.

The Cook County Board voted to raise the sales tax at the end of February, after a five-month stalemate on the 2008 budget. Board President Todd Stroger and his supporters ultimately prevailed, saying the tax hike was necessary to provide health care and other services.

That increase kicked in today. Some shoppers said they didn't even notice and not all of them knew it was coming.

Old Town resident David Ashamalla said, "Wow, what are they going to? … 10.25 percent? Well I'm not going to be purchasing much more."

The tax hike applies to everything but groceries, medicine, cars and boats. For larger purchases like furniture or appliances, the taxes can add up.

It will definitely be cheaper to shop in the suburbs. Buy a $500 TV in DuPage County where the taxes are 6.75 percent and you'll pay $534, in Chicago where the taxes are 9 percent, you'll pay $545 for that same television, and when taxes increase to 10.25 percent, you'll pay $551.

"It's kind of frustrating," Ashmalla said. "I go to Best Buy or something, and high-priced electronics – it adds like $20, $30 to a TV I bought."

Ashamalla said he'll do more shopping in DuPage County, where his parents live and where the sales tax is much lower.

"I'm not going to be purchasing in Chicago much more – not electronics or anything high-priced," he said.

Some shoppers have vowed to take their protest right out of the state; they were already shopping for big ticket items in Indiana on Tuesday.

Indiana's sales tax rose from 6 percent to 7 percent in April and a lot of residents didn't like it. But when they look at the sales tax in Chicago, 7 percent doesn't seem so bad.

Pamala Walker lives in Chicago, but she was shopping at a Merrillville, Ind., furniture store for one reason; "for the cheaper taxes," Walker said.

The sectional sofa she wanted to buy costs $999. With the 7 percent sales tax in Lake County, Ind., she'd pay $1,069. The price would be about $32 more in Chicago. That might not seem like much, but for her family, every little bit counts.

"The economy has gotten so rough," Walker said. "I mean, we're even talking about relocating to another city because of the outrageous gas prices in Chicago. Now the high sales tax in Chicago. And it's just too much."

Retailers said the lower sales tax in Indiana drew customers over the state line even before the latest hike in Chicago. But now, it makes an even better sales pitch.

Durwin Arnold, a manager for Harlem Furniture in Merrillville, said, "Today every customer is looking for an added bonus, so when they come in and we find out they live in Illinois, that is the added bonus."

Just down U.S. Route 30, Grant's Appliances & Electronics was also expecting to see more Illinois customers looking for items like flat screen TVs.

Ruben Coria said, "The sales tax is the same whether you buy a $200 dishwasher or a $5,000 kitchen package." He said you'd spend about 4-thousand dollars for a matching kitchen set and save $130 on sales tax by buying in Indiana.

Cook County Commissioner Tony Peraica (R-16th) was one of the commissioners who led the fight against the tax hike. He says it's not too late to repeal it.

"I feel compelled, to protect the taxpayers, to at least try to do that – to roll back this unwise, ill-advised tax, at this time in our economic situation where things are just devastating everywhere," Peraica said.

He plans to introduce the measure to repeal the sales tax at the next County Board meeting in mid-July, but he predicts getting his proposal to pass will be a challenge.

Leading a "tax revolt" outside the James R. Thompson Center on Tuesday, across the street from the County Building, Peraica told angry consumers, "This is nothing but a corruption tax ladies and gentlemen. Corruption equals higher taxes..."

Peraica, one of the only Republicans on the Cook County Board, criticized his colleagues who voted to increase the county's portion of the sales tax.

The Civic Federation also said the tax should be rescinded.

"The tax is unreasonable, it's too big of a tax, and it wasn't necessary for the county to maintain its services," said Civic Federation President Laurence Msall.

"It's a sales tax that [Cook County Board] President Stroger himself admitted is larger than what even would be needed by their budget estimates. So we think it is very unfortunate," Msall added. "We call on the County Board to reverse their decision."

Businesses are concerned that consumers will leave Cook County to make purchases, and some businesses outside the county are capitalizing on the opportunity already.

Close to the Cook County line, they are advertising that customers pay no Cook County taxes.

Some residents of Palatine have been so upset by the tax hike that they have even talked about seceding from the county.

But as for those who will have to pay the higher sales tax, driving out of the county to make purchases isn't always feasible.

"I would like to say I would go to a different county, but with gas prices being the way they are, we're just going to have to suffer through it," said taxpayer Jerilyn Pearson. "It's unfortunate."

A spokesman for Stroger said that the sales tax increase was badly needed, especially for county hospitals, which have been treating more people without insurance than before.

But critics said the increased revenue is far more than what was needed to balance the county budget.

CBS 2's Pamela Jones, Anne State and Joanie Lum contributed to this report.

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