Chicago business leaders recently told Mayor Richard Daley that their companies plan massive layoffs throughout the city that will continue into the new year. Certainly, the cost of doing business in Daley’s Empire is partially to blame for the pending pink slips: The Second City’s 10.25% sales tax makes it First in the nation, trouncing even New York and Los Angeles, where sales tax levels remain below 8.5%.
This summer, the debt rating of Cook County, where Chicago resides, was moved from “stable” to “negative” by Fitch Ratings, a major financial ratings service. The county moved their sales tax from 0.75% to 1.75%, which, combined with Chicago’s, brings the total sales tax on local citizens to 10.25%. Melanie A. J. Shaker, a Fitch director and lead analyst on the report, in her best politically sensitive speak condemned the tax hike:
“Having a high sales tax rate is economically difficult for individuals and businesses,” she says. “It introduces some uncertainty, both politically and economically.”
Unfortunately, the city’s economic situation might ominously mirror the national picture.
September and October job cuts portend lower economic growth and further cuts. President-Elect Obama will hopefully keep his campaign promise to cut taxes and not follow the Chicago Way by raising taxes to spend his way out of problems. As we noted before:
Spending-stimulus advocates believe the government can create economic growth by “injecting” new money into the economy, increasing demand and, therefore, production. This raises the obvious question: Where does the government acquire the money it pumps into the economy? Congress does not have a vault of money waiting to be distributed… Every dollar Congress “injects” into the economy must first be taxed or borrowed out of the economy. No new spending power is created.