Dear Aldermen of the Chicago City Council,
On behalf of National Taxpayers Union’s (NTU) members, I strongly urge you to oppose the massive tax hikes contained in Mayor Emanuel’s budget. The Mayor’s plan is rife with bad fiscal policies designed to paper over years of overspending. While there are numerous ill-conceived tax hikes in the plan, NTU believes it is important to highlight a few of these issues as you debate a spending plan going forward.
Chicago’s fiscal situation is a mess and rather than tightening its belt, this budget proposal would once again stick it to taxpayers by hammering homeowners, businesses and consumers.
The centerpiece of the budget is a massive property tax hike to pay for mandated contributions to the police and fire pension funds. Regrettably, the tax increase would only serve to kick the can down the road, as it fails to make the necessary structural reforms to the city’s troubled pension system. In Ernest Hemingway’s classic The Sun Also Rises, a character named Bill Gorton asks another character, Mike Campbell, how he went bankrupt. “Two ways,” Mike says in response. “Gradually and then suddenly.” Like Mike’s bankruptcy, the Chicago pension problems are an entirely predictable result of years of dereliction and mismanagement.
Another troubling proposal in the budget is an excise tax on electronic cigarette and vapor products. These products are far safer than traditional cigarettes and often serve as a bridge for smokers trying to quit. A recent study by the United Kingdom’s Department of Health determined e-cigarettes were 95 percent safer than cigarettes and should be promoted to help smoking cessation. Given this, a tax on these products is counterproductive for long term public health concerns.
To date, only a handful of jurisdictions have implemented excise taxes on e-cigarette products, but the proposal under consideration in Chicago would be an absolute mess, as it would institute excise taxes on e-cigarettes and e-vapor products of $1.25 per container and $0.25 per milliliter of nicotine liquid. This differs from most other excise taxes in the Windy City; tobacco excise taxes are paid on a per cigarette basis, while liquor taxes are paid on a per gallon basis.
The structure of the proposed tax plan would create bizarre results. As an example, a Chicagoan buying a ten milliliter container of liquid nicotine would pay an excise tax of $3.75, while another Chicagoan buying ten one milliliter containers of liquid nicotine would pay an excise tax of $15.00. Each purchased ten milliliters of the same substance, but the difference in packaging leads to an $11.25 difference in tax burden. If the intent of the City Council is to deter usage, you should know that the structure of the tax would create an incentive for more, rather than less consumption.
Electronic cigarettes and vapor products are extremely important to certain small businesses. By creating the two tiered excise tax, the proposal would favor so-called “vape shops” that typically sell large containers over convenience stores that typically sell smaller sizes. Tax policy should not be used to tilt the playing field between competitors, yet that will be the result of Mayor Emmanuel’s e-cigarette tax hike.
For years, the City of Chicago has pursued spendthrift fiscal policies with little regard for taxpayers and the budget under consideration is no different. It fails to address structural problems with the City’s troubled pension system while creating a peculiarly structured excise tax. These policies should offend homeowners, public health advocates, convenience stores and their customers. Accordingly, NTU urges you to reject the plan.
Policy and Government Affairs Manager, National Taxpayers Union