CTU recommendations for new revenue mirror Detroit’s failed policies

When Chicago Public Schools laid off more than 2,000 employees – including 1,036 teachers – last week, Chicago Teachers Union President Karen Lewis skewered Mayor Rahm Emanuel for not supporting tax-increasing policies that she claims would bring additional revenue to the city. She said: “It is equally shameful that as CPS slashes school budgets, they have not offered one...

When Chicago Public Schools laid off more than 2,000 employees – including 1,036 teachers – last week, Chicago Teachers Union President Karen Lewis skewered Mayor Rahm Emanuel for not supporting tax-increasing policies that she claims would bring additional revenue to the city. She said:

“It is equally shameful that as CPS slashes school budgets, they have not offered one sound recommendation to resolve their ‘budget crisis’ other than attacking teachers, closing schools, disrupting communities and vilifying parents […] CPS can generate new revenue by closing corporate loopholes, engaging banks about toxic swaps, re-examining the city’s TIF program and supporting a final transaction tax which could put billions of dollars back into our schools.

What Lewis forgets when making these statements is that many of these policies have already been tried before in the now-bankrupt city of Detroit.

Detroit is one of a handful of cities that has implemented local income and corporate taxes. Last year, its residents paid 2.45 percent of their income in taxes, while nonresidents paid 1.225 percent and corporations paid 2 percent. That’s on top of federal and state income taxes.

How’s it working out for them? Not so well:

• At 16.3 percent, the unemployment rate in Detroit is more than twice the national average.
• Between 1995 and 2010, 32 percent of Detroit’s population left the city. They took with them$12.5 billion in taxable income – that’s more than six times the market value of all of Detroit’s professional sports teams combined.
• Detroit only has 100 entrepreneurs per 100,000 people – the smallest percentage of any major city in the country.

Lewis and the Chicago Teachers Union should be careful what they wish for.

While raising current taxes and instituting new taxes may bring in additional revenue in the short term, the long-term damage these policies would cause is difficult to reverse. Lewis should instead advocate for policies that lift the regulatory burdens on local businesses and spur economic development.