Downtown diners would pay 11.75% tax on restaurant bills under Lightfoot proposal

Downtown diners would pay 11.75% tax on restaurant bills under Lightfoot proposal

Chicago Mayor Lori Lightfoot has proposed a $20 million tax on dining out to help fill the city’s $838 million budget shortfall.

Chicago’s reputation for tax hikes may once again bite into its renown for fine dining.

The latest among Chicago Mayor Lori Lightfoot’s proposals to help close a looming $838 million budget deficit is a doubled citywide tax on eating out, raising the tax to 0.5% from 0.25% on diners’ restaurant bills. Lightfoot projects the tax hike would generate $20 million annually.

Chicagoans currently pay the city’s 0.25% “restaurant tax” on top of the nation’s highest general sales tax rate of 10.25%. That’s a 10.5% sales tax on eating out. Guests then pay an extra 1% tax, for a total rate of 11.5%, when dining at restaurants in most of downtown Chicago including the Loop, Navy Pier, McCormick Place and both airports – all of which are in the Metropolitan Pier and Exposition Authority’s special district.

Add in Lightfoot’s proposal, and Chicagoans eating out on Navy Pier could end their meal with a total tax bill of $11.75 on a $100 tab.

That special 1% exposition authority tax district could yet expand beyond the boundaries of Chicago’s downtown central business district, depending on the actions of some state lawmakers. In May, lawmakers in the Illinois Senate proposed expanding the boundaries for the authority’s 1% meal-and-drink tax district to include Lakeview, Wicker Park, Bucktown and Bronzeville.

Lightfoot announced she planned to double the city restaurant tax just hours after proposing a $40 million ride-sharing tax hike, according Crain’s Chicago Business.

Lightfoot has proposed hiking parking meter rates and refinancing local debt to narrow the city’s $838 million deficit, according to the Chicago Tribune. And she has floated the possibility of a property tax hike if she fails to secure aid from Springfield.

In 2015, former Mayor Rahm Emanuel passed the largest property tax hike in city history with the intent of fixing city pensions.

As in the rest of the state, the leading cause of Chicago’s fiscal problems is its worsening pension crisis. Like the gaping budget deficit, Lightfoot inherited four city pension funds that are over $27 billion in debt and are only 26% funded. In total, Chicago taxpayers are responsible for $46 billion in public pension debt with payments expected to escalate by $1 billion during the next four years.

The unsustainable costs that have repeatedly driven the mayor to seek help from Springfield make it clear the only legitimate solution is amending the Illinois Constitution’s pension clause. A smart constitutional amendment would protect workers’ already-earned pension benefits but allow for changes in the growth of future benefit increases – such as replacing automatic 3% annual raises with a real cost-of-living increases tied to inflation.

Tax hikes and increased spending have failed to fix the city’s and the state’s pension crises. Lightfoot should show the reform leadership she promised: stop trying to tax her way to a solution and start pushing for constitutional pension reform from Springfield.

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