Rahm plans to borrow $1.2 billion to construct Lucas museum
The mayor’s plan to construct the Lucas Museum of Narrative Art includes more of the same bad policies that got Chicago into its fiscal crisis: a bid to borrow $1.2 billion and hike taxes on residents.
Chicago Mayor Rahm Emanuel’s plan to house the George Lucas museum near McCormick Place calls for $1.2 billion in borrowing. Emanuel’s plan would borrow the money from the state agency that runs McCormick Place, and tack on five future consumption tax hikes to the more than 30 taxes Chicagoans already pay, all to construct the Lucas Museum of Narrative Art.
Chicago has a plummeting credit rating and underfunded pensions, and the city’s instability combined with the continued threat of tax hikes is causing residents to flee.
In the midst of the city’s financial crisis, it’s hard to understand how the mayor expects to find room for another expensive pet project.
The plan is by no means set in stone, as Emanuel must first persuade state lawmakers and the governor to allow his borrowing proposal. The mayor may need some Jedi mind tricks to convince state lawmakers the money is worth loaning, and to convince taxpayers to accept yet another tax hike.
The mayor’s proposal would extend five existing taxes past their current expiration dates to 2066, including:
- Extending the 2 percent hotel tax instead of letting it expire in 2032
- Extending the 2.5 percent hotel tax for the Metropolitan Pier and Exposition Authority past its current expiration date of 2060
- Extending the 1 percent tax on downtown restaurants past its 2060 expiration date
- Extending the 6 percent tax on car rentals past its 2060 expiration date
- Extending the $4 fee on taxi rides out of O’Hare and Midway airports past 2060
Emanuel must not have considered that Chicagoans are already the most-taxed residents in any city in Illinois. Even without the 2015 record $700 million tax hike factored in, Chicagoans’ per-household local-tax burden for 2014 was $4,282, or nearly 9 percent of their income. That’s nearly six times the tax rate residents in Naperville pay for their city operations, nearly three times what residents in Aurora pay, and more than 2.5 times what residents in Springfield pay.
With such a heavy tax burden, it’s not surprising that in 2015, Chicago lost more residents than any major city in the country.
When factoring in the 2015 tax hike, the burden gets even worse. But beyond that, Chicagoans are also paying the highest sales tax in the nation at 10.25 percent, and about 30 additional taxes, including:
- Amusement tax (5 percent or 9 percent of charges for amusement)
- Amusement tax – subscribers to paid television programming (9 percent of television programming costs)
- Boat-mooring tax (7 percent docking or mooring fees)
- Bottled-water tax (5 cents per bottle)
- Chicago share of the state income tax (distributed by the state)
- Cigarette tax ($1.18 per pack, with a minimum price mandated at $11.50 per pack)
- Electricity infrastructure maintenance fee (usage schedule starting with 0.53 cents per kilowatt hour)
- Electricity use tax (usage schedule starting with 0.61 cents per kilowatt hour)
- Emergency telephone system surcharge – landline ($3.90 per month)
- Emergency telephone system surcharge – wireless ($3.90 per month)
- Foreign fire-insurance tax (2 percent of taxable premiums)
- Fountain-soft-drink tax (9 percent of syrup price)
- Gas use tax (6.2 cents per therm on businesses that purchase gas from sellers not subject to either distributor or reseller occupation taxes)
- Ground-transportation tax (varies, including $78 per month for city cabs, $3 per day for noncity cabs)
- Home-rule retailers’ occupation (sales) tax (1 percent on food and drugs; 2.25 percent on general items)
- Hotel-accommodations tax (5.58 percent of gross rental charge, includes municipal-level tax)
- Liquor tax ($0.29 per gallon of beer, $0.36 to $2.68 per gallon of liquor depending on alcohol content)
- Motor-vehicle lessor tax ($2.75 per vehicle per rental period)
- Nonretail transfer-of-motor-vehicles tax (based on schedule of age of vehicle, from $10 to $80)
- Occupation tax – natural-gas distributor and reseller (8 percent of receipts)
- Off-track-betting tax (1 percent of wagers plus $1 on off-track-betting admissions)
- Parking tax (22 percent for daily parking, 20 percent for daily parking on weekends, 20 percent valet parking)
- Personal-property-lease transaction tax (9 percent of receipts or charges)
- Personal-property replacement tax (distributed by state, 2.5 percent on corporate income, 1.5 percent on partnerships, trusts and S corporations)
- Real-property transfer tax ($5.25 per each $500 of transfer price)
- Restaurant tax (0.25 percent of retail price in addition to sales tax)
- Soft-drink tax (3 percent of price)
- Telecommunications tax (7 percent of receipts or charges)
- Tire fee ($1 for each new tire sold)
- Use tax for nontitled personal property (1 percent, except for first $2,500 each year)
- Use tax for titled personal property (1.25 percent)
- Vehicle fuel tax (5 cents per gallon)
- Wheel tax ($85.97 annually for small passenger automobile; $136.54 annually for large passenger vehicle)
Raising taxes has never been the solution to fix Chicago’s financial mess, but tax hikes to build a filmmaker’s museum are an especially unreasonable demand on Chicago taxpayers – who already bear the heavy burdens caused by the city’s poor policy decisions.
And the state, locked in a nearly yearlong budget impasse, might not be eager to approve Emanuel’s requested borrowing, either. With budget gridlock continuing and a fight for structural reforms – such as fixing workers’ compensation or freezing property taxes – at its core, funding Lucas’ museum shouldn’t top the list of priorities in Springfield.
And it shouldn’t in Chicago, either. In March, Fitch Ratings downgraded Chicago to just one notch above junk status, while Moody’s already lowered Chicago’s rating to junk status last year. Fitch also added a negative outlook to its rating when it downgraded Chicago, meaning it expects to downgrade Chicago again soon unless “the city presents a realistic plan that puts the pension funds on an affordable path toward solvency.” Fitch called the March 24 Illinois Supreme Court ruling that struck down Chicago’s attempted reform of its municipal workers’ and laborers’ pension systems “among the worst of the possible outcomes for the city’s credit quality.”
This poor outlook doesn’t even consider Chicago Public Schools, or CPS, which all three major credit ratings have rated as junk. And CPS teachers may strike later this school year, which would give Emanuel another task higher on the priorities list than the Lucas museum.
Instead of building a new high-priced museum, the city should instead focus on avoiding insolvency by fixing its broken pension systems and finding ways to make the city friendlier for taxpayers and businesses.
Raising taxes is bound to accelerate the out-migration from the Chicago area, leaving the city in an even tougher budgetary situation. The city is faced with many urgent and essential challenges it must tackle – but building a museum is not one of them.