Who Will Chicago Tax If The Rich Say “Enough”?
The City of Chicago would like to spend a billion dollars more than it will raise under existing taxes and fees, so Mayor Lori Lightfoot is setting the stage for a tax increase.
Activists, union leaders and others in her coalition have a simple solution: Command the high-income earners to pay more! Their logic is simple: Middle-income folks are taxed too much already, but the very well-off are few, our demands are many and we control the City of Chicago — so make the high-income folks pay our bills!
It’s true that they are outnumbered, that the city can impose taxes one way or another on folks that are outnumbered, and that every tax is a command that residents ignore at their peril.
The flaw in their logic is this: The well-off are free to choose whether to stay and pay or leave — and thereby leave everyone else with the obligation to fund the city’s spending tab instead.
The city only has the power to coax; it does not have an effective power to command so long as we are free. Every tax, every law, every rule the city imposes is an offer, not a command: If you would like to live in this area, then this is what it will cost and these will be the rules.
And every resident, the high-, middle- and low-income alike, gets to choose: Do I want to accept the offer to live here under these costs and those rules?
Chicago’s 2.7 million residents each independently and continuously considers whether to accept or reject the value proposition Chicago offers. The financial and other costs and benefits of staying or leaving are different for each of us, but as the net value of living here falls, more will leave.
Neither Mayor Lightfoot nor I knows exactly how many more will leave and how fast. Sure, some who own plants or lease offices here might take more time than others to make arrangements, winding down operations, as they relocate to places where a local government coaxes people to come.
And as people of every income level leave, they spend, they give, they build, they invest, they pay taxes … elsewhere. Meanwhile in Chicagoland, property values fall as the supply of houses for sale goes up and demand fades. Civic organizations and charities see contributions flatten and fall. Ambitious people pursuing dreams of building something or getting rich don’t come or make new investments elsewhere, and job opportunities are correspondingly diminished. After all, who wants to build something where the people seek to take it away?
Oh, and of course the government is “surprised” to discover that the revenue commanded doesn’t materialize. Confronting a “new, unexpected” and even larger operating deficit, the folks running the city demand more money — now from you too.
Except now your property is worth less than it was, and opportunities for advancement are more plentiful elsewhere than here, and you are already paying more than you wish…
Sound familiar? The truth is that Chicagoland is already in this downward spiral of shrinking population from all income levels, falling property values, tighter civic and charitable fundraising, perpetual “surprise” operating shortfalls and diminished opportunities leading our parents to Florida and children to Austin where they start careers.
The city’s financial failure is not a future contingency — it’s our present reality.
It doesn’t have to be this way. The City of Chicago is an entity with a legal standing independent of the people of Chicago. Its liabilities are not the personal liabilities of the people who live here — those liabilities are solely the obligation of that entity.
The City of Chicago is in this regard much like General Motors. Just 10 years ago GM found itself unable to pay for all the liabilities it unwisely incurred — because GM cannot command its customers to accept offers either. And so GM restructured its liabilities, reducing them to a level that permits GM to grow and thrive again by offering products and services that consumers choose to buy.
Just as a restructured GM works for consumers, suppliers, employees, and investors, so too a restructured city would offer all residents improved services at lower costs, empowering Chicago to coax people to come and build their future here instead of another city.
The only thing standing between Chicago’s current cycle of failure and its potential future of success are the folks who run the city. They need courage and vision — and they need to work for you instead of all the folks to whom the city owes too much money.