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Emanuel vague on luxury tax, Chico adds it up

Updated: May 6, 2011 4:45AM

Issues? You say you want to hear about issues? Well, let’s put it to the test.

Gery Chico seems to have decided that the breakthrough issue for his mayoral campaign could be Rahm Emanuel’s proposal to impose a sales tax on “luxury services,” which Emanuel would couple with a reduction in the city’s sales tax rate.

Chico has taken to calling this the Rahm Tax and suggesting that Emanuel’s plan would impose a sales tax on everything from haircuts to day-care services.

That’s not true, says Emanuel, who has portrayed his plan as a tax cut for working families, because he would reduce the city’s 1.25 percent sales tax rate to 1 percent. He contends he’d pay for that by extending the sales tax to such services as private club memberships, pet grooming, limo services, tanning parlors, interior design services, charter jet use and elective plastic surgery.

Many good government types will tell you this is a smart play, that the best way to reduce Chicago’s too-high combined sales tax rate is to expand the base to include the service sector. Of course, as with all taxes, your own point of view may depend on whose ox is being gored.

Theoretically, this could be accomplished to be revenue neutral, meaning the amount of money that goes to government remains the same, but would come from different places.

The problem for Emanuel is that he has opened a door that is not as easily closed, and Chico is determined to force his way through the opening.

It’s the “such as” that causes the problems.

Haircuts, car wash, parking?

Emanuel has tried to avoid issuing an exhaustive list of the services he would tax. So Chico has decided he will accuse Emanuel of taxing one everyday service after another to force his hand.

On Friday, Chico held a news conference inside a small Hyde Park barbershop that he said would be adversely impacted by the Emanuel proposal. In the coming days, he said he will go to a parking garage and then a car wash and so forth to reinforce his point.

Let me repeat, Emanuel says he doesn’t intend to tax those types of services, and it’s not like Chico has some secret document that would tell you otherwise.

But Chico says he’s entitled to take this approach because of the lack of detail in Emanuel’s plan and because previous attempts by the Illinois Legislature to tax “luxury services” have veered off into everything from nail salons to weight reduction services. The Legislature is an essential part of this equation, because the City of Chicago cannot decide to impose such a tax on its own.

While I’m not sure Chico’s tactic is entirely fair, I am rather perplexed how Emanuel waded into a very serious issue without seeming to have worked through more of the details.

If this is an example of what we could expect from a future Mayor Emanuel, then we could be in for an interesting ride.

Private clubs vs. YMCA?

Taxing luxury services is trickier than it might sound. For instance, Emanuel wants to tax private clubs, but what private clubs?

“Clubs like the Saddle & Cycle Club,” said Emanuel campaign spokesman Ben LaBolt, referring to the exclusive 19th century social-athletic club at Sheridan and Foster.

What about health clubs? Would he tax East Bank Club members? YMCA members?

Or take his tax on pet grooming services. Does that extend to boarding your pets for the weekend so you can take the kids to the Dells?

“We will work out the exact final categories with Springfield,” LaBolt said.

There was an odd time delay on Chico making this an issue. Emanuel first mentioned his idea of decreasing the sales tax and closing sales tax “loopholes” — without mentioning the word “services” — two weeks ago during the WTTW-Mikva Challenge debate, and Chico followed up by agreeing with him. Then on the day Emanuel rolled out his plan, Chico brushed aside reporters’ questions by saying, “We have a proposal that is similar.” He said he wasn’t prepared to release the details.

Emanuel says that means Chico “was for it before he was against it,” which is possible, although it’s just as likely Chico didn’t understand Emanuel’s proposal when he first spoke. Of course, Chico won’t admit that.

On the same day Chico was telling reporters he had a similar proposal, Carol Moseley Braun jumped right in and called Emanuel’s plan a tax increase and said she didn’t support any new taxes.

Ron Harris, owner of the barbershop where Chico met reporters Friday, takes the tax threat seriously.

“People have been trying to tax us for years,” he said. “It could happen.”

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