Updated: September 24, 2012 6:25AM
We’re not ready to take sides in the race for Chicago mayor.
But when we hear a good idea — even if it includes the verboten word taxes — we can’t let it pass without note.
On Wednesday, Rahm Emanuel threw out an idea we’ve long supported, along with the Illinois Senate and a slew of good government types.
He wants to drop the Chicago sales tax from 1.25 percent to 1 percent in exchange for taxing more services.
Before you recoil in horror at more taxes, consider this:
Only goods are taxed in Illinois now, including restaurant meals, clothes, school supplies and, at a lower rate, groceries — basically most of what you buy at Target. Nearly every service, including such luxury services as interior design, carpet cleaning, dating services and health clubs, are exempt. By taxing some of those services, as Emanuel suggests and the Illinois Senate voted to support in 2009, Illinois would be in line with the rest of the Midwest and most states that already tax services. Illinois now has the third most narrow sales tax base in the country.
Focusing our sales tax on goods may have made sense in the 1960s, when the sale of goods represented 32 percent of economic activity in Illinois, but that has dropped to just 12 percent, according to the Center for Tax and Budget Accountability. Meanwhile, the service sector is growing quickly and now accounts for more than 60 percent of the Illinois economy.
If done right, this proposed change would more fairly spread the sales tax burden and, when coupled with an overall lowering of the tax rate, would leave many shoppers, particularly lower-income ones, paying less in sales tax than they do now.
When state lawmakers passed an income tax increase earlier this month, they missed an opportunity to modernize our tax system and make it more fair. Proposals to expand the sales tax base, reduce our reliance on property taxes and make the income tax more progressive so that lower income earners don’t pay a disproportionate share all were jettisoned.
We wish Emanuel had produced a more fleshed-out proposal. This is too important and thorny an issue to rush.
But he’s right to raise it — and he gets points for not being afraid to push it.