Every year for the past nine years, Illinois has lost more people than it has gained. In 2022, an astonishing 104,437 people moved out of Illinois. And just like each of the eight years that preceded it, the vast majority left from the state’s biggest city, Chicago.
Something is clearly not going right. But now, Chicago’s new mayor, Brandon Johnson, is planning to take steps to make the exodus from the state even worse.
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As a part of his campaign, Johnson proposed a tax plan that aims at raising $800 million in new revenue. According to the Illinois Policy Institute, this includes a goal of collecting: 1) “$400 million over four years from raising the real estate transfer tax on high-end home sales, commercial, apartment and other properties”; 2) more than $20 million from a $4 per month, per employee head tax on large companies; 3) “$30 million from increasing one of the nation’s leading hotel taxes”; 4) “$100 million from ‘user fees on high-end commercial districts frequented by the wealthy, suburbanites, tourists and business travelers”; 5) $98 million from a tax on jet fuel that airlines use; and 6) “$100 million from taxing financial transactions.”
That’s a lot of tax for a city that already has some of the highest rates in the country.
A good rule of thumb in economic policy is that if you want more of something, you should lower its costs. If you want less of something, then you should increase its costs. By taking one of the most heavily taxed jurisdictions in the country, and then slapping $800 million worth of new taxes on top of that, Johnson is making it clear what kinds of things he wants less of. He wants fewer large companies in his city, fewer tourists, fewer people with expensive homes, and fewer hotels.
What does each of those things have in common? They are all either 1) indispensable to the economic activity of the city and/or 2) indispensable parts of Chicago’s tax base.
The question is obvious: Why in the world would Johnson be eager to pass a tax plan that drives away the very people the city relies on for economic prosperity? After all, once all the people Johnson is itching to tax actually leave, the city will be left with no meaningful sources of revenue — which will quicken the city’s decline.
Economist Ludwig Von Mises observed there is often a pernicious cycle in which a politician identifies a problem, concludes that massive government intervention in the economy is necessary, the intervention makes the problem worse, and then the new, worse condition is used as a pretext to justify greater intervention. This is exactly what is happening when Johnson proposes his massive tax hikes.
The problem gets even worse when one considers who Johnson’s political allies are. After pledging to raise revenue in his inaugural address, a far-left nonprofit group and Johnson ally called the Action Center on Race and the Economy, or ACRE, laid out its own plan in an effort to move Johnson in an even more progressive direction.
They want to hike taxes by more than $8 billion. Yes, billion with a “b.” In addition to nearly all of Johnson’s plans, ACRE’s proposal would levy a 3.5% city tax, a “0.4% ‘wealth tax’ on the wealthiest 10% of Chicagoans,” an additional $1 tax on hotel rooms per night, and impose a tax on digital platforms such as Google and Facebook. And, to top it off, they also want to defund the police.
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Although there is no way this plan gets passed, it is not unreasonable to think Johnson could be pressured to incorporate certain aspects of it into legislation he eventually signs.
No matter what version of these proposals passes, nobody should be surprised when Chicago’s condition goes from bad to worse.
Jack Elbaum is a summer 2023 Washington Examiner fellow.