Cut the overall sales tax rate and broaden the tax base by including luxury goods. He estimates that this tax swap will lead to an increase of $15 to $20 million in the city’s coffers.
This has the feel of far-fetched fairy dust. The question our reviewers asked was if the city cut sales tax and then couldn’t get the cooperation of the State on the state tax changes what would happen? The answer that came back was not reassuring.
It turns out that a lot of our fair city’s revenue comes from sales taxes which are indeed the highest of any municipality in the country. So we wondered if you could really replace the sales tax with a flurry of luxury taxes and the answer was inconclusive. Our reviewers were curious how Mr. Emanuel planned to proceed because to cut city taxes without securing the changes needed from the state would be a catastrophe helping no one. They came to the conclusion that there was also no way to accurately imagine what this would save or cost without making a number of assumptions that were particularly chaotic. They meant this in the mathematical sense of the term, things changing radically based on a small variation in some initial condition or newly arising variable.
Aside from the obvious problem of having to wrangle the state into position to have this have any chance of working there is the uncertainty of knowing it will work at all. Experts spar with real intensity over the effectiveness of every tax and in regards to a tax swap it gets downright contentious fast. Our reviewers were far from kind to each other in the process and some of the arcana involved was way above my pay grade and I like trolling through the federal ledger just to keep my legalese sharp.