Reeder: New sales tax plan to help fund schools is not a good idea
SPRINGFIELD – I was awakened one morning by my wife shaking me and whispering, “There is a mouse in the house, and I want to know how it got in.”
“Somebody probably left the door open too long and it scampered inside,” I whispered back.
“We have caught two mice in two days, so how can one mouse getting in be responsible?”
Well, if that mouse was pregnant …
New taxes are a bit like pregnant mice – leave the door open a crack and soon they start multiplying.
Several communities across Illinois are voting next month on opening the door to a new sales tax that goes to school districts.
The sales tax is being marketed to voters as an alternative to property taxes when it really should be pitched as an addition to property taxes.
In fact, a more truthful depiction would be to describe it as a new mechanism for local school districts to be able to go deeper into debt.
Stifel Nicolaus, one of the nation’s largest investment banking firms, put out a slick video that depicts the sales tax as a wondrous financial instrument designed to reduce property taxes.
I’ll let you in on a secret.
Outfits like Stifel Nicolaus have one thing in mind: marketing debt.
They get paid every time they handle a bond issue for a governmental entity and sell it off to investors on Wall Street.
“Usually what sparks a school district asking for a sales tax referendum is a desire to build a new school or make improvements to existing buildings,” said Roger Eddy, executive director of the Illinois Association of School Boards.
“Oftentimes, local school boards feel like they are tapped out on local property taxes and that they can’t go any higher. This gives them an alternative.”
Eddy, a vocal advocate for the sales tax, says some communities have used the sales tax to reduce the property tax rate.
And that has happened in communities such as Abington. When a countywide sales tax was instituted in 2010, the small west-central Illinois community used its share of the new tax to retire some of its long-term debt and reduce property taxes. But a larger neighboring district in the county used its new revenue to borrow more.
Once a county opens the door to a new tax like this, there is no guarantee it will ever go away. Will the sales tax disappear once a particular construction project is completed? Probably not.
In 25 years covering government, I’ve found nothing is as permanent as a temporary tax.
There is no way for voters to know with certainty that instituting a sales tax will result in property tax relief.
“At this point in Illinois, it would be naïve to think that if governments are going to collect a certain amount in sales tax that they are going to give it back in property taxes,” said David From, Illinois director for Americans for Prosperity. “That hasn’t been the reality.”
“Frankly, I don’t think allowing the government to collect more money so that maybe they will give you some tax relief is a good way to proceed. The better way is to not allow them to collect it.”
• Scott Reeder is a veteran statehouse reporter and the journalist in residence at the Illinois Policy Institute.