Combined state and local rate of 10.25 percent sends customers shopping elsewhere.
Chicago Ranked No. 1…for High Sales Taxes
Chicago received a dubious
distinction recently: top in the nation for high sales tax rates.
According to the Tax Foundation’s mid-year report on sales tax
rankings for major U.S. cities, Chicago ‘earned’ the top spot for its combined
state and local tax rate of 10.25 percent (state: 6.25 percent; local: 4
percent). This status was cemented as of Jan. 1, when Cook County adopted a one
percentage point county sales tax increase.
The high-tax climate of the Windy
City makes it harder for small businesses to compete with businesses in nearby
areas that have lower sales taxes.
“Sales tax avoidance is most likely
to occur in areas where there is a significant difference between two
jurisdictions’ sales tax rates,” the study authors wrote. “Research indicates
that consumers can and do leave high-tax areas to make major purchases in
low-tax areas, such as from cities to suburbs. For example, strong evidence
exists that Chicago-area consumers make major purchases in surrounding suburbs
or online to avoid Chicago’s high sales tax rates.”
Meanwhile, the rest of Illinois
isn’t doing much better. A new report from the Illinois Policy Institute
shows that Illinoisans pay some of the highest rates nationwide for sales
taxes, individual income taxes, corporate taxes, and property taxes.
