January 12, 2011
As part of the Cook County Modernization Report, the Civic Federation examined the County’s revenue and tax structure. Cook County is the only county in Illinois to have home rule status, which gives it considerable taxing flexibility. One of the report’s key revenue findings is that there has been a significant change in Cook County’s tax revenue structure.
Nationwide, property taxes are the largest source of own-source revenues for counties. Historically, the property tax has been the largest revenue source in Cook County as well. The following line graph illustrates the change in Cook County revenues over the past ten years. To better illustrate the change in property and home rule taxes, all other revenues have been combined in the chart. Other revenues include fees, intergovernmental revenues and miscellaneous sources. There has been a clear trend of the County moving away from reliance on property tax revenue towards a greater reliance on home rule taxes, principally the sales tax, as the largest funding source. This is primarily the result of holding the property tax levy flat while increasing the sales tax rate. The Cook County sales tax rate was increased from 0.75% to 1.75% on July 1, 2008 with the first full year of additional revenue experienced in FY2009. On July 1, 2010 half of the increase was repealed bringing the rate to 1.25%.
The following chart provides a closer look at the Cook County property and home rule taxes. There are two factors impacting the amount of revenues generated by each home rule tax: the tax rate and tax base. For example, sales tax revenues are a function of both the amount of retail sales and by the tax rate applied to those sales. The sales tax and the cigarette tax have both seen major tax rate increases over the ten year period, contributing to their large revenue growth. The other home rule tax rates have been held flat. Of those, only the amusement tax and the parking lot tax have had a signficant natural revenue growth. The amusement tax revenues increased 77.5% or $9.8 million and parking lot revenues increased 30.6% or $8.5 milion. The wheel tax revenues also grew, but it is a very small revenue source. It is crucial to have some taxes with natural revenue growth to keep up with inflationary increases in expenses.