Chicago Mayor Johnson's Budget Betrayal Would Raise Taxes on Small Businesses

With Chicago facing an expected budget shortfall of nearly $1 billion next year, Mayor Brandon Johnson has unveiled his proposed 2025 budget. The plan not only reneges on the progressive’s campaign pledge to not raise property taxes but also includes a steep hike on alcohol taxes.

Independent liquor stores will bear the brunt of Johnson’s liquor tax. These small businesses are primarily immigrant-owned and are located in predominantly minority-populated neighborhoods of the Windy City. At the same time, Chicago continues to indulge in a decades-long spending spree that prioritizes everything from teacher pensions and art classes to fancy government office renovations.

Chicago’s financial woes are no secret at this point, and the mayor’s $17.3 billion proposed budget still includes a $982 million deficit. Johnson sought to fill the gap with a now-failed $300 million property tax hike alongside other “revenue enhancements” (a government euphemism for “we are raising your taxes”). Included in the dizzying array of budgetary numbers is a proposed ordinance to raise certain alcohol taxes by 34 percent.

Taxing alcohol has proven to be a popular idea among politicians as it often draws less scrutiny than income or property tax hikes. Therefore, it can act as a sort of backdoor revenue generator—but also one that is regressive in nature, given that it most significantly impacts lower-income populations that are less able to absorb the hike.

But the most severe threat posed by Chicago’s planned alcohol tax escalation is the impact it would have on small businesses in the city, including craft distilleries and neighborhood liquor stores. The Distilled Spirits Council of the United States has projected that the tax could result in $25 million in lost retail sales and cost at least 300 Chicagoans their jobs.

Like in many large cities, Chicago’s neighborhood liquor stores are often owned by Arab and South Asian immigrants and commonly operate in minority-populated neighborhoods. It is these small businesses that are most threatened by Johnson’s alcohol tax increase.

It is not a mere matter of dollars and cents. Many of these businesses are located in the South Side of Chicago, which borders the Indiana state line. This poses a particular problem given that the Hoosier State’s excise tax for distilled spirits sits at $2.68 per gallon. Chicago’s current rate—when combined with Illinois’ state liquor tax—is already over $13 per gallon.

“It is cheaper for Illinois retailers [such as neighborhood liquor stores] to buy at retail in Indiana than to buy at wholesale in Illinois,” wrote Sean O’Leary, former chief legal counsel of the Illinois Liquor Control Commission, on his Irish Liquor Lawyer blog. “These businesses are presented with many bad choices, cheat and buy at retail in Indiana so you can make a profit, follow the rules and be uncompetitive in the marketplace, or go out of business.”

The mayor’s alcohol tax would potentially be more defensible were revenue strictly being used to fund vital government services, but the 2025 proposed budget still earmarks over $72 million to fund the city’s Department of Cultural Affairs and Special Events, which dispenses grants to local artists and funds the Chicago Film Office’s efforts to get more movies and TV shows filmed in the city (and boasts an 80-person work force totaling around $8 million in personnel costs). 

The proposed budget also includes about $4 million in funding for the superhero-sounding “Graffiti Blasters“—a team of over 30 government employees that use “weapons” such as a “baking soda truck” and a chemical sprayer “loaded with citrus-based oil” to eradicate paint on walls. In a lesson of the-right-hand-doesn’t-know-what-the-left-hand-is-doing variety, the Department of Cultural Affairs and Special Events dispenses grants to the Design Museum of Chicago, which has hosted classes teaching Chicagoans how to draw graffiti—graffiti that is then, presumably, “blasted” off by the Graffiti squad.

Johnson is no skinflint himself. Less than a year into his tenure, a Freedom of Information Act request from a local news station uncovered an at least $8,000 trip that the mayor and his coterie took to Los Angeles, and which included an extra two days in L.A. to attend the Grammy Awards. Prior to the latest budgetary drama, the mayor also attempted to pressure Chicago Public Schools leadership into taking a risky $300 million high-interest loan to fund teacher pensions—a move that even fellow progressives balked at, as evidenced by the resignation of the city’s entire Board of Education in protest (all of whom were originally handpicked by Johnson himself).

Most recently, another local news investigation turned up invoices totaling more than $80,000 to renovate an office in the Chicago Cultural Center in which the mayor’s wife plans to host visiting dignitaries. The furniture bill alone was $43,000, with even a staffer scoring a $4,600 desk, alongside the acquisition of a $2,200 “high-back executive chair” for the city’s first lady.

On Thursday, the Chicago City Council dealt the mayor a devastating blow when it rejected his proposed $300 million property tax increase in a 50–0 vote. Earlier in the week, Johnson told reporters that “he was never serious” about the property tax increase, but proposed it “simply to shock the Council” into suggesting “serious revenue-raising alternatives,” the Chicago Sun-Times reported. 

The mayor’s alcohol tax gambit is still in play, and if it is approved, it will be everyday Chicagoans—including the immigrant owners of neighborhood liquor stores—that will pay the price.

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Source: https://reason.com/2024/11/16/chicago-mayor-johnsons-budget-betrayal-would-raise-taxes-on-small-businesses/