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One problem, mayor: You can’t do this tax without the legislature and the governor

Monday, May 20, 2024 - Posted by Rich Miller

* Crain’s

City Chief Financial Officer Jill Jaworski said recent policy changes to shore up the city’s beleaguered pension plans will continue through Mayor Brandon Johnson’s first term and Chicago’s diverse economy will fuel the growth necessary to buffer the city’s tax base.

Jaworski and Johnson also hinted the city is seriously exploring extending its sales tax to professional services, an idea that has been met with resistance in the past but is popular with politicians because it could broaden the city’s sales tax base and bring in more revenue, while potentially lowering the overall tax rate. […]

[Johnson] and Jaworski pointed to potentially extending the sales tax to professional services — an idea City Hall sources have told Crain’s is the likeliest to move forward — and a City Council subcommittee on revenue that Johnson hopes will provide other options.

Johnson said extending sales taxes to services, which could hit law firms, consultants and other professional work, could allow the city to lower the overall sales tax rate because the tax would be broadened.

Um, no.

* From Article VII of the Illinois Constitution

A home rule unit shall have only the power that the General Assembly may provide by law (1) to punish by imprisonment for more than six months or (2) to license for revenue or impose taxes upon or measured by income or earnings or upon occupations.

“Upon occupations” means a service tax.

* The City of Chicago imposed a one percent service tax in 1981. By the end of the year, the Illinois Supreme Court had knocked it down, saying that “the intent of this section of the Constitution is that the legislature exercise ‘maximum supervisory power’ in these enumerated areas”

The service-tax ordinance is challenged, inter alia, on the ground that it is a tax “upon occupations” enacted without legislative authorization in contravention of the 1970 Constitution. Since the adoption of the 1970 Constitution, this court has had several occasions to rule on similar challenges to various taxing ordinances enacted by home rule units. In those cases, which will be discussed later, it was noted that section 6(m) of article VII of the Constitution requires that the powers and functions of home rule units shall be liberally construed. In those cases, in upholding taxing ordinances, this court “liberally construed” the powers of home rule units to enact taxing ordinances under the 1970 Constitution. We are urged to do so once again and to uphold the Chicago service-tax ordinance. We cannot uphold the ordinance without violating the clear limitation of article VII, section 6(e), of the Constitution, which requires authorization by the General Assembly before a home rule unit can impose a tax upon occupations. […]

The reasons given in the majority report of the Committee on Local Government of the constitutional convention for restricting a home rule unit’s authority to impose a tax upon occupations are just as applicable to the Chicago service tax. The mere recitation in the ordinance that the tax is upon purchasers of services does not eliminate the evils the delegates to the convention sought to prevent.

Obviously, the city of Chicago was aware of the “legal incidence” language previously used by this court and attempted to tailor its ordinance to incorporate a sufficient amount of such language “magic words” to transform an occupation tax into a tax upon the purchaser.

Emphasis added.

* It’s also in state law. From the Home Rule Municipal Service Occupation Tax Act

Limitations: Nothing in this section shall be construed to authorize the Municipality to impose a tax upon the privilege of engaging in any business which under the Constitution of the United States may not be made the subject of taxation by the State of Illinois.

* Also, even if the General Assembly gives its approval, future service taxes can be tricky here if they aren’t uniformly applied. From the Illinois State Bar Association

In 1981, the ISBA, the Chicago Bar Association, and other plaintiffs sued Chicago, challenging the constitutionality of an ordinance that imposed a 1 percent tax on all purchased services. The ordinance exempted the commodities and securities businesses as well as all transactions on a futures or securities exchange for 10 years.

The Illinois Supreme Court held that the city’s tax was unconstitutional because it represented a tax on occupations. Commercial National Bank of Chicago v. City of Chicago, 89 Ill.2d 45, 70 (1982). The Illinois Constitution prohibits home rule units like Chicago from imposing an occupation tax without the authorization of the General Assembly.

The ISBA and the CBA also argued that the ordinance violated section 2 of Article 9 of the Illinois Constitution because it was not uniformly applied. The exemptions provided for the securities and exchange industry unfairly taxed attorneys, who provide services substantially similar to those provided by securities and exchange businesses. The Illinois Supreme Court agreed, holding that the distinction between attorneys and securities and exchange businesses was “wholly arbitrary and cannot be upheld.”


  1. - Three Dimensional Checkers - Monday, May 20, 24 @ 11:15 am:

    Yeah, no one in the 300+ person Law Department could have figured this one out before it was announced. Superior collaboration.

  2. - jimbo - Monday, May 20, 24 @ 11:16 am:

    Well at least MBJ got that whole Bears thing successfully wrapped up this week. So at least he’s got that win going for him. /s

  3. - Jerry - Monday, May 20, 24 @ 11:20 am:

    There is this tax and the Bears Tax Increase, thanks to President Warren.

  4. - ChicagoBars - Monday, May 20, 24 @ 11:21 am:

    But Mister Mayor other than those multiple judicial precedents and existing constitutional and statutory hurdles cited by CapFax a City of Chicago only service tax is totally politically doable, right? /s

  5. - Suburban Mom - Monday, May 20, 24 @ 11:26 am:

    Somebody called him “Left-Wing Rauner” last week and I gotta say I see it

  6. - TheInvisibleMan - Monday, May 20, 24 @ 11:32 am:

    I dislike having to do this because I don’t see the Johnson administration making good decisions regularly as-is, but there seems to be some context hinted at in the story which is important but possibly overlooked.

    In the Crain’s article, Johnson was discussing how the teachers union came together to travel to springfield to ask the legislature to increase funding for schools.

    It’s entirely feasible that conversation was simply continued and included how the city can also go to springfield to work on ways for the city to increase funding - say by passing certain legislation which would align with the goals of the city for a service tax.

    However, the entire conversation isn’t printed in the story, just snippets which seem to be presenting something different.

    I could be wrong in my view on this of course, but in the totality of the conversation where these snippets are coming from, it seems including a potential discussion with the state legislature was already the direction being taken in the conversation as a whole.

  7. - James - Monday, May 20, 24 @ 11:37 am:

    It is really, truly, stunning to watch how inept this administration is. Just very, very, basic understanding of how Government works is lacking. Is there no adults in any of the rooms on the 5th floor?

  8. - Rich Miller - Monday, May 20, 24 @ 11:44 am:

    ===including a potential discussion with the state legislature===

    “an idea City Hall sources have told Crain’s is the likeliest to move forward”

  9. - City Zen - Monday, May 20, 24 @ 11:46 am:

    Labor unions offer professional services.

  10. - JS Mill - Monday, May 20, 24 @ 11:50 am:

    Chicago could increase their sales tax rate unless it is already capped by statute. It would not be on services obviously.

  11. - Now I'm down in it. - Monday, May 20, 24 @ 12:19 pm:

    This will never fly. If it did, it would hurt middle and lower-income workers the hardest. AKA the people the Johnson administration professes to care about the most. The ineptitude is startling.

  12. - Jerry - Monday, May 20, 24 @ 12:40 pm:

    Don’t forget that the the Chamber of Commerce also offers professional services. They need to be taxed.

  13. - Annonin' - Monday, May 20, 24 @ 12:53 pm:

    Service tax idea usually runs out of gas when small local biz— barbers, hair stylists, etc ( AKA people who tend to run cash biz) voice concerns

  14. - pragmatist - Monday, May 20, 24 @ 1:05 pm:

    Whoever coined the name Left Wing Rauner for Brandon Johnson nailed it.

  15. - DuPage Saint - Monday, May 20, 24 @ 1:20 pm:

    The Mayor is just throwing up a smoke screen. He is doubling down on the transaction taxes for the Board of Trade now /S

  16. - Friday Addams - Monday, May 20, 24 @ 1:30 pm:

    Mid to late May is always a great time to begin a remedial Illinois Constitution and Law class.

  17. - Tax and Spend - Monday, May 20, 24 @ 1:59 pm:

    Have to give Chicago credit for trying….they are just trying to get the Services tax before the Supermajority takes it for their own….it’s only a matter of time.

  18. - Steve - Monday, May 20, 24 @ 3:05 pm:

    How do you collect a tax on Chicago based law firms when so much of the work can be done outside of Chicago’s borders? It’s almost like Mayor Johnson’s staff hasn’t heard of remote work or something…

  19. - Just a guy - Monday, May 20, 24 @ 3:11 pm:

    At some point, you just have to smile and nod, and say to the guy there running the 5th Floor “You don’t really listen to anyone who knows about how these things work, do you. But hey, Go Bears!”

  20. - Shytown - Monday, May 20, 24 @ 3:23 pm:

    I’m guessing they 100% know they need state approval, but they don’t care.

  21. - low level - Monday, May 20, 24 @ 7:38 pm:

    Jill Jaworski is sharp as a tack. I’m sure she knows it would need Springfield approval.

  22. - Leslie K - Monday, May 20, 24 @ 9:36 pm:

    ===Somebody called him “Left-Wing Rauner” last week and I gotta say I see it===

    That really rings true

  23. - NorthsideNoMore - Tuesday, May 21, 24 @ 8:51 am:

    Those darn state statutes and constitution always getting in the way !

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