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Pritzker unexpectedly won’t rule out service tax for mass transit

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* My weekly syndicated newspaper column

Gov. JB Pritzker unexpectedly moved away last week from his longstanding opposition to taxing services, saying he didn’t want to start taking ideas off the table as lawmakers search for ways to fund and reform the Chicago region’s mass transit system.

As you may know, the Chicago area’s mass transit agencies are facing a $730 million “fiscal cliff” in 2026. The federal government’s COVID-era subsidies will expire that year. While ridership has declined as service worsens, operating costs have increased and average fare prices have fallen.

According to a report last year from the Chicago Metropolitan Agency for Planning, imposing a service tax could be part of the solution. The CMAP report said adding a service tax to the state’s existing 6.25% state tax rate could generate $1.1 to $1.9 billion in 2026. Some legislators are proposing a $1.5 billion annual funding increase for transit, as part of a consolidation effort.

So, my associate Isabel Miller (who contributed to this column) asked Pritzker during an unrelated media event if he wanted to take any state taxes off the table before the talks heat up, including the service tax.

“I have never been in favor of that before,” Pritzker said of the service tax. He has indeed opposed the tax all the way back to his first 2018 gubernatorial campaign, often calling it regressive.

“There may need to be a source of revenue here,” Pritzker said, “but that’s not something that I have favored in the past.”

As far as specifically ruling out a service tax, however, the governor said: “I really don’t want to start saying, ‘We’re not going to do this, we’re not going to do that.’ At this point, there are just so many pieces of this that we have to look at before we’re going to pay for what’s necessary here as we come off of support from the federal government and making sure we’re restoring transit services.”

Some legislative Democrats pushing transit agency consolidation and reform welcomed the news of the governor’s new openness to a service tax, which seems to be evidence the governor is serious about finding a fix.

“I appreciate the governor being open to it, and I appreciate him recognizing this is a complicated matter,” Rep. Eva-Dina Delgado, D-Chicago, told me. Delgado introduced House Bill 5828 last week to provide the systems an annual $1.5 billion state appropriation once the mass transit system is consolidated.

Rep. Kam Buckner, D-Chicago, whose House Bill 5823 would create a consolidated transit agency, told me he’s also opposed a service tax in the past. But Buckner said he is open to it now, and he appreciates the governor is keeping an open mind.

Pritzker also reiterated last week he’s not yet endorsing any particular mass transit reform proposal but insisted “change is going to have to come.”

“We just know that we’re going to have to upgrade service, make sure that we’re dealing with the transit funding challenge that’s coming up,” Pritzker said. “I hope to see several proposals so that we can consider what direction to take.”

That change in direction will be a complex endeavor, the governor said.

“We’ve got to look at cuts that need to be made, along with, you know, are there changes in fares for certain types of riders that need to be made,” Pritzker said.

A Pritzker spokesperson later explained when the governor said “cuts,” he meant efficiencies to save money, like consolidating the regional transit system but not service cuts.

Most transit agencies hotly oppose consolidation, including the Chicago Transit Authority.

A spokesperson for the Illinois Chamber told me the organization hopes the governor remains ambivalent about a service tax.

“From our position, taxing Illinois’ service businesses — especially our smallest businesses — to close a budget gap is a non-starter. The tax would negatively impact the smallest of businesses: service-based small businesses and startups — especially businesses in counties that border other states as customers can save just by crossing the state line,” the Chamber spokesperson said.

One issue with a service tax is implementing it would take time. Many of the businesses that would be covered are not currently set up to pay sales taxes, for example. The Chamber predicted it could take “several years” to implement a service tax, so it won’t solve “short-term gaps.”

“As the voice of Illinois business, we would welcome sitting down with the governor’s team to discuss pragmatic ways to address the budget gap, but taxing services is not one of them,” the Chamber spokesperson said.

posted by Rich Miller
Monday, May 6, 24 @ 7:49 am

Comments

  1. So the people riding mass transit pays $3.00 A ride. People not riding it pays every day on every item they buy so we can give them a $3:00 rides. Let them pay their fair share for the ride. Don’t make everyone else pay so they can ride while getting sick of paying for everyone else.

    Comment by Me Monday, May 6, 24 @ 8:53 am

  2. As usual, the governor’s position is very well thought out and reasonable. Such a contrast with his predecessor.

    I have no idea how it will turn out but am very confident a proper solution will be found w Pritzker at the helm.

    Comment by low level Monday, May 6, 24 @ 9:15 am

  3. ==discuss pragmatic ways to address the budget gap, but taxing services is not one of them==

    I wish they would name one.

    Comment by supplied_demand Monday, May 6, 24 @ 9:28 am

  4. I don’t particularly like the idea of consolidation just because I’ve seen a consolidated MBTA hollow out the T in Boston, but I own a small service business and like a service tax even less.

    Comment by ChicagoVinny Monday, May 6, 24 @ 9:30 am

  5. Using a broad service taxes to specifically fund transit makes little economic sense. If taxes must be increased to fund public transportation, the more sound policy would be to tax car-related economic activity like: parking, use of ride share apps, car rentals, vehicle registration, and the purchase of auto parts. Or increase the motor fuel tax. Those kind of taxes act as more of a user fee than anything else — and it’s probably easier to pull off politically than a service tax (easier, but certainly not easy.) If you want to stress the transportation system by driving your car rather than jumping on a train or bus, that’s fine. But you have to pay for the privilege.

    Comment by Tony T. Monday, May 6, 24 @ 9:51 am

  6. “I wish they would name one.”

    It isn’t the Chamber of Commerce’s job to find solutions for the incompetent CTA.

    Comment by sulla Monday, May 6, 24 @ 9:59 am

  7. How about at least part of the proceeds from the millionaires tax (if it passes) goes toward funding mass transit. Not just in the Chicago area and to help fund the consolidated transit agency (if it becomes reality) but for all MT systems statewide.

    Comment by NonAFSCMEStateEmployeeFromChatham Monday, May 6, 24 @ 10:05 am

  8. Was surprised to learn their was a tax Pritzker was not in favor of.
    Learn something new every day.

    Comment by Back to the Future Monday, May 6, 24 @ 10:06 am

  9. ==Was surprised to learn their was a tax Pritzker was not in favor of.==

    Then you haven’t been paying attention to anything. His opposition to certain taxes has not been a secret.

    Comment by Demoralized Monday, May 6, 24 @ 10:19 am

  10. I hope they can keep CTA affordable and appreciate that they governor is not ruling out a service tax pre se. A 30-day pass for CTA is only $75 right now. Middle class households can save some money and reduce their carbon footprint using the pass, and it gives the agency predictable revenue.

    Comment by Three Dimensional Checkers Monday, May 6, 24 @ 10:24 am

  11. ===It isn’t the Chamber of Commerce’s job===

    Actually, it is. Lots and lots and lots of Illinois businesses depend on mass transit one way or anothr.

    Comment by Rich Miller Monday, May 6, 24 @ 10:33 am

  12. ==Using a broad service taxes to specifically fund transit makes little economic sense.==

    Indeed. There are and have always been dozens of competing interests for that revenue stream. Transit already has a dedicated revenue stream from the lockbox amendment.

    Comment by City Zen Monday, May 6, 24 @ 10:33 am

  13. ** How about at least part of the proceeds from the millionaires tax (if it passes)**

    There is no actual millionaire tax on the ballot. It’s a meaningless non-binding referendum.

    Comment by SaulGoodman Monday, May 6, 24 @ 10:38 am

  14. ==Don’t make everyone else pay so they can ride while getting sick of paying for everyone else.==

    I haven’t owned a car in over 30 years. I use mass transit all the time. I still pay for road upkeep that you use, subsidized by my tax dollars.

    Comment by low level Monday, May 6, 24 @ 10:54 am

  15. ==It isn’t the Chamber of Commerce’s job to find solutions for the incompetent CTA.==

    They planted themselves into the conversation. If you are going to dismiss the ideas of others, it helps your credibility to bring some ideas of your own.

    Comment by supplied_demand Monday, May 6, 24 @ 11:10 am

  16. The CTA President talks about funding vs governance. I encourage him to ride the Blue Line between Forest Park and Kedzie/Holman and see how poorly the service is on that stretch of service.

    For the drivers complaining about having to help pay for transit. Electronic vehicles do NOT pay gas taxes. That needs to be made more equitable because those vehicles use the same roads. This is something that needs to be looked at during this process.

    Comment by Jerry Monday, May 6, 24 @ 11:22 am

  17. ==I use mass transit all the time. I still pay for road upkeep that you use, subsidized by my tax dollars.==

    But fares have not kept up with inflation, whereas the motor fuel tax is indexed to inflation.

    Would you be willing to pay $3.25 for a CTA ride? That’s what it should cost today.

    Comment by City Zen Monday, May 6, 24 @ 11:25 am

  18. Im loving this argument that since you dont use transit you shouldnt have to pay for it. Maybe we can go to a la carte taxation whereby we only pay taxes for what we use. Im sure that would be efficient/ s.

    Comment by low level Monday, May 6, 24 @ 11:26 am

  19. Sadly, not enough people take public transit. So, a new revenue stream will be subsidizing something consumers don’t want.

    Comment by Steve Monday, May 6, 24 @ 11:38 am

  20. ==Sadly, not enough people take public transit. So, a new revenue stream will be subsidizing something consumers don’t want.==

    Thats a faulty assumption but even if that were the case, I’m sure that getting rid of it and put even more drivers on the road will help w road maintenance and traffic congestion…

    Comment by low level Monday, May 6, 24 @ 11:43 am

  21. Except,low level, you are paying for trucks to deliver food to grocery stores, merchandise to retail stores, merchandise to your house, etc

    Comment by ThePAMan Monday, May 6, 24 @ 11:46 am

  22. ===subsidizing something consumers don’t want===

    Plenty of “consumers” want it. But the service has deteriorated to the point where many can’t use it. So, of course, your solution is to make the service even worse.

    You’d be a fine prospect for X.com.

    Comment by Rich Miller Monday, May 6, 24 @ 11:49 am

  23. =Electronic vehicles do NOT pay gas taxes.=

    They pay a higher registration fee.

    Comment by Pundent Monday, May 6, 24 @ 11:52 am

  24. Sadly, not enough people drive on rural roads and small-town streets. Maybe just get rid of them.

    See how that doesn’t work?

    Comment by Rich Miller Monday, May 6, 24 @ 11:56 am

  25. =The CTA President talks about funding vs governance. I encourage him to ride the Blue Line between Forest Park and Kedzie/Holman and see how poorly the service is on that stretch of service.=

    Rode in today as I had to be downtown. It is an extremely painfully slow ride these days. But, hey, the stations near the United Center look great!

    Comment by ThePAMan Monday, May 6, 24 @ 11:57 am

  26. ==Except,low level, you are paying for trucks to deliver food to grocery stores, merchandise to retail stores, merchandise to your house, etc==

    Yep. And mass transit is providing rides to work for the people who drive the trucks, load the merchandise and work retail.

    Comment by low level Monday, May 6, 24 @ 11:57 am

  27. =And mass transit is providing rides to work for the people who drive the trucks, load the merchandise and work retail.=

    Judging from the ridership numbers, the empty storefronts (especially in the Loop), and where the warehouses are located, for example, along I-55, I am not sure that is very true.

    Comment by ThePAMan Monday, May 6, 24 @ 12:11 pm

  28. =Judging from the ridership numbers==

    There were over 23 millions rides on the CTA in February (18% more than last year).

    https://www.transitchicago.com/assets/1/6/Monthly_Ridership_2024-02.pdf

    Comment by supplied_demand Monday, May 6, 24 @ 12:28 pm

  29. =They pay a higher registration fee.=

    That still doesn’t cover the wear and tear on the roads.

    I agree with the Governor. We need to look at everything.

    Comment by Jerry Monday, May 6, 24 @ 12:41 pm

  30. == Judging from the ridership numbers, the empty storefronts (especially in the Loop), and where the warehouses are located, for example, along I-55, I am not sure that is very true.==

    I guess they arent providing all the things you say they are if that is the case. Your argument is inane.

    Meanwhile, you might want to ask the suburbanites who ride Metra into the city about consumer demand for CTA services as they transfer to buses to get to work everyday. Im sure they would be overjoyed about having to drive each day.

    Comment by low level Monday, May 6, 24 @ 12:50 pm

  31. Don’t tax you, don’t tax me. Tax that man behind the tree….

    Comment by Friendly Bob Adams Monday, May 6, 24 @ 1:09 pm

  32. No to service tax expansion at this time. There is already a DuPage County RTA sales tax that was promised to eliminate the need for a services tax. Everybody in DuPage pays this sales tax, and the small percentage of DuPage County residents who do use the RTA have been subject to numerous steep fare increases and cuts in service. I think the tax on services is Mayor Johnson and his CTA yes men trying to pull a fast one on the collar counties.

    Comment by Dupage Monday, May 6, 24 @ 1:23 pm

  33. “Actually, it is. Lots and lots and lots of Illinois businesses depend on mass transit one way or anothr.”

    So you’re saying it falls on the shoulders of the private sector to problem-solve a solution for government bureaucrats who cannot effectively run a transportation system that is already being artificially propped up by $730 million in federal funding?

    The Chamber might be rightly be considered a stakeholder when it comes to transit, but they are not the ones on the hook for coming up with a solution to this mess. Look to the CTA’s governance and those that appoint that leadership.

    Comment by sulla Monday, May 6, 24 @ 1:26 pm

  34. ===So you’re saying it falls on the shoulders of the private sector to problem-solve===

    Nope. I’m saying they should be part of the solution.

    And, you cannot be serious about wanting the CTA to find a solution, can you?

    lol

    Don’t be a troll, man.

    Comment by Rich Miller Monday, May 6, 24 @ 1:28 pm

  35. ==think the tax on services is Mayor Johnson and his CTA yes men trying to pull a fast one on the collar counties.==

    And if you think DuPage residents dont use the CTA, you arent getting out of the house enough. Stand at Union or Northwestern station any morning from 6am - 9am and from 4:30pm -6:00 or so and report back to the class

    Comment by low level Monday, May 6, 24 @ 2:12 pm

  36. One of my late friends had an insurance business in the Loop, and paid every one of his employees’ transit expenses as an employment perk. That was a successful private sector solution, because his employees were loyal to a fault and their output added far more to the bottom line than the cost of a few hundred dollars worth of fares and station parking. I guess the CoC wouldn’t have a more universal idea that made business sense.

    Comment by Six Degrees of Separation Monday, May 6, 24 @ 2:13 pm

  37. I appreciate that JBP isn’t foreclosing on the idea of a service tax; not because it’s necessarily a great idea, but because it demonstrates he’s taking the problem seriously.

    I think it would behoove outfits like the IL CoC to be a bit more solutions oriented. That’s what a productive and useful private sector entity - or one that represents them - should be doing.

    Comment by The Doc Monday, May 6, 24 @ 2:30 pm

  38. I guess the money JB volunteered for migrant health care would come in awfully handy right now

    Comment by Sue Monday, May 6, 24 @ 2:32 pm

  39. I guess the money JR Thompson volunteered to build all of the prisons downstate could come in awfully handy right now.

    I guess all the money that Richard M Daley volunteered to build a new stadium for the Bears could come in awfully handy right now.

    I guess all of the money government volunteered for the “war on drugs” could come in awfully handy right now.

    Comment by Jerry Monday, May 6, 24 @ 2:41 pm

  40. ==paid every one of his employees’ transit expenses as an employment perk. That was a successful private sector solution==

    Cool. You support employers paying employees transit costs? Lets run a bill and see how many GOP votes we get for that private sector solution.

    Comment by low level Monday, May 6, 24 @ 2:41 pm

  41. Low level I think you will find a lot of employers already pay train and bus costs. Transit agency folks have programs set up for this.
    Where I hang my hat has had transportation cost programs in place for well over a decade or more. They actually are cost effective and folks like them.

    Comment by Back to the Future Monday, May 6, 24 @ 4:50 pm

  42. @ow level - Monday, May 6, 24 @ 2:12 pm:

    ==think the tax on services is Mayor Johnson and his CTA yes men trying to pull a fast one on the collar counties.==

    ===And if you think DuPage residents dont use the CTA, you arent getting out of the house enough. Stand at Union or Northwestern station any morning from 6am - 9am and from 4:30pm -6:00 or so and report back to the class===
    A small percentage of DuPage County residents, as in a drop in a bucket, use the RTA. Everybody in DuPage County pays the RTA sales tax.

    Comment by Dupage Monday, May 6, 24 @ 5:05 pm

  43. ==A small percentage of DuPage County residents, as in a drop in a bucket, use the RTA.==

    https://metra.com/sites/default/files/inline-files/2021%20Annual%20Ridership%20Report_Final_%202022_0211.pdf

    Overall, METRA provided 14.1M rides in 2021. That doesn’t even include PACE. I wouldnt term that a drop in the bucket

    Comment by low level Monday, May 6, 24 @ 6:20 pm

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