Local sales tax may be tax of the future
By CHRIS SUNDHEIM
News-Gazette Staff Writer

   Paying taxes in the 21st century is not likely to be any more fun than in the 20th.
   But the tax man may decide to take more of his share at the cash register rather than through bills that come in the mail.
   The local sales tax could well become the tax of the new millennium, soon surpassing property and income taxes in statewide totals.
   It's already happening. In 1998, sales and income tax collections surpassed property tax revenue for the second consecutive year. Observers expect that trend to continue.
   Sales taxes are easier to implement, generate more money and seem to be preferred by voters who have historically snarled at the prospect of higher annual property tax bills.
   Voters increasingly seem to prefer "something they can control," said Ken Alderson, executive director of the Illinois Municipal League, a group that lobbies the Legislature on behalf of cities.
   "A sales tax is basically a consumption tax. If you consume less, you don't pay as much tax," he said.
   At the dawn of 2000, many Illinois counties and cities are now wielding new taxing powers that are likely to make the sales tax the fund-raiser of choice for building projects.
   Throughout the 1990s, communities with limited revenue sources looked to sales taxes as a reliable money maker when property tax increases looked doubtful and utility taxes were coolly received.
   In December 1999, a law went into effect to give non-home-rule communities the power to raise local sales taxes by referendum for public sewer and road projects. The law allows taxes to increase by either 0.5 percent or 0.25 percent. A binding referendum would be required. The earliest any sales taxes could increased would be Jan. 1, 2002.
   Sales taxes have appealed to taxing bodies for several reasons:
   n Taxpayers don't have to pay sales taxes all at once. Unlike property tax bills – which must be paid in not more than two installments – sales taxes are paid every time someone makes a purchase.
   Everyone – not just property owners – pays sales taxes, which spreads the tax burden among greater numbers of people. Some of the largest property owners – in Illinois, mostly farmers – pay the same as taxpayers who own no property.
   n Sales taxes are more stable. Property taxes rise steadily year after year, in part, because they are paid by a smaller group of taxpayers. Sales taxes are implemented at a specified level and stay there.
   The popularity of property tax caps – which limit how much property taxes may be raised – also has helped make sales taxes more attractive.
   Supporters of the legislation said non-home-rule communities  generally those of 25,000 population or less – face many tax restrictions and often are desperate for money to improve infrastructure.
   A number of other area mayors backed the bill, including Arcola Mayor Linda Fishel, Mahomet Mayor Jeff Courson, Tuscola Mayor Dan Kleiss, Villa Grove Mayor Ron Hunt and St. Joseph Mayor B.J. Hackler.
   The measure was designed specifically to fund public infrastructure projects – involving work to improve sewers, water systems or roads. The tax wouldn't cover groceries, prescription drugs or titled vehicles.
   It   was the second sales-tax-related bill since 1997 to win approval in the Legislature.
   In 1997, Champaign County played the leading role in urging lawmakers to give counties of less than 180,000 residents the power to enact a quarter-cent sales tax for public safety needs, provided that voters approved the new tax in a vote.
   That law expanded to smaller counties a power that larger ones have had since July 1995. All 102 Illinois counties have the ability to ask voters for such a tax.
   Champaign County is building a new courthouse and youth detention center with just such a tax.
   Champaign County is also paying off its satellite jail facility that opened in 1996 with sales-tax revenue. Vermilion County is expanding its jail and building a youth detention center of its own.
   The trend shows no sign of slowing.
   Income and sales taxes collections grew by $1.2 billion in 1998 in Illinois, according to figures published by the Taxpayers' Federation of Illinois. Combined income and sales taxes are now expected to trounce property taxes in overall revenue.
   "That's a very recent occurrence. It's not due to any grand plan . . . it's due simply to the fact that, nationally and here in the Midwest, the economy has just boomed," said Steve Sandstrom, a spokesman for the Illinois Taxpayers' Federation.
   Alderson of the Illinois Municipal League said the growth in electronic commerce is likely to bring sales taxes more attention in the near future.
   Internet sales are mostly conducted without any taxes, but if that remains the case indefinitely, cities and local economies could suffer from lost revenue.
   Internet businesses save money on buildings and land that would normally generate tax dollars. Eventually, Internet sales could undercut the brick-and-mortar businesses that employ local residents and pay taxes.
   "At the local level, you're going to have people unemployed in the community. You're also going to have a loss of property taxes . . . higher unemployment, abandoned property," Alderson said.
   "So you really end up with a situation in this crystal ball, that if we don't end up with equity (with Internet businesses), I would forecast that not only governments but citizens are looking at some very major problems."

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