The Cook County Board has approved a 1-percentage-point sales tax increase to bail out the county worker pension system.  This increase is effective January 1, 2016.

More here: Cook County Board votes to raise sales tax – Chicago Tribune

This means that small businesses in Cook County — which includes the City of Chicago — need to make plans to update their POS and sales tax systems so that they don’t get caught charging the old, lower rate to customers, but paying the new, higher rate to IDOR.  It’s surprising how often I see this happen, so: businesses, mark your calendars!  Accountants, reach out to your clients!  A 1% spread over the course of a month or a quarter could mean a lot of cash out-of-pocket for companies, especially retail stores, that do not plan ahead.

As for why this is happening:

“The immediate problems is pensions. The city of Chicago alone has a $20 billion unfunded liability and when Moody’s Investors Service dropped the city’s debt rating to junk, it forced $2.2 billion in accelerated debt payments. So Cook County has to borrow more money now at higher interest rates to pay those newly due bills AND it has to increase sales taxes to that whopping 10.25% rate effective in January to help pay the interest on it all.”

Source: http://www.cnbc.com/2015/07/16/sticker-shock-sales-taxes-in-chicago.html

As for what it means for the poor, and for our communities… well, this is entirely my own opinion, so feel free to stop reading here if what you wanted to know about were the ramifications for accounting.

But, in my opinion, it’s important to remember that sales tax hikes, unlike income taxes, affect even the poorest among us. If you don’t make a lot of money, then you have to spend 100% of it just to keep going. That means 100% of it is subject to sales tax. It’s not the same for someone with disposable income, who can choose not to buy something because sales tax makes it too expensive.

Furthermore, an over-ten-percent tax rate hurts the local economy, causing businesses to avoid locating here and customers to avoid shopping here, choosing the suburbs instead.  (This is not just my opinion — studies have shown this is exactly what happens: http://www.chicagotribune.com/business/ct-cook-county-tax-0719-biz-20150717-story.html#page=1 )

Lastly, this hike is entirely to shore up a pension fund that they’ve known for years was underfunded. An emergency measure now, when this is obviously something that bad planning caused in the first place, smacks of crappy governance.

But that’s just my opinion.  The important take-away as a small business owner or accountant?  UPDATE YOUR POINT OF SALE AND SALES TAX SYSTEMS BEFORE JANUARY 1.