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What Is The Rahm Tax? Emanuel, Chico Spar Over Taxing Services

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For the past few days, Gery Chico's been making the rounds at a couple of local businesses: a barber shop in Hyde Park, a gym in the West Loop. Sure, he's been shaking hands and talking issues, but the biggest issue he's been talking about has been a policy of his leading rival: the so-called "Rahm Tax."

Chico decries candidate Emanuel's notion to tax a range of services as "a terrible plan" that will be an unwelcome burden on working-class families. Emanuel spokesman Ben LaBolt fires back that his camp is "drawing a line in the sand" at any tax that would hurt working families, and that the revenue would offset a sales tax decrease, actually putting $200 back in the average family's pockets.

So which is it? A deceptive burden, or a luxury tax that pays out to average folks? What exactly is the Rahm Tax?

Well, some of the details are hard to ascertain, but the broad strokes are clear. The tax structure in Illinois is one of the most regressive in the nation. Everyone pays the same amount in income tax, and things like the sales and cigarette taxes disproportionately affect the poor - that $10 added to my grocery bill is a much bigger proportion of my income than of, say, Rahm Emanuel's or Gery Chico's. Ultimately, the bottom 20 percent of earners pays about 12.7 percent of income in taxes, whereas the top one percent pays less than 6 percent (even lower with federal offsets included). But for now, the sales tax only applies to goods, like groceries, and not services, like a haircut.

The Emanuel proposal is a backdoor attempt to alter that structure. His idea is to try to reduce the sales tax, and make up for it by creating new taxes on services - but only those used by the wealthy. "If you can afford an elective cosmetic procedure like Botox, if you can afford to take a charter plane flight into Chicago, you shouldn't be able to do that on the backs of working families," said Chicago For Rahm communications director LaBolt.

This seems eminently reasonable. The question is, which services will ultimately get taxed? Only the ones that won't affect "working families," LaBolt insisted. But different working families use different services. Is there a comprehensive, specific list of the things Emanuel would like to see taxed?

At this point, the spokesman was decidedly more curt, pointing to a press release. "We released the policy to the press two weeks ago, but you all didn't pay any attention to it until Gery Chico announced he was against it," he said.

The Emanuel campaign's list only contained a couple of examples, and they were again mostly in the obviously-for-wealthy-people category: "private club memberships, pet grooming, limo services, tanning parlors and interior design services."

Then again, there are plenty of other services that reasonable people could argue are or are not "luxuries." What about dry cleaning? Parking garages? Computer repair? Performing arts? These were all part of a plan to tax services that the General Assembly considered, and ultimately rejected, last year. And they could be considered luxuries or essentials, depending on which working folks you asked.

LaBolt would only say that it will "require negotiation with Springfield" - state lawmakers would have to pass a new tax - and that Emanuel has drawn his "line in the sand" at not harming "working families."

It's this ambiguity that Chico finds misleading. "Voters who are heading to the polls in just three weeks have no idea what services Emanuel would tax if he were elected as mayor," the campaign said in a press release today.

But the problem goes further than uncertainty about nitpicky details. If, as LaBolt suggests, the tax only affects a very limited set services for the wealthy, then it's hard to imagine that it will generate the tens if not hundreds of millions of dollars required to offset the sales tax decrease. After all, how many dog-walking, limo-riding plane-charterers are there in the state of Illinois?

Until the Emanuel camp releases more specifics, Chico will certainly continue to make political hay. No word yet on the next business he plans to take his Rahm Tax Tour, but you can bet it probably won't be a Botox clinic.