On Tuesday, state Rep. Elizabeth “Lisa” Hernandez, D-Cicero, held a Springfield news conference in support of getting rid of the lower wage typically paid to workers who also receive tips. Chicago’s City Council already voted last October to eliminate the sub-minimum wage for tipped employees working within Chicago by July 1, 2028, a move the struggling restaurant industry opposed. Hernandez wants the state to follow suit.
“While we knew this would be a long process,” Hernandez said in an advance statement, “we also knew that abolishing the sub-minimum wage for tipped workers will increase the standard of living for those living paycheck to paycheck, help suburban restaurants compete with their Chicago counterparts, and address systemic harassment facing these workers.”
That statement is absurd. A big lie, even.
Everyone knows, including Hernandez, that removing the lower wage for tipped employees (who usually earn far more in total than kitchen workers) will not help “suburban restaurants compete with their Chicago counterparts” but will do precisely the opposite.
As for “systemic harassment,” whatever that means, what does that have to do with this issue? No worker should be harassed, whatever the wage structure in place. And unless you are consumed by anti-capitalist dictums, it’s generally humans who do any and all harassing, using systems as a smokescreen.
Right now, suburban restaurants have a significant advantage thanks to Chicago’s counterproductive decision to handicap its own struggling restaurant industry, which may explain in part why master chef Rick Bayless is opening his latest Tortazo restaurant in Skokie —not in Chicago, as he reportedly considered at first. The Tribune quoted Bayless saying he was “on hold” when it comes to the future prospects in the Loop. We don’t doubt that so experienced a restaurateur has tallied the many cost advantages available outside the city limits.
If Hernandez were being honest, she’d point to that disparity and say her bill is an effort to address that inherent unfairness to which the city subjected its own eateries. She’d also note that actions like the city took with its restaurants are only fair and effective when they are implemented statewide and operators can’t evade them simply by relocating to the suburbs.
This is why Chicago Mayor Brandon Johnson floating a citywide sales tax on services is absurd. All that would do is hand suburban commercial building owners a brutally effective new marketing tool to woo law firms and other service providers now based in Chicago.
The exits to the Oak Brooks, Oak Parks and Skokies would be swift and voluminous. It would be, to paraphrase Shakespeare, “First, let’s expel all the lawyers.”
We’re no fans of increased taxes, but the idea of subjecting services — or maybe some services, be they massage therapists or accountants — to a general sales tax in Illinois merits an honest debate. There is an argument that it is only fair, especially given the massive societal expansion in our spending money on “services” and the associated decline in how much we spend on goods. Expanding the sales tax to services also would allow for lowering the painfully high sales tax on goods, particularly in Chicago. That idea deserves an airing.
But applying those taxes just in Chicago is a terrible idea, especially since enthusiasm for these schemes varies in Springfield. Chicago could well find itself permanently rendered as non-competitive. Where restaurants go now, lawyers soon would follow. Fortunately, like many of Johnson’s other revenue-raising ideas (and there are many), this one is likely to go nowhere, since Chicago appears to need state approval in order to proceed.
Instead of focusing on the sub-minimum wage, Hernandez and her crew would be better off supporting Gov. J.B. Pritzker’s proposal to increase the statewide tax on sports betting.
To a large extent, sports betting on mobile devices has replaced old-fashioned table games and slot machines as the youthful growth engine of the gaming industry. Chicago, we suspect, waited too long to develop its first physical casino and Bally’s now has to compete with sports books not just at sports venues such as Wrigley Field but everywhere there is a phone.
Those mobile devices are addictive in and of themselves, and their app technology can accommodate a variety of impulse-driven prop bets, such as the chances of a home run coming in the next innings. Most people making those bets are not making reasoned decisions, and plenty of Illinoisans under 21 with itchy fingers have found out how to get access to sports betting accounts. Given general agreement that less desirable activities are preferable targets for taxation, sports betting fits that criterion. And the businesses being targeted are big, data-driven entities from out of state, not the local Thai restaurant down the street struggling to make ends meet.
Right now, Illinois sports books pay 15% tax on their revenue. Pritzker’s budget proposal would increase the tax to 35%. Predictably, Big Sports Betting has argued that any increase will make promotions less generous (not entirely a bad thing) and drive companies from the state (unlikely). Peer states are all over the map when it comes taxation of online gambling: in some, mostly on the East Coast, the rates go as high as 50%, although many elsewhere are down around where Illinois is now, or even below.
Thirty-five percent strikes us as probably too aggressive. But 15% seems too low. Physical casinos face two taxes: one flat tax on admissions (not paid by phone users) and another on table games and slots that comes with a sliding scale rising to as much as 50% for high-revenue facilities.
Seems to us a similar sliding scale would work for sports betting too, based on the revenue that flows operators’ way from Illinois. Companies that are making a fortune here from online gamblers should not be getting away with paying less tax than the operators of physical casinos who employ more Illinoisans and spend a lot more money with Illinois vendors.
But before Johnson gets any more bad ideas: This is something for the state to impose, statewide.
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