Cook County sales drop 12% in first month of new tax

Cook County sales dropped 11.94% in one month after the county instituted its new tax, new data released Tuesday shows, but just how much of that drop had to do with the tax is far from clear.

According to sales tax figures from the Illinois Department of Revenue, Cook County businesses reported $3.360 billion in sales in July, the first month the new 1.75% county sales tax took effect. Sales in June, when the county tax was 0.75%, were $3.816 billion.

However, a look at sales tax data from the last five years shows there has always been a drop from June to July, albeit never as large as this year. In 2004 the drop was 4.61%; in 2005, 7.57%; in 2006, 8.56%; in 2007, 6.67%.

The data is also highly seasonal, says John L. Mikesell, a professor of public finance and policy analysis at Indiana University, and a specialist in sales taxes.

"That means that it is inappropriate to simply look on a month-to-month basis," he wrote in an e-mail.

Instead, Mikesell looked at the last five July's.

"You can see that sales were following a rather consistent pace of increasing by around 3 percent each (July)," wrote Mikesell. Had that continued, July's sales should have been $3.628 billion. Instead, the actual number is about 8 percent lower than what the previous pace would have predicted for July.

But is that a result of the sales tax? It's too early to tell, Mikesell noted.

"There are other forces at work - the state of the overall economy being the one that immediately comes to mind."

And that economy is precisely why the tax never should have been raised in the first place, said Cook County Commissioner Forrest Claypool, a Chicago Democrat who voted against the tax.

"I think those numbers show how irresponsible it is to raise taxes in the middle of a recession," Claypool said. And, he pointed out, they happened before the Wall Street meltdown - not a good sign for the future, he said.

While one month may not be a lot of data, "I would be stunned if that weren't the manifestation of a trend," Claypool said.

Commissioner Tim Schneider, a Bartlett Republican who also voted against the tax, also doesn't find the drop surprising. He thinks that as furies cool, shoppers will stop crossing county lines for small purchases, but will still do so for large purchases where the savings can cover the gas and then some.

"I don't fault anyone going over county lines," Schneider said.

Cook County Commissioner Joan Murphy, a Crestwood Democrat who proposed the tax, doesn't deny that the numbers are probably indicative of at least a souring economy.

"I think probably in this economy it's probably more than statistical noise," said Murphy. "However, I think, 'Thank goodness we have the sales tax.'"

With other revenues declining, an increased sax tax income allows the county to continue to provide health care and other services, she pointed out.

That the county gets more money is unquestioned. The county's take was $28.6 million in June, and $58.8 million for July.

A few small businesses contacted are taking a wait-and-see approach like Professor Mikesell.

"It's probably too early to tell," said Carol Cook, owner of Palatine's The Music Room, a store selling musical instruments and music lessons.

She adds, however, that her business is specialized enough that it may be able to weather any people fleeing sales taxes by crossing the border into Lake, Kane or McHenry Counties.

Bob Naughtrip, owner of Palatine's Soccer Plus feels the same way. His product is specialized enough that he feels somewhat insulated, and his numbers have been up through September this year over last. But he worries that his Barrington area clientele may be heavily affected by recent Wall Street crisis.

"Call me in December. Maybe I'll have a different opinion," he said.