Chicago's Sales tax will test limits

The Chicago Tribune reports:

After shopping around for a new laptop, Patti Jo Mitchel took a 40-mile drive from her home in Chicago's Bridgeport neighborhood to a Best Buy in Indiana.

It wasn't a sale that lured Mitchel over the state line. It was the sales tax.

"On a big-ticket item like this, I figure it's worth it," Mitchel said while making her purchase Thursday.



By crossing the state border, she saved more than $32 on her $1,075 purchase of a laptop and accessories.

And the difference in tax rates from state to state, county to county and town to town is only going to grow because of recent hikes by the state legislature and the Cook County Board.

Economists and retail advocates say the increases give shoppers even more incentive to cross borders. Some consumers will be pushed out of stores altogether and into online shopping, where many pay no taxes at all.

"In a sense the folks in [Cook County government] are undertaking an experiment, and they are hoping the response will be small," Michigan State University economics professor Charles Ballard said. "If they raise the rate but don't lose a lot of business, they'll get a lot of revenue. On the other hand, if everyone flees to do their shopping, you could lose revenue.

"Unfortunately, you don't know what the magic number is until you've crossed it."

The General Assembly started the hikes in January by approving a 0.25 percentage-point increase in Cook County and a 0.5 percentage-point boost in the collar counties to help pay for transit. Those increases kick in April 1.

No word yet from the Obama campaign on this one,Obama supported the status quo, Chicago Democratic Machine Democrats, in the last Cook County elections.