Chicago has won a legal battle allowing its wasteful “amusement tax” to be levied on everyday people. Residents who enjoy gaming will now have to pay a 9 percent tax for streaming services they buy through Playstation. They also have to pay this 9 percent tax on other streaming services for entertainment like Netflix, Spotify, and Hulu. The amusement tax is one of multiple examples of government using its ability to pick the pockets of the populace to select winners and losers in the market while paying its bills with money that citizens often do not realize they are spending.
The Windy City originally passed its amusement tax in 2015, not through the democratic process, mind you, but through backdoor bureaucratic means. Elected officials on the Chicago City Council never touched the proposal. Instead, it was passed by diktat through the Chicago Finance Department. Although a higher court may find the tax unconstitutional in the future, it was recently upheld by the Circuit Court of Cook County.
This cash gab is just one of many that I outlined in “How Do I Tax Thee?” The amusement tax is expected to generate well over $12 million in revenue each year for Chicago, which could put a very small dent in its expected $98 million budget deficit in 2019. This is in addition to a property tax hike of $63 million, plus increased water and sewer fees, to boost pension funding for police, fire fighters, and municipal workers.
{mosads}Chicago has reputation as one of the worst run cities in the nation, which is one of the main reasons for this affront to taxpayers of all ages who live there. However, the amusement tax on streaming services is part of the growing trend of clandestine revenue streams for local and state municipalities looking to plug heavy spending sparked by paying public sector employees and funding welfare programs. Unsurprisingly, the Golden State is another place in the nation where this is happening.
California has just announced a new proposal to tax cell phone usage, including text messaging. While sending text messages is often a free service through mobile plans, the state still wants to get its share. Just as in Chicago, the “text tax” is not a product of the state legislature. It will be voted on in January by unelected bureaucrats at the California Public Utilities Commission. The tax would be collected as a monthly fee, and would add to the almost 7 percent surcharge already levied on cell phone bills. Meanwhile, the California Public Utilities Commission is already collecting billions each year from existing surcharges on consumers.
Taxes and fees like the ones above are levied by cities and states across the nation, but there is a disturbing concentration of such duties among heavily councils and legislatures dominated by Democrats. By imposing such duties through bureaucrats, elected officials can avoid political blowback and responsibility for squeezing their constituents. It is a bit of brilliant sleight of hand that officials can use by delegating the hard work to civil servants who will often use such funds for their own devices.
It is a false game for consumers. The Chicago entertainment tax also allows the city to impose duties on tickets for the theater, concerts, circus and rodeo. The measure even goes so far as to tax entry fees for going to an amusement park, a bowling alley, or joining a gym. Taxpayers fund subsidies for sports stadiums, which are often owned by billionaires, but also the tickets to get into the door. Illinois residents are on the hook for $36 million for Soldier Field and likely will be for a further $55 million for a new basketball stadium at DePaul University. Taxpayers are still coughing up the money 30 years later to fund the $120 million Guaranteed Rate Stadium, formerly known as Comiskey Park. Meanwhile, the White Sox are worth $1.5 billion and DePaul University has a $500 million endowment.
No one winds up winning under these schemes except bureaucrats and the well connected. Small businesses hit with a loss of patrons and new paperwork to pay entertainment taxes might be better off moving outside Chicago. For all intents and purposes, such fees on everyday services are far easier to implement than actual income tax hikes. Since these are generally across the board charges, they act as especially regressive taxes on the young and poor. Next time you get your cell phone or cable bill, take a look at the amounts you are paying for amorphous programs in hidden taxes. This is usually the first step in becoming a libertarian.
Kristin Tate is a libertarian writer and author of “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.