RTA Opposes Bill that Will Result in Loss of Hundreds of Millions in Sales Tax Revenue

April 27, 2011

To amplify opposition to legislation that will potentially divert nearly $250 million annually to communities outside its six-county region, the Regional Transportation Authority’s (RTA) Board of Directors today unanimously passed a resolution in favor of tightening the procurement processes of Northeastern Illinois transit agencies to avoid doing business with companies that structure transactions to so that they pay taxes in low or no taxing jurisdictions in violation of current Illinois law. Senate Bill 2194 has passed the Senate and is now in the House.

“The impact of the proposed legislation would be devastating to our transit system. It would enable businesses to take advantage of a sales tax loophole that now exists and consequently will increase the tax burden on local residents and businesses. This tax scheme would dramatically reduce revenue for taxing districts that fund public transportation, education, public health and public safety across the entire state,” said John S. Gates, Jr. RTA Board Chairman.
Senate Bill 2194 would severely limit the Illinois Department of Revenue’s ability to conduct audits and protect taxpayers. The bill is designed to protect businesses and weaken regulators.

“The RTA regional sales tax provides critical revenue to the nation’s second largest transit system,” said Gates. “Every day nearly one million people use the system to reach jobs, school or access health care. Transit benefits the wider economy, our environment and our quality of life and helps create value for every business in the area. We can not afford to create a system where any taxpayer can avoid paying their fair share.”

Under the terms of the legislation, even if the sale of a product by a business in Chicago was negotiated in the City of Chicago, then delivered and used by a purchaser at a Chicago address, the purchaser would not be required to pay any City of Chicago, Cook County, RTA sales taxes or other specific taxing districts if the order is executed in a satellite office outside of the region. As a result, government agencies would receive less revenue and local businesses, residents and transit riders would be forced to fill the gap.

In addition to the regional transit system and municipal and county government, sales tax revenue helps fund special districts across northeastern Illinois, including libraries, parks, fire protection, water treatment and sanitary districts, economic and community revitalization, and other vital services.

In 2010, the RTA received $1.2 billion in revenue from sales tax collections which helps support more than 2 million trips on CTA, Metra and Pace every day. The chart below shows the loss of funding for public transportation in the Chicago region from increased use of tax migration.