Quote:
Originally Posted by tjp
What do you guys think of the commuter tax? I worry it would stymie the movement of jobs downtown and offset any benefit of increased tax revenue, but I really haven't thought or read much about it.
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It’s really not obvious to me. We definitely don’t want to discourage employment downtown—the net fiscal benefit of every additional worker downtown is almost certainly positive. But the counter factual to a commuter tax is not necessarily the status quo. Rather, it could be a higher property tax on commercial buildings downtown, which would be even worse. The disincentive to downtown employment from a commuter tax would at least somewhat offset by some workers moving into the city, but a higher property tax downtown can only be avoided by moving jobs out.
Some very quick and very rough calculations just to put some structure on the problem: Looking at Census LODES data show about 542k workers work in Chicago and commute from the suburbs. Assuming an average income of 50k, a $100 commuter tax (I've heard that number bandied about before) would amount to a 2% pay cut. I've estimated the elasticity of commuting flows with respect to wages in Chicago in the past, showing that a 1% drop in wages would cause a 1% drop in the flow of commuters (which would vary by each workers' wages and length of commute, but let's ignore that for now). So a 2% drop in workers in the city would be about 10k workers gone. That amounts to a 0.08% drop in total employment in the city, which would have ramifications for both a lot of businesses in the city as well as wages for other workers. Consensus estimates among economists for the elasticity of wages with respect to employment is 7%, meaning a drop of employment of 0.08% causes a 0.008*0.07=0.05% drop in the average Chicago worker's income. Assuming an average income of 50k, that's a reduction in total Chicago income of $35 million. The $100 commuter tax nets $54 million. If the reduction in sales taxes and other fiscal benefits commuters brings is greater than 54-35 = 19 million, this looks like a useless tax.
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