Aldermen approve Emanuel plan to cut amusement tax after windfall

The second time was the charm for Mayor Rahm Emanuel’s plan to cut the city’s amusement tax to honor a commitment made to ticket resellers and cancel an unexpected $200,000 windfall.

Last month, the amusement tax cut ran into opposition from aldermen bracing for a painful rescue for the Chicago Public Schools.

Aldermen Patrick Daley Thompson (11th) and Harry Osterman (48th) argued then that giving back found money — albeit only $200,000 — made no sense when aldermen were preparing to walk the tax plank yet again to bail out a broke school system.

“The mayor has talked about taxing downtown businesses or high-wealth individuals, and we don’t know what else. But right now, we have a revenue stream, a small amount. … I’m not real comfortable giving the money back right now,” Osterman said then.

The opposition stalled the change.

On Monday, the Finance Committee approved it.

Emanuel’s 2017 budget changed the way the city’s 9 percent amusement tax is applied to ticket resales.

Prior to that change, ticket resellers like Gold Coast Tickets were required to pay the tax at the normal rate of 5 percent or 9 percent, depending on the type of event. But the tax applied only to the ticket markup. That resulted in what the city called “difficult calculations” and lost tax revenue.

The new plan simplified the amusement tax rate on ticket resales to a flat 3.5 percent on the full resale price, regardless of the markup.

The change was billed as “revenue-neutral,” but it didn’t turn out that way. The city got an unexpected windfall.

To make it right and keep the city’s word to ticket resellers, the Finance Committee agreed Monday to reduce the revised tax from its current level of 3.5 percent; it would become 3 percent for large events and 2 percent for smaller ones.

“It was not revenue-neutral, despite the fact that we had made the commitment that it was,” retiring Budget Director Alex Holt told aldermen.

“The overall $200,000 hit … is not really a hit to our budget. We hadn’t planned on that money. And while it is not a significant amount to the city, it is certainly a significant amount to the ticket brokers. And since we had made the commitment to make it revenue neutral, we think it’s important to go ahead and make that change.”

Thompson countered that the $200,000 “isn’t a significant amount, but we need every dollar at this point.”

He also raised the issue of “double-taxation.”

Deputy corporation counsel Wes Hanscom dismissed the concern.

“What [prior] cases say about double taxation is that it basically has to be the same tax on the same transaction on the same people in order for there to be a legal problem,” he said.

“Here, each time the ticket gets transferred, there’s a new person getting basically the privilege of attending that event … with the tax applying.”

Also on Monday, aldermen approved a technical change that would allow the city to collect a 7 percent monthly surcharge on pre-paid cellular phones if Gov. Bruce Rauner follows through on his threat to veto a 28.2 percent telephone tax hike.

“If we don’t have that in place, then as of July 1, the Illinois Department of Revenue will not collect any of the pre-paid surcharge for us. So, we’ll be receiving no money at that point in time from that surcharge,” Holt said.

During debate on that change, Holt revealed that the number of land lines in Chicago has plummeted since 2011 — from 1.4 million to 900,000.

Also on Monday, the Finance Committee signed off on four legal settlements. The largest was a nearly $1.3 million settlement to compensate a woman whose 11-year-old son was ejected from a car and killed after colliding with a vehicle being pursued at high speeds by Chicago Police. The three other settlements totaling $580,000; two stemmed from allegations of police abuse, while the other involved allegations of negligent care by paramedics.