Illinois Supreme Court ends Chicago tax on suburban car rentals

The Illinois Supreme Court shut down a tax Chicago was imposing on car rentals outside city limits, noting the potentially chaotic nature of the policy.

The Illinois Supreme Court ruled Jan. 20 it’s unconstitutional for the city of Chicago to collect taxes from suburban rental car companies.

In 2011, Chicago extended an 8 percent tax on leased personal property to include rental cars within 3 miles of the city limits if city residents were renting those vehicles. Rental car companies Enterprise and Hertz sued the city that same year, and a Cook County Circuit Court ruled in their favor, saying the city had overstepped its authority. But in 2015, an Illinois Appellate Court reversed the Cook County Circuit Court’s decision, saying the city had the authority to impose the tax based on the assumption that the vehicle would be primarily used in the city.

Hertz and Enterprise argued in their appeal to the Illinois Supreme Court that it would be chaotic if other Illinois cities tried to impose similar taxes outside their borders. And in the Supreme Court’s ruling in their favor, it said “Given the number of local governmental units, particularly in the Chicago area … unrestrained extraterritorial exercise of the powers of taxation and zoning and in other areas could create serious problems.”

With sky-high property taxes and more than 30 other taxes and fees in the city, Chicago politicians haven’t shown the ability to think of many other solutions to the city’s fiscal problems except to tax their own residents – and to make sneaky cash grabs into the suburbs. But instead of nickel-and-dime schemes pushing residents out of the increasingly unaffordable city, Chicago City Council should enact serious economic reforms – most notably pension reform – to avoid bankruptcy and help struggling taxpayers and businesses.

Politicians have already slammed Chicagoans with the highest tax burden in the state, and it’s increasing constantly. Chasing down these same city residents to tax their suburban transactions is unfair and irresponsible.