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Chicago successfully taxes streaming services (cbsnews.com)
140 points by hhs 10 months ago | hide | past | web | favorite | 211 comments

Chicago is in the hole for nearly thirty billion dollars. They have been floating the idea of a ten billion dollar bond with the debt structured in a way which lets current politicians escape the fallout from its payment and not having to raise property taxes. The state of Illinois is not well off either with debts estimated at the low of one hundred thirty billion to two hundred fifty billion. An Illinois proposal just to fix state pensions would result in a forty four percent property tax increase for thirty years.

Chicago has a narrower group of people to draw from so besides tourist and sin taxes they have to go after any product consumed by residents of the city and that includes digital.

Why is this all happening, because there is a well hidden largess in government employee payroll and worse in their pension system. Illinois alone is estimated to have over twenty three thousand retirees pulling down one hundred thousand dollars a year or more. A lot of this is from the higher end positions in city and county governments but you can find police and fire there too.

People complain about the disparity in corporate executive level pay to employee should also take a look at the disparity between the same in state and city governments let alone the disparity in retirement to even every day workers in the state. A 100k retirement not counting full benefits is equivalent to nearly forty eight dollars an hour.

So expect more digital taxes in your future.

PS: the Chicago debt is only for pensions, they are down tens of billions more in deferred maintenance and similar debts.

Do the employees and employers not pay into a separate fund that cannot be touched? I fail to see how it's the fault of the pensioners. It's absolutely archaic if the future taxpayers have to pay for a retirees pension. In Canada we have pension funds that are separately funded entities that are payed into over an employee's career.

In Illinois and Chicago, the government has been playing games like declaring pension holidays where the contributions shift to the future. The unions control a large base of voters and haven't objected, even though this basically endangers their retirements. There's going to be a point where the funds will literally run out of money, and I doubt that there will be enough things to tax in a year to make up the difference that should have been paid in over decades.

What boggles my mind is that bond rating agencies rate Illinois debt at any rating that allows continued borrowing when it is so obvious how bad and deep the financial hole is.

Disclaimer: actively seeking ways to short Illinois/Chicago.

They are rating the chances of default. The bond purchasers will be paid, one way or another. Privatize the parking meters (like Chicago already did), the roads, the water utilities, etc. It's the people who live there that will pay for the deficit via increased taxes and fewer services.

So why are property values not reflecting this? Irrational market?

They are. From all the data I can see, property values for almost all areas in the Northeast and Rust Belt in general are declining (in real terms), except for certain few rich areas in and around the big cities that the richer populace is “escaping to”. I’m writing from mobile, but compare the Fed’s analysis for home prices by state.

Even Buffett says he’s looking at state finances when deciding investment options, and if he’s saying it, surely other organizations are too. It will be a gradual accelerating decline though (barring effects of natural disasters), since people don’t just up and move.

Check out downtown Chicago and the western suburbs. Prices are not going down. If anything, they’re more inflated than ever.

I specifically conditioned out that situation:

>except for certain few rich areas in and around the big cities that the richer populace is “escaping to”

Sorry I didn't pick up on that. The areas I refer to in the Chicago western suburbs aren't particularly rich (Aurora, IL, for example).

All markets are irrational. It will take time

It's archaic and should be changed, but the way the system works in the U.S. is pretty well known to its citizens, which makes it at least partially the fault of the pensioners. I live in Chicago and every retired schoolteacher and police officer I meet knows full well that they're making an exceptional amount of money in retirement. It's usually part of why they took the job.

IMO, it's no more the pensioners' fault than any other voter. If they're a resident eligible to vote, it's partly their fault. It's not their fault for accepting a job offer with certain terms broadly available.

On the one hand, yes. On the other hand...

(1) Pension decisions play out potentially over ~30-40 years.

(2) If we accept that the cause is some official made a bad decision, it is almost certain that pension issues will be ongoing. There is potentially a 40 year window for idiots to get in and screw the whole system up.

So in a sense, some large group of people need to be responsible. Not because it is fair, but because if that isn't how we treat the situation it isn't likely to get fixed for the next round of pension crises. The pensioners were most invested in the success of the enterprise. They are most responsible for its failure.

This isn't a nice position to hold, but the alternatives are a very nebulous concepts of blame and lumping the cost of fixing all the mistakes on the one group of people who we know weren't responsible - people who are currently entering or in the workforce and can pay taxes.

So you're saying the pensioners are the reason for our failed system? I've never been more swayed by an argument in my life.

They’re saying it’s most reasonable to hold the pensioners responsible, but that’s a subtle difference and you weren’t reading closely anyhow.

Except that’s not how responsibility works. They may be the beneficiaries of a broken system, but they aren’t necessarily — and certainly not solely — the ones that broke it.

Just phase them out and switch to 401ks. It’s absurd that such a large portion of government budgets are retirement accounts.

The problem when you say “just phase them out” is what to do with the trillions in outstanding obligations. For example, pension benefits are protected by the Illinois state constitution. You can imagine the process you’d need to construct and execute to fix pensions in Illinois, Cook County, and Chicago’s cases.

The unwinding is the terribly difficult part because the can keeps getting kicked down the road due to a combination of greed and incompetence. You need back pressure from financial markets to inhibit borrowing for what can never be paid back. Then the hard conversations are forced.

There's a finite time that benefits are paid out. At most, it's the maximum lifetime of the retired worker or their spouse. At some point, the workers and their spouses will be dead. They're beneficiaries do not, nor have they ever gotten a pension.

You simply stop giving new workers pensions, and you offer buyouts to the existing workers. None of this is fast, nor did I say it was. Even if you did it today, we're talking probably at least another 50 years before the last pension is paid out. Meanwhile, You're still dealing with the problems of running a pension plan, but at least you're on a path to divest from them.

This strategy is basically what every old company with pensions is doing. The problem here, is that governments don't do it, in large part due to the unions. I don't blame the unions for insisting on pensions, they're a good deal if you've got one But the fact is they're unsustainable. Unlike a company, the government is never going to go out of business, it's just going to become a retirement plan with a police force.

I tend to agree, but there's a limit. Accepting a job where the payout promised requires an almost 50% property tax raise? You can't possibly claim surprise when those promises are reneged on.

The current pensioners didn’t recently accept their job. They accepted it decades ago and it’s on the municipality to manage the funding.

A lot of the people paying these taxes never agreed to the other end of the bargain either? I mean, you can argue that this is an integral part of the social contract, but if everyone leaves Chicago because property taxes increase astronomically there won't be any tax payers to lecture about how they have to hold up their end of the one-sided bargain. And then the whole thing collapses anyway?

When you move to or live in a city, you sign on to the things the city did/does. That you didn't personally agree to build a new library or hire Sally Jane as a Police Dispatcher is irrelevant.

I think people are leaving Chicago over solvency/funding outlook issues. I have two barely wealthy (single digit millions, almost surely) friends in Chicago who are moving to Arizona and Texas because they worry they're among the juiciest targets to be squeezed in the upcoming years.

this so-called pension crisis has been clear for well over a decade, bare minimum. It was heavily discussed circa 2000.

And apparently on the tax payer to eat it up.

I view it in the same terms as an elected official who willfully courts lobbyists or something else legal, but still distasteful. Members of those pension classes have known forever that their pension amounts would bleed the city dry, but they went along with it anyway. It's technically not their fault, but only in a dry legal sense. They knew they were leaving the rest of us in a bad state.

That's how socialism works: you spend someone's else money.

That's how any government works I think.

In the US a “pension” typically means a fixed benefit regardless of investment performance. Many pension sponsors reduced contributions to their plans when markets were up and have had large shortfalls when markets have gone down, which has contributed to the “pension funding crisis”.

In Canada, pensions contributions are never ever adjusted depending on market performance. Instead, payouts are typically indexed to inflation. When markets are down, funds usually have a shortfall, so they cut the inflation indexing. When markets are up and the pension fund is overfunded, they restore the inflation adjustment. This slightly harms the pensioners, but not by much to have a critical effect on their well-being.

This is a reasonable approach, but means you don’t really ever have any idea how much you’ll have when you retire. Honestly that’s probably the only approach that will ever work longer term, but it’s not an easy thing to sell or plan for.

The US Postal System has essentially this exact problem every year - they aren’t making enough to cover their pension obligations so they keep raising stamp prices (and let’s not get started on the absurdly short-term solution of “forever” stamps). Since they’re a government agency but independent and unable to accept funding from any other method it’s a great example of the problem.

You have an idea of the minimum you will get. Your pension will never go down, just that you don't know whether your pension will go up.

inflation means that your pension goes down by default.

They also are obligated to cover all future obligations today, which is pretty unrealistic.

The real issue for the postal service is that the law was changed so that the USPS would start funding their retirement health care costs since they are promised to the workers and the projected costs had exploded:

>...Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.

>Prior to 2006, the Service simply paid retirees’ health benefit premiums when they came due. The Service put aside no money when it promised the future benefits. Paying benefits when they come due rather than funding them in advance is known as the pay-as-you-go or unfunded approach.

>Early this century, Congress, the Administration, the U.S. General Accounting Office (GAO), and a bipartisan presidential commission expressed concern about the lack of funding. Although retiree health benefits are often unfunded or poorly funded, two considerations suggested the Service’s retiree health care obligations should be funded: they are as firm a commitment as the Service’s pensions, and they had become enormous (about $75 billion by 2006). In 2003, the presidential commission suggested establishing a reserve fund for these obligations, and the Postal Service itself sent Congress a proposal for creating such a fund.

>In 2002-2003, it was discovered that the Service was contributing far more than necessary to fully fund its pensions, and Congress allowed the Service to contribute less. Congress decided the pension “savings” could help patch the retiree health benefit underfunding. In 2006, as part of the Postal Accountability and Enhancement Act (PAEA), the Postal Service Retirement Health Benefits Fund (RHBF) was established. Most of the Service’s contributions to the new fund could be paid using the pension “savings.” PAEA was bipartisan legislation with broad support.


I don't understand how they ruled officers don't have to pay back that money. It was clearly stolen from taxpayers.

How do you ensure the funds are invested properly, and not in a nephew's real estate development project? How do you ensure the correct assumptions are used in calculating how much to contribute into the fund in the first place? You can adjust mortality tables and investment return assumptions to make the benefits seem cheaper than they are. The government can even choose to forego making their understated contribution if they vote themselves to forego it! (which many governments frequently have)

People's eyes glaze over when talking about their own 401k, what chance is there for voters to get into the nitty gritty about multiple government agencies' pension liabilities and investments at the city/county/state/federal level?

The employer isn't liable for the pension at all. Neither is the employee. All they do is pay into the fund. Instead, there is an entirely separate legal entity (the pension fund) that controls and distributes the assets. The fund releases reports regularly on the health of the fund. The contribution calculations are usually included in those reports. The investments by pension funds are usually in long term infrastructure assets like highway 407 in Ontario, or various property management companies such as Cadillac-Fairview. https://en.m.wikipedia.org/wiki/Ontario_Teachers%27_Pension_... the Ontario Teachers Pension Plan is probably one of the best examples of a well run pension fund. All public employees in Ontario, as well as federal employees are all part of a union, whether it be OMERS, PSAC, CUPE, caisse or otherwise. These unions protect the employees from the 4 year swings of governments and instead look after the long term health of employees.

I suggest you research the laws surrounding pensions in Canada. Answering the questions properly here is too lengthy, but they could probably be answered by 30 minutes of research. Pensions are incredibly powerful for looking after retirees. In fact, Canada has a federal pension plan called CPP which pays out to all Canadians based upon their contributions over their lifetime. Pensions are not the enemy my friend, it's elected representatives who look out for their short term interests instead of the health of their electorate.

That is not how taxpayer funded pensions in US work. What you describe is the equivalent of the employee purchasing an annuity from an insurance company. What the US has is a politician today offering benefits 30 years from now, which may or may not be funded with contributions and investment returns from a pension fund, but at the end of the day the employee always has a lien on the tax revenue if pension funds are short.

The same problem exists in Canada as well.


“How do you ensure the funds are invested properly”

Look up the Ontario public teachers pension plan, OTPP. It has its own quite extensive wiki page.

Spoiler: it has more assets than the entire state of PA public pension fund (by a factor of 6, if I recall)

Pension funds are a force on the stock market and have been for aeons.

Getting a fund to work is not hard, and given the massive economic growth that america has seen in the past 30 years alone, even the most conservative fund would be doing impressively well.

All of these things are easy.

The only thing which I have heard and seen which is a problem is people/politicians coming in and breaking the compact made with emoloyees 10, 15 years down the line.

At that point the fund gets drawn down and you can easily get a scenario like today.

The spenders are no longer in office and the obligations are coming Due.

i've noticed a lot of banks/hedge funds will invest in property tax certificates with a typical return of 18%, and then pay out a lower interest rate back to the customer... its alot safer to do it that way than to invest in randomly performing stocks or mutual funds.

> In Canada we have pension funds that are separately funded entities that are payed into over an employee's career.

Speaking for the UK, ‘national insurance’ is a direct transfer from young to old.

Pay-as-you-go versus fully funded makes little difference. If you fix retiree membership and consumption, it's the difference between workers paying an extra $X/month in student loan repayments etc versus an extra $X/month in taxes.

Pulling or cutting the pensions of retired public service workers (many of whom who risked their lives to protect the public) would, beyond the ethical questions, eliminate the credibility of the city's promises to those who sign up for such jobs and hence would likely greatly reduce the quantity and quality of recruits.

The whole idea of policemen “risking their lives” is not statistically accurate. Only 144 policemen died in the line of duty in the entire United States last year (https://www.npr.org/2018/12/27/680410169/more-police-officer...)

The Chicago police department isn’t exactly what most people would call “quality”.

It's not even in the top 10 most dangerous occupations: https://www.ajc.com/news/world/these-are-the-deadliest-jobs-...

Full list of occupations ranked by fatal injuries per 100k workers. The referenced article isn't that useful because it doesn't provide any numbers to do an absolute comparison.

                                           Fatal injuries per
  Rank  Job                                100k workers
  ====  ===============================    =================
  1.    Fishers                            100.0
  2.    Logging workers                     87.3
  3.    Aircraft pilots                     51.3
  4.    Roofers                             45.2
  5.    Refuse material collectors          34.9
  6.    Steel workers                       33.3
  7.    Truck drivers                       26.9
  8.    Farmers, ranchers                   24.0
  9.    Groundskeeping workers              21.0
  10.   Electrical power-line installers    18.6
  11.   Misc agricultural workers           17.7
  12.   Construction workers                17.4
  13.   Helpers, construction trades        17.3
  14.   Maintenance and repair workers      16.6
  15.   Grounds maintenance workers         15.9
  16.   Construction laborers               14.3
  17.   Mechanics                           13.1
  18.   Police                              12.9
  19.   Construction equipment operators    11.8
  20.   Mining machine operators            11.7
  21.   Taxi drivers                        10.5
  22.   Athletes                             9.5
  23.   Painters                             8.9
  24.   Firefighters                         8.9
  25.   Electricians                         8.4

Why is aircraft pilots so high? I'm assuming it isn't just commercial airline pilots?

The airline pilots who are flying from NYC to LA have a fairly safe job. It's the bush pilots flying between remote places in Alaska who are driving up the statistics; basically all of the fatal air crashes in the US are in Alaska.

Probably includes helicopters.

The danger involved for fire and police is highly dependent upon geography and role/rank.

It strikes me as a bit disingenuous to say it's not even in the top 10 when it's number 18, according to that list. At that point we're talking about a difference of degree, not category. If anything your citation supports the idea that police officers endanger their lives.

It would be disingenuous if he said “it wasn’t in the top 10” when it was #11. #18 is nowhere near the top 10.

Even a garbage collector is three times more likely to die on the job than a police officer.


18 is quite close to 10, in an absolute sense. The context of that citation is a claim that it's statistically inaccurate to say police officers risk their lives. That claim is demonstrably not borne out by statistics. Out of the universe of available professional work, being a police officer is #18 in risk. It's a rather small consolation that they're not eight jobs higher up the chain in terms of risk, considering there is essentially no chance of e.g. my monitor killing me as I sit at my desk.

A valid takeaway from the cited list is that being a police officer isn't literally the most dangerous thing you can do for work. An invalid takeaway is that being a police officer isn't dangerous.

How close 18 is to 10 in absolute sense has zero meaning. So does saying "10 most dangerous jobs" without quoting actual numbers. What if job 11 is 100x more safe than job 10? What if job 18 is 100000x more safe than job 10?

Being a police officer in a suburb where there is no crime does not belong in the same analysis as being a police officer in a crime filled area. Being a parking compliance officer and an undercover drug enforcement agent also have wildly different risk exposure. To compare these various jobs similarly from a risk assessment point of view by bucketing them under "police officers" is ridiculous.

Being a nurse or care technician in a hospital is more dangerous than being a cop in terms of being physically assaulted. They are often females on 1-to-1 assignment with mentally ill men that often attempt to attack & rape them.

I'm not sure if you just intended to reply to someone else, or just ignored the words I wrote completely. Comparing these professions on a global basis is dumb. Nurses who work in environments where they are exposed to convicts or the mentally ill are at a higher risk of assault than those who work in pediactrics. Comparing risk-laden professions by just putting everyone into a gigantic bucket by a job title in order to say "which job is more dangerous" defies a basic understanding of what people in these fields actually experience depending on where their job is, their position, and their role (disclosure: son of a firefighter, brother in law of a cop, husband to a physician)

The point is, you can render specifity to the point of uselessness. Of course there are specific situations & circumstances where a given occupation is more risk prone than another, but global averages are where public perception & policy are set & laws are made. Such is life.

Why do you consider the idea that police officers risk their lives to be statistically inaccurate? According to the United States Department of Justice, there are approximately 1,100,000 police officers in the entire country[1]. If 144 police officers died last year, a given police officer has (assuming uniformity) slightly greater than a 0.01% chance of dying each year. In other words one out of every 10,000 officers is killed.

Assuming surviving one year does not impact the likelihood of dying the next year, over a 20 year career a police officer then has a 0.26% chance of dying in the line of duty. We can expect that slightly greater than two out of every 1,000 officers will die prior to retirement.


1. https://www.bjs.gov/content/pub/pdf/nsleed.pdf

From another post, that doesn’t rank being a police in the top 15 most dangerous occupations.


Okay, but it is listed in the top 20. What you're citing doesn't seem to support your thesis; in fact, it appears to refute it. With that in mind, and considering the foregoing back of the napkin math I presented, I'm still not following how police officers don't endanger their lives.

About a third less than garbage collectors....


Does that mean we should pay garbage collectors more in hazard pay than police?

Statistically speaking, yes, if your compensation model pays commensurate with risk. But I'm not sure I see how that's relevant to the discussion at hand.

You started by saying that the claim that police officers risk their lives is statistically inaccurate, with a citation. I countered that citation with one of my own and a calculation showing they do risk their lives. Now you are talking about garbage collectors and their exposure to risk being greater than that of police officers.

That doesn't really counter my point about police officers' lives being exposed to risk, because I never made a claim that police officers are exposed to more risk than garbage collectors. Likewise I'm not forwarding a normative point about whether or not people should be paid commensurate with the amount of risk they encounter in their professional work. I am making the narrow, positive point which is that, objectively speaking, police officers are exposed to risk (and this is borne out by statistics).

I'm not in a position to make a normative claim about whether or not (or how much, in an absolute sense) we should compensate people more for risking their lives. I'm not sure if you were expecting me to say that garbage collectors shouldn't be paid more than police officers in hazard pay. But if we are assuming a system that pays commensurate with risk, then I'm happy to agree it would be internally consistent to pay garbage collectors more than police officers in hazard pay, sure.

To say someone "does not risk their life" is meaningless really. What OP probably means is "not risking their lives to an exceptional degree". Born out by a comparison to jobs that might otherwise be classed as lower risk

No. Garbagemen should have life and disability insurance.

Police and fire employees tend to live shorter lives due to specific conditions related their occupation. It’s apples and oranges.

When killed in duty, it's most often due to a traffic accident. [0] Garbage men die when their own truck runs over them.[1] Additionally, trash collectors get a lot more repetitive stress injuries. The cause of death for garbage men is just as intrinsic, to their job. It's just that the sanitation workers' union isn't as politically popular.

As for firefighters, it's literally no more deadly than being a painter (8.9 fatal injuries per 100k). They're both climbing tall ladders with one hand. It may not be romantic to say that, but that's the actuarial science.

[0] https://qz.com/410585/garbage-collectors-are-more-likely-to-...

[1] https://consumer.healthday.com/encyclopedia/work-and-health-...

According to another post, the study attributed much of the difference to shift work and bad eating habits that may result from shift work. This also isn’t unique to police work among blue collar workers.

Police and Fire work is hard on employees, reducing their overall life expectancy materially.


From the paper:

>A recent study suggested that overweight and obesity were more prevalent among law enforcement personnel than the general population (Ramey, Downing, & Franke, 2009) and lack of regular physical exercise is one of the occupational risk factors contributing to the higher prevalence of elevated blood pressure, metabolic syndrome, and CVD among emergency responders such as police officers (Kales, Tsismenakis, Zhang, & Soteriades, 2009).

Lay off the donuts.

You can say the same about a lot of professions, particularly blue-collar.

Only 144? I guess it's a matter of perception, but I'm pretty sure way less software developers died for their job.

From a sibling comment, it is the 18th most dangerous job.

Also from the article.

Leading causes included heart attacks and strokes, which caused 18 deaths. And 15 officers died due to cancers that the NLEOMF says were "related to search and recovery efforts after the attack on the World Trade Centers on September 11, 2001."

What about injuries, and the fact that they are forced to retire once their physical fitness wanes?

Here are numbers from the CDC:


But as far as retiring when your fitness wanes. How is that any different than any other job that requires manual labor?

You're correct, it's not different. A lot of those jobs (construction, plumbing / steam-fitting, railworkers, auto plant workers) are unionized too.

Why does the fact that they are unionized matter? The police union is one of the strongest unions in the country and they will even protect obviously bad apples from prosecution. On the one hand, it's good to see unions protect their members, on the other police don't really need more protection from prosecution than they inherently receive just for being officers. It's pretty hard to prosecute an officer even when is obvious to most of society that they've done something wrong that any other person would get some form of punishment for simply because it's in the DA's best interest to not screw with the police, who they require assistance from regularly.

Have you spoken to any police officers lately about their jobs? My next-door neighbor in my hometown was a state policeman who had guns and knives pulled on him several times in his career (during ordinary traffic stops, no less). If you're a cop working in a high-crime area, you're going to be dealing with the worst of society on a daily basis. I'm very thankful that my computer can't sporadically decide to physically attack me while I'm at work.

We pay soldiers who literally go into war zones less than what we pay officers typically. I'm if the opinion that we should pay soldiers more and gurantee lifetime healthcare for soldiers, but at this time it does put the actual risk into perspective. Healthcare workers are also routinely put into danger, as are security guards, and really any position that deals with the public on a regular basis. I'm not sure police officers really have a strong argument about being more dangerous because of several occasions of violence or risk of harm, obviously it's a non-trivial risk, but they typically should have body armor and training to minimize the risk that others may not have access to.

Just pay them market rate and give them 401ks like everyone else - what am I missing? Why do we keep doing this to ourselves with government jobs?

> Why do we keep doing this to ourselves with government jobs?

Because the politician who agrees to the largess will be long gone before the bill comes due.

Not sure how to fix this, but generally I think some sort of additional checks and balances should be required whenever government takes on huge future liabilities.

Easy to fix, ban long term compensation agreements. If a union wants an annuity, they can go buy it from an insurance company. No need to negotiate anything other than cash salaries. Unfortunately, not enough taxpayers vote to offset the government workers voting themselves benefits as a bloc.

And sadly every time we grow the size of government by assigning more responsibilities to government, the larger that voting bloc grows. In states favoring big government, this can only end badly. Although they can always raise taxes to address shortfalls, this has limits as it eventually drives those paying the most taxes to low-tax states.

> Why do we keep doing this to ourselves with government jobs?

Time horizon arbitrage.

The elected politicians care about things looking good the next 4 years. The employee unions care about the life long outcome for their members.

Doing this requires spending money now. You can get away with funding pensions with IOUs much longer than you can do it with a salary or 401k. Further the benefits of solving this kick in long after you are out of office, assuming no one breaks your system before then.

Public employee unions.

Public employees don't have a market rate...wat

A lot of states do this. Florida Retirement System for public employees is mostly paid for through managed assets.

> Pulling or cutting the pensions of retired public service workers (many of whom who risked their lives to protect the public) would, beyond the ethical questions, eliminate the credibility of the city's promises

Well, yes. It would be a default. But more money has been spent than is there and there are only three pools to draw from: taxpayers, services and creditors. (Creditors include both pensioners and bond holders.) At this point, multiple pools have to be hosed. It’s just a matter of when and to what degree, with the hosing being less extreme the earlier it’s dealt with.

In all likelihood, the city will go bankrupt and have creditors cut services in federal bankruptcy proceedings, thereby imperilling the city’s long-term tax base. State, being unable to go bankrupt, will probably hose creditors more.

They were promised something by the city that couldn’t be delivered to them. There’s no other way out.

Is there a difference in Silicon Valley workers being promised future stock if they just forgo their paycheck for a little while longer? The Difference of courses that taxpayers don’t foot the difference.

Differences between silicon valley stock and city pensions are

1) stock options are a known volatile thing rather than a government backed guarantee.

2) Missed Stock options are much easier to compensate for financially than a pension. If you miss stock options, you are still part of the wage pool. If you miss a pension that is much harder. After all, the point of a pension is to take care of people who are 'worn out'. Hence, there is much less of a fall-back system for missed pensions.

Silicon Valley workers also don’t work for the taxpayers, so that would be another difference. Who would pay public employees if not taxpayers?

The current proposed solution is just to cut back benefits on new job offers - though obviously if they cut back too much no one decent will want to work there.

Because there is some glut of smart qualified people gunning for those public sector jobs?

I've met plenty of idiots who worked in well-paid private sector jobs, and plenty of smart people who worked in government jobs.

Not true - if it were, every minimum wage, overworked job would go unfilled.

Minimum wage overworked jobs have a hard time attracting people with alternatives.

I would think quality recruits are already avoiding Illinois in general due to the future share of tax revenues that will need to be diverted to pay for prior years' labor, meaning less resources for today and the future's quality of life.

On the flip side, Chicago pays their teachers, police and fire fighters pretty good annual salaries. I imagine that outweighs their analysis of future benefits as a share of tax revenue.

I don’t think the fix is removing pensions from old people, but rather drastically reforming pensions for future retirees entering the workforce now.

Cutting pensions now would be like cutting someone’s salary and would likely lead to skilled people quitting.

So cut compensation for current already underpaid employees to shore up retirement for the people who voted for the politicians who caused this?

That doesn't taste right to me.

I don’t think reducing compensation for future employees through reduced pensions shores up retirement for current employees or pensioners. For that you have to raise taxes a lot, I think. My suggestion was to prevent even worse problems in the future.

I think the current folks are hosed because raising taxes on the middle and working class along with rich people is unpopular so I don’t think elected officials will want to do that. So they will probably chug along and then go bankrupt, hosing pensioners.

The aarp is a powerful propaganda machine.

You can’t cut the pension for the retired, or the soon to be retired. Instead you try buy outs and phase them out. New workers get 401ks. Old workers get pensions. Middle aged workers get a choice.

30 years later, the pension holders are dead, or your company is. Either way, it’s no longer a problem.

The feds went through this back in the 80s when they switched from CSRA to FERS+thrift (basically a 401k). I think that helped but didn’t completely solve the problem. But at least they are more solvent than Chicago.

What about unvested obligations for current workers like 3٪ of highest pay going to 2٪ for all pay after now?

How can you be in debt for pensions of all things.

Get employee. Put money in pension fund. Let fund grow. Wait 20 years earn interest and pay employee.


What you are describing is gross mismanagement of funds, and blaming the rightful recipients of funds for the existing.

The pension systems have overestimated their annual returns for decades and planned for future returns that are completely out of whack with reality. This is a pretty well known issue.

So if you're putting money into a system, and you know it's not enough to cover your benefits, you're not exactly just a innocent victim here. You're benefitting from a system that you know is broken.

I have no horse in the race, but it feels like the pension system is promising money that would never exist. How come there's no oversight or some sort of check against this when it was established? Surely those who would rely on the pension would at least band together to create this committee.

Ex Chicagoan here. Basically corruption and incompetence took the actual money away

The money did exist. Workers pay into the pensions as part of their compensation package.

Chicago borrowed against the actual pension accounts and corruption/incompetence drained them. Then they did scoop and throw methods for two decades to avoid having the pensions land on their heads.

There is a ton or corruption in Chicago. I have a friend who works for Idot. They have a lot of workers on the payroll who are making 6 figures. My friend has never seen these people who are supposed to be his co-workers show up for work, and when he asked he was told "Don't bring it up. Over your head. We can't fire them."

How can a pension fund overestimate success?

Firstly pension funds are conservative in their estimates, they aren’t growth funds.

And what precisely is anyone supposed to do? NOT put money into a fund ?

The only option other than a pension plan is to put it in a more risky fund. Which means your investment would be blown out post 2008.

AND that means your benefit from that job changes, making it less likely for you to join a government job -at all.

There’s a huge amount of discussion here that seems to have nothing to do with pension funds, but some bizarre form of fund which you should be blamed for partaking or being a dependent of through your job.

> Firstly pension funds are conservative in their estimates,

Not really.


There's two common ways of doing pensions.

One is a fund you pay into and at the end you get whatever it's worth.

The other is a scheme you pay into which guarantees a set payout at the end. It's that which often causes problems, because the scheme has promised payouts that significantly exceed their investments if they have assumed greater growth than they get.

Because pensions are guaranteed benefits. So if you put it on a bond, and the bond goes down, you need to draw more taxes to make the difference.

Pensions are partially the outcome of wishful result-oriented thinking ("workers should have pensions they can depend on, so make the promise first and then the solution will happen").

What? How the heck is that a pension ??

That’s a bond. Why does that have anything to do with a pension ?

And who in his right mind plants a bond and links it to a pension ? How does that even work?

A bond is a loan. That means the firm or institution is taking a loan.

A pension is the opposite of that - it’s money taken from employee payments and added to a conservative fund with a time horizon of 20-30 years. This allows them to make long term plans which avoid the risks of high beta and risk stocks or deals.

So as your economy goes up, your fund goes up and you pay people off with the interest.

Something changed/went wrong, long before you got to the bond.

What do you think "conservative fund" is? It is a fund of bonds. What do you think pensions are?

There is nothing more "conservative" in investing than bonds ( particularly treasury bonds ).

Nobody "plants" a bond and links it to a pension. A pension buys bonds, stocks, etfs, etc which hopefully grows in value or pays healthy interest.

The problem is if the pension doesn't do as well as expected or the ratio of workers to retirees gets too skewed and they can't meet their defined payouts.

Funds for pensions are usually mix of stocks and bonds, but stocks are really bad for defined benefit contributions because in a downturn you will have to oversell. This is something that actually happened in 2008 and broke some pension funds in the U.S. So bonds would not have that issue (treasury bonds, low-risk bonds) so you have no volatility.

But even they will not produce enough for the benefits that are promised: as soon as someone outlives their contribution the fund might not be actuarially safe. It turns out it is exceedingly difficult to mitigate all risk in a retirement fund, and government makes the promise that if they fail, they will pass the bill to someone else.

Pension funds are truly evil.

> Wait 20 years

That's the problem, politicians don't care about 20 years from now. They care about their next election.

$75k income, increasing at 1% a year, saving 15% each year, investing at 7% average returns over a 40 year career would give you $101k in retirement.

That doesn’t seem unreasonable.

Err, who earns $75k a year for 40 years?

40 years ago that person probably started off below $15k/year.

(In 1979 average household income was $19,553) https://www.multpl.com/us-average-income/table/by-year

The calculation includes inflation. $20k in 1979 is $70k today.

It’s also the classic tradeoff of government work: lower salary than you could get in the private market, but retirement equivalent to a higher salary than you could get. Compelling only if you are sufficiently long term oriented.

I ran a few scenarios--your numbers are not correct.

Start at age 20, making $15,000/y, increasing 5% per year. (Salary at retirement over $100k/y)

Assume annual savings rate of 15%

8% return

Retire at 60.

I get around a million dollars saved at age 60 (i.e. today). Not enough to buy an annuity that pays out over $100,000/y. Off by a factor of 2 or so, I think.

And starting salary 40 years ago was probably under 15k, 8% consistent compounded returns are really good, the other retirement benefits besides the pension etc.

Your calculations are a bit off, since even $75k * 0.15 * 40 = $450k (ie, not taking into account salary increases or returns).

Also, $75k is a lot more that most people make. From what I can find, that would be ~85th percentile of personal income, or around the 60th percentile of household income.

Edit: Some representative (although a bit outdated) sources:



101k a year in income, more than $2m in total balance.

Chicago police officers make $65k within 18 months [0]. If $75k is a high estimate, it’s not by a ton. Government competes for professional/managerial/educated employees as well.

[0] https://www.chicagomag.com/Chicago-Magazine/The-312/August-2...

Could they raise more money by locally legalizing more "sins" and heavily taxing them? Something of a cross between Las Vegas and Colorado could pull in a lot of revenue.

They already do, via video game gambling in bars:


I suspect they will. As a resident of Colorado, once the politicians realize they can MAKE money off it, rather than spending considerably more money ON it (eg: jails, etc)... the transition suddenly "makes sense".

It's so sad that undoing horrible laws and ineffective prohibitions must come down to dollars and cents, rather than the innate freedom we all should have.

Land of the fee, home of the slave.

Hopefully the Fed can inflate away >50% of real pension liabilities.

God I need to sell our apt. in Chicago...

> So expect more digital taxes in your future.

This is not a problem that will be solved with taxes, it will be solved with a global reset, and those are usually accompanied by major wars. This is not a Chicago problem, an Illinois problem or even an American problem.

For what it's worth - the title is a bit misleading.

The tax began its life as an extension/adaptation of an existing 9% "amusement tax" on patrons of amusements (movie theaters, bowling alleys, etc) in the city. But until 2015 it only included physical businesses, not any of the new online replacements. The definition is now expanded to include online games, streaming movies, movie tickets sold online, etc.

Also, this has been in effect for a while now (e.g. my Netflix bill went up by $0.99 a year ago) and all the various online businesses have already implemented it. Not sure why the article is bubbling up now, just as the new mayor is about to take office. :)

For more history see https://www.forbes.com/sites/kellyphillipserb/2018/05/29/chi...

OK, we've switched to the HTML doc title above, which isn't Netflix-specific.

I was under the impression it was because the city finally collected on it, but I might be wrong.

This stuff makes sense for cities, it’s just frustrating how much more difficult it makes it to operate a “mom and pop” software business. The complexity of potentially complying with hundreds of state and municipal governments - not where you are located but where online purchases originate - is a pretty significant deterrent to setting up a small side business. Imagine if every food truck had to pay taxes based not on where the truck is, but where the customers were from.

On the other hand, this is an obvious opportunity for payment processors to automate. I’m surprised sales tax still isn’t built in to stripe, for example.

It was only recently added to SmugMug's processing.

Having owned two businesses, I can say it's a lot more complicated than most people realize. Tax rates and reporting don't fit neatly into city, state, or even simple ZIP Code boundaries. Plus different products, even sold from the same food truck to use your example, can have different tax rates.

The whole retail taxing system is a mess.

There are vendors that will calculate taxes for you, but the ones that do it right down to the address level charge a lot. Plus you are sending all of your customers' detailed purchase data to a third party.

That sounds like a good reason for the federal government to regulate interstate commerce, such as by preventing local governments from establishing such obstacles. Constitutional jurisprudence has discovered the most amazing powers hidden in the emanations and penumbras of that clause, but sometimes it would also be useful to look at its plain meaning.

Scalia is dead, let’s let his rhetorical style die with him

> The complexity of potentially complying with hundreds of state and municipal governments - not where you are located but where online purchases originate - is a pretty significant deterrent to setting up a small side business.

Check out Avalara and TaxJar. They're not 'built in to Stripe' but have hundreds of integrations with WooCommerce, Shopify, and more.

This just opens up space for a business to calculate these fees as part of a SaaS offering. For example Avalara already has a product that can calculate the thousands of different sales taxes that exist in the US. The internet opens up a huge market to mom and pop software companies, I don’t see why we need any special tax cuts or holes for us.

You don't reside there, you're not liable to abide by their laws. I run a small US company, I don't have to comply with GDPR for example. Same applies here.

I don't see why any company would implement this, perhaps appeasing regulators at the federal level.

You would have been right up to June 21, 2018. After that, you are wrong. See South Dakota v. Wayfair, decided by the Supreme Court on that date [1]. If your business is in the US, and your customer is in the US, you can now be required to collect taxes for your customer's jurisdiction even if you have no connection with that jurisdiction other than online or mail order customers reside therein.

[1] https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.

But ideally Congress forces states to make their tax systems easy to comply with in return.

I assume you mean well, but it’s not about your residence (or for businesses the place where they are incorporated) but rather where you do business. Just because I’m in California doesn’t mean I can do business in the EU without complying with their laws. Same goes for Chicago.

You’re not required to do business there, but they can fine you for non-compliance if you are doing business.

Note: all of this is in reference to “software companies” as the GP said, and doesn’t touch on “corporate nexus” and stuff like that.

Are you actually doing business in those places, if people from there just go to your site that is hosted in your home jurisdiction? I'm not sure that it logically follows.

Obviously, governments interpret the situation in the way that accrues them maximal power and brings the most activity into their purview.

A free service probably isn't going to get sued into compliance if you accept sign ups from EU, but if you accept payment from EU that definitely counts as 'doing business' and you should expect to comply with local regulations.

I think the question everyone here is interested in having answered is "what if you don't?" The EU has no jurisdiction here (in my country); the law applies to the citizens of those countries. Sure, some countries might be willing to extradite you to the EU for breaking laws that apply there, but that seems rather extraordinary (in the case of a law that applies to internet sites), not to mention an outrageous abuse of power.

Presumably the main consequence is they shut down your business in their country, and if you dodge fines etc they don't let you come back.

Extradition would be quite reasonable if you were conducting a very large business, and/or ignoring significant laws, e.g. prohibition on human trafficking. But they aren't going to extradite you for failing to be GDPR compliant on $10 of app sales.

I accept payments from the EU and do not comply with GDPR. They can't sue me in my country's court for violating their laws. It really is that simple.

They'd have no repercussions except to block my site - and I'm guessing they didn't intend GDPR to turn into an internet filter.

That's factually incorrect. No one in the EU can sue a California company for failing to comply with EU laws so long as the company does not have a physical presence in the EU. They'd have to block their site or something as an EU court has no jurisdiction over a California company and would be unable to take action against them.

An explicit law would need to be made in your jurisdiction forcing you to comply with their laws. I'm not aware of any such thing.

It seems odd that this is referred to as the “Netflix” tax while most of the money has been collected from Eventbrite and Fandango, both of whom sell tickets to events physically happening in Chicago and both of whom would already be subject to a variety of other locality taxes as a result.

Even Netflix charges sales tax (or VAT, such as in Europe) in locations that require it (based off your billing address), so I find it hard to see this kind of thing as anything more than greedy governments taxing something simply because they can and know it’s big money.

In Chicago's case, the tax is more about desperation than greed. But yes, greed is what got that city's government where it is today fiscally.

Hate it. There's nothing wrong with taxes, but this kind of tax is onerous. It adds a shit ton of overhead if you have to maintain tax rates for every municipality in US, or the world. This is where I wish government would figure something else out. Have one state or (preferably) federal agency levy one tax, and then figure out how to disperse the collected income to municipalities - instead of each municipality creating its own tax for specific online goods. It just sucks.

And by the way, big companies will figure it out because they have entire departments to deal with garbage like that. It's the small companies that suffer from this bureaucracy.

It's not hard to "figure something else out"; this problem became a political issue in Australia in the 1980s and was finally solved with a federal goods and services tax in 2000, the proceeds of which are distributed back to the states by an apolitical bureaucracy. There are no more local or state sales taxes. I am sure other countries have found similar solutions. The difficulty is overcoming the political and constitutional barriers to further consolidating federal power in the United States.

Yep. Canada has the federal General Sales Tax (5%), and most provinces have a separate Provincial Sales Tax (varying rates). Some provinces have combined these into the Harmonized Sales Tax, which is collected by the Canada Revenue Agency and the provincial portion distributed according to their respective rates.

Other levels of government are not permitted to charge sales tax, or even income tax. Most cities' primary sources of income are property tax and development fees.

All taxes can be consolidated into one tax, Wealth tax! which can directly account for everything. i.e. Live in NYC vs suburbs. Got 5 kids vs single. No income, sales, federal, city, county, state, capital, property, SS... list goes on. If you're rich you pay more if you're not you don't. How do you know how rich someone is? Total wealth. Federal government should ban any other taxes that state would want to implement

Please research the economic literature on wealth taxes. There are numerous problems with it, too many to discuss in a comment.

I thought the main reason states collect tax on Amazon purchases is because they have a presence in a state (distribution centers, warehouses, etc)?

I'm confused how the legal thinking goes that a company not based in Chicago, offering services on the internet, can be taxed.

(They don't even ship DVDs to most customers, whereas Amazon was shipping physical goods)

South Dakota v. Wayfair [1] last year overturned the requirement of a physical presence for a state to levy taxes.

Most states with sales tax have since passed legislation to tax online purchases.

[1] https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.

edit: It seems as though HN's linkification drops trailing periods, so that link doesn't work when clicked.

Enclosing a link like that in parentheses will make it work. (https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.)

Interesting. Is there a limit on what level of entity can do this? (Ex: in PA it feels like every two feet you're in a new township, then there's the county and state)

I'm not necessarily anti-tax, but I don't envy a developer who needs to track down to the township level who taxes what in what way while providing goods across the entire USA.

IANAL but, as I understand it, the Supreme Court decision in South Dakota vs. Wayfairwas based on state laws that do not "unduly burden" interstate commerce. Kennedy's opinion cited adoption of "the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state-level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules." There is also a minimum sales threshold.

Tickets for local events are one thing. It's not clear to me that a city tax on a streaming service meets the tests that the Supreme Court said should be met.

It's an entertainment tax. Netflix supplies entertainment to people in the city of Chicago, and so the city of Chicago taxes that entertainment.

Same thing with concert tickets and other forms of entertainment.

And if every city and town has their own tax that's different in some way? Then what?

Or alternatively, could Netflix ban all residents of Chicago?

1. Businesses have to incorporate the local tax code to any area they provide services in. Same as any brick-and-mortar business right now.

2. It becomes burdensome for businesses to comply so they ask the federal government to occupy the field and standardize.

I don't really know why people expect businesses that deliver their products digitally to be treated differently from everyone else.

But we're talking about online businesses here. This isn't isolated to the US. We're talking about complying with the requirements and taxation of any city in the world. There is no federal government to address there.

Welcome to business.

Yes, Netflix chooses to serve Chicagoans, and if they’d prefer not to, they can. There have been a few “make the customers angry, so they write to their representatives” attempts throughout history, but I doubt a 99 cent tax for Netflix is enough to risk it.

As a related thing, look at Spotify vs Apple on the App Store. That 30% is material.

But I don't think this is actually possible in the EU in the long term. They want to do away with companies only serving digital services to some EU member states, but legislation still applies per country. What if the rest of the world decides that this stuff is great for taxation as well? Then you won't be dealing with the tax code of an American city, you'll be dealing with the tax code of a city in some small country.

I think that has to be overturned with the way companies are consolidating to costal cities, else in the long run there won’t be tax collected at all.

Instead of trying to tax purely digital activities, why not just raise the income/property taxes on the people who live or work in your city? This would be a lot less regressive, and would prevent people from getting around it just by changing their credit card billing address. Not to mention the beauracratic nightmare of requiring SaaS companies to keep track of every customer's physical address and local tax regulations.

Because raising progressive taxes that are already high make it likely you’ll trigger a death spiral where high earners flee, raising the taxes you need to levy on the rest, etc.

Yup. I would argue that that death spiral is a feature not a bug. Governments will do every thing they can to hide the extent of their taxation by nickel and diming its citizens, testing the limits of how much can be raised before people flee.

If people could see the some total of the various taxes they pay, they'd be shocked. I'd love it if Stripe or other payment processors started reporting taxes to credit card companies so we could see the total sales and other taxes we paid across all transactions on top of our income taxes.

Because it's easier politically to implement regressive taxes. Property owners in particular are politically powerful and sympathetic. They're also very motivated because the tax increases would be large and these folks are highly leveraged in their investment. So we get things like Prop 13 in CA, or property tax increase caps in NY.

Basic question: what is the legal basis for cities to tax something? I understand physical goods sold within a city benefited from infrastructure and security the city government offers, and agree to a tax on them.

But digital goods and services? The city already taxes internet connectivity, property tax, ... Taxing digital goods further is just double taxation, with no benefit provided in return by the city to the consumer, or producer of digital goods

They derive their right to tax as recognized entities from the states wherein they are incorporated. There is no limit to what they can tax according to their charter, as long as no higher jurisdiction forbids it.

That's way too broad and not how it ought to be.

THIS is why you see rich cities like San Francisco and Chicago preaching ever higher taxes, while simultaneously providing worse services for it's citizens.

There's a feedback loop missing where there are actual consequences to the city council when quality of service isn't delivered, but instead, city politicians indulge in emotionally appealing demagoguery, further increase taxes, line their pockets and continue to not deliver

So in other words, voters continually vote against their own long-term interests? I don't see how this is going to be solved by getting the democratically-elected state legislature to pass laws restricting the cities' taxing powers.

Again only tax that should exist is wealth tax. Otherwise you can create as many taxes out of thin air as many words one can think. This complexity has real cost to entrepreneurship and thus GDP. Simple progressive ONE wealth tax can account for all matters indirectly. Funny for country founded because of taxes to have dozens on dozens of taxes, an entertainment tax? Really?

If you live in SF and make 90k you're taxed the same if you made same amount in North Dakota somewhere. Make sense??? One is touching upper class status wise and other is one less paycheck away from being homeless.

Right now we have income, capital, sales, bunch of business taxes, ... Each state City county has its own rate. Whenever it comes to taxes we seem to accept everything, it's taboo subject to talk negatively about any aspect of it despite there being real inefficiencies and better alternatives

Maybe instead of putting on a show in court, Netflix et al should simply stop asking people for their physical addresses? I mean, that is the underlying vulnerability that will allow this push to succeed.

We were so excited for the promise of the Internet to overturn all this legacy bullshit. Then the legacy bullshitters got here, built a bunch of proprietary services on top of HTTP, marketed them as progress, and are slowly reimplementing the status quo!

The Internet option, piracy, has been here the whole time. It's just "inconvenient" people say, as they repeatedly complain about new inconveniences caused by centralized services. In reality, it's simply the poverty mindset - a little bit of self-actualizing work today would pay off tenfold down the road.

I look forward to the next phase of storage getting cheap enough, along with streaming services fragmenting themselves, that it becomes trendy to trade USB keys with friends.

> Maybe instead of putting on a show in court, Netflix et al should simply stop asking people for their physical addresses? I mean, that is the underlying vulnerability that will allow this push to succeed.

> We were so excited for the promise of the Internet to overturn all this legacy bullshit. Then the legacy bullshitters got here, built a bunch of proprietary services on top of HTTP, marketed them as progress, and are slowly reimplementing the status quo!

I don't understand your point. The tax Chicago is trying to impose has nothing to do with Netflix's service being proprietary. The tax would still be charged even if their service were built entirely out of free software and all they streamed was public domain material, as long as they charged for the service.

> The tax would still be charged even if their service were built entirely out of free software and all they streamed was public domain material, as long as they charged for the service.

If a user couldn't simply `git clone` and then http://localhost/ , that would still be a proprietary service. Even if a foundation is free - HTTP/TCP/IP or even Free software as in your example - services built on top are not necessarily so.

My point is that Netflix is better viewed as yet another cable company, rather than as some champion of the Internet. This is especially relevant to Net Neutrality, for understanding when Netflix will turncoat - they aren't going to be standing up for p2p rights.

>Maybe instead of putting on a show in court, Netflix et al should simply stop asking people for their physical addresses? I mean, that is the underlying vulnerability that will allow this push to succeed.

That's an interesting point. There are internet services that don't require an address to pay for something. What are their legal obligations, if any, with respect to local taxes? I assume quite a few local laws don't explicitly make this a loophole, so does that mean anyone doing business online has the legal obligation to collect address information? That would be an odd situation, and it doesn't seem to be the one we're in.

It seems like the situation on the ground is that in reality only companies big enough to attract attention are at risk from this. My understanding of the legal situation is that the federal government in the United States provides the legal basis for ensuring that a business in one state or city abides by the laws of another state or city when it sells to its residents. But they seem uninterested in actually enforcing this.

It's interesting to think about what would happen to companies of various sizes should they refuse to implement this tax. Small / medium size companies? Probably nothing. In fact it's unlikely that many of them will implement it. Suppose Netflix refuses; it now becomes illegal for Chicago residents to purchase Netflix subscriptions (unless they have some mechanism for the citizens to pay the taxes themselves, as some states do; this usually doesn't happen though). But Netflix can say "no problem", we just make web servers available over the Internet, we don't check whether someone's logging in from Chicago. What does Chicago do? They either ban the Netflix domain at the local internet level, or (more likely) they get the Federal government involved and have fines put in place to penalize Netflix for not paying taxes to Chicago.

I'm not a lawyer though, and it would be interesting to get one's point of view of one here since questions about jurisdiction come up here all the time, e.g. whether US companies have to comply with EU laws.

Legally, government can keep grinding at the courts until they convince some judge to write a justification for the practice - look at what happened to the Bill of Rights. The legal system assumes its own omnipotence, rather than limiting its own scope and excusing itself.

So those limits end up being defined by what is actually practical to enforce. Which is why the technical environment ends up being quite important, and the web 2.0 surveillance industry is ultimately the enemy of Free people - it is vaccination for the state [0]. If Chicago ended up failing here, we could chuckle at the corrupt politicians making nonsensical laws and then quickly forget. But rather, success means that other municipalities will be looking to get on this gravy train.

Then, even if there is eventual pushback where online services start explicitly forgoing obtaining users' addresses, there will be enough money behind it to fund that grinding at the courts. Eventually it will be declared that doing business and not obtaining the identity of your customer is illegal, presuming an intent to evade all of these "duly enacted" backwoods laws.

[0] FWIW Bitcoin is in the same class, as it negligently lacks the standard property of untraceability.

Netflix: We don't know where any of our customers are, sorry Chicago!

Chicago: Okay fine we talked to all the local ISPs and you're no longer accessible in our city. Have a nice day.


Chicago: We didn't fall off the turnip truck yesterday guys, have you heard of this thing called GeoIP services?

Besides, I'm sure Netflix is bound by all kinds of territory-based licensing to need people's addresses. Like if Foobar Productions did a deal with someone else for exclusive digital rights to Austria and Australia but is letting Netflix license their show for streaming everywhere else, Netflix needs to be able to not show it to the Austr(al)ians.

To the extent that territory licensing forces Netflix's position, that still doesn't justify the customer-hostile behavior. I don't expect my comment to change Netflix's behavior, but rather to highlight the hypocrisy of casting themselves as a modern solution while dragging us backwards.

And yes, obviously the totalitarian matrix is interconnected. GeoIP is a symptom of that cancer - the legacy status quo attempting to make the Internet conform to its preconceived notions. Which is why I pointed the way towards the Internet-first solution.

You need to provide a physical address to pay with a credit card.

The credit card processors and banks actually do not require a physical address. All you need to charge a credit card is the cart number, and you need to provide an expiration date that is in the future.

You can provide a zip code, or a full address, or the card security code, or a name, and those will be checked and you will be told if they match the information on file with the card issuer, but it is up to you whether or not mismatches should block the transaction.

Transactions with mismatches generally have a higher risk of being fraudulent, so it is a good idea to not go through with transactions when the data doesn't match because if you put through too many fraudulent charges bad things can happen to you, ranging from higher fees to having your ability to accept cards revoked.

I love Chicago, but its basically bankrupt. They can raise taxes all they want, but they won't be able to raise enough to cover the problems they've created.

So how does a business actually deal with collecting and remitting this? Is it a special case they have to deal with separately from sales taxes, or is it treated like a sales tax? If it is a sales tax, do the sales tax service companies like Avalara and TaxCloud and Savos handle it for you as long as you set the right tax code [1] for the item?

[1] Sales taxes often vary depending on the type of good. E.g., some states might charge a different rate for food ingredients than they do for prepared food, or for food sold through a vending machine. The tax service companies assign a code to each category of goods that might have a different tax rate so that when you ask them to computer tax on an order you can supply the appropriate codes for each line item so they can compute the right tax.

Sales tax should be earned by a state, as a way to finance the services they provide to businesses that sell products within their state. I say earned, because if it's the tax is not worth the benefits, new businesses will locate elsewhere. It's reasonable that business pay for the emergency services, roads, infrastructure, etc. that they use. Streaming service sales do not in any way increase the costs faces by a locality, so they shouldn't be taxing it. If Chicago wants to tax companies like Netflix they should convince them to locate there.

Successfully taxes streaming services? Shiiit, there's no such thing as successful taxation in Chicago. The city and it's crook county are corpses.

Chicago is a financial disaster and it's dragging Illinois into the fire. The situation is worse than detriot before it's bankrupcy.

It's so bad that illinois is the only state in the union with a negative population growth. And, doubly, the only state to have that honor several years in a row.

The debt is unsustainable and they tax everything. Just a few years ago they started taxing soda cans, and hybrids since "they don't pay as much gas tax".

They may have successfully taxed streaming but it's just another example of how incredibly desperate they are.

Illinois is drowning under pension promises from their massively bloated government. Enough that every Illinois citizen owes something like $20,000 to the state pension systems. They're squeezing money from stones

> Chicago is a financial disaster and it's dragging Illinois into the fire.

Cook county (Chicago) and the 5 suburban counties contribute more revenue to the state coffers than the entire rest of the state combined. The rest of the state receives a higher share of that revenue than Chicago and its suburbs (ie - they get more than they put in). [1]

> The situation is worse than detriot before it's bankrupcy.

Highly subjective, but having personally lived in the Detroit area before its bankruptcy - and currently living in Chicago now - I disagree.

> It's so bad that illinois is the only state in the union with a negative population growth.

Not so. Multiple states have experienced negative population growth year over year; and multiple states had experienced it multiple years in a row. [2][3][4][5]

Your comment is demonstrably, factually incorrect. Please support your opinions with facts, or label them as your own opinions.

1. https://opensiuc.lib.siu.edu/cgi/viewcontent.cgi?article=105...

2. https://docs.google.com/spreadsheets/d/1R7AN4o7m3coGcnWSJsKd...

3. https://www.census.gov/library/visualizations/2018/comm/popu...

4. https://www.census.gov/library/visualizations/2018/comm/popu...

5. https://www.census.gov/data/tables/time-series/demo/popest/2...

Your first source is quite flawed IMO. For one, they focus on the idea that the impetus behind the Tea Party movement was some kind of schizophrenic notion of citizens wanting both low taxes but also many high-quality public services. The Tea Party in the Boston harbor wasn't simply about taxation, it was about representation or lack there of. The modern Tea Party that sprang up under Obama was quite similar in that regard, i.e. voters felt they were being squeezed while their government provided them an inadequate voice in how they should be governed, and after the massive shift in state and local governments in 2010 after the ACA was passed, the Tea Party essentially sputtered out because the goal of representation had been achieved in a lot of cases.

Secondly, it lacks focus on cost efficiency or assessing cost effectiveness in how the tax payer's money is being spent. I don't know the situation in Chicago very well, but my inclination is to discount any source as irrelevant if it doesn't address how efficiently tax dollars get converted into desired services.

Finally it seems more concerned with diverting the reader's attention towards national politics, particularly Trump's election and why voters voted for him.

I’m inclined to agree that the source isn’t great, but it’s also the only one I’ve found that directly addresses the “Chicago is the root of our problems” mentality found in IL politics. Looking past the commentary of the paper, I think the data is sound.

Specifically it’s a response to the GP saying “Chicago is a financial disaster and it's dragging Illinois into the fire.” If that were the case, it stands to reason that the state would be spending all its money there - however, we don’t see that. Page 23, I think, illustrates it well.

> I don’t know the situation in Chicago very well

I doubt that most people on the thread do; or they would know this whole “Netflix” tax is actually old news. Chicago ruled that Netflix was subject to the tax back in 2015. ;)

Regarding discounting sources as irrelevant if they don’t address inefficiency - wouldn’t that rule out most sources that talk about ... well, practically anything political?

Your own references show that Illinois is the only state with negative population growth for the last 5 years straight. Illinois financial state is totally unprecedented, and you didn't even bother arguing my point that the debt is equivalent to 20k per citizen.

Before accusing me of being factually incorrect you should read your sources

You stated that Illinois was the only state to experience negative population growth, and the only one to experience multiple years in a row.

The sources cited disprove that. Don’t move the goalposts.

I’m also not disputing every aspect of your comment, which is why I didn’t address it.

just make Netflix (and all video streaming services) illegal and force them to distribute their content through the cable network (a bit like it is illegal to create city fiber networks) /s

Would we ever see legislation that would require companies to not increase the cost of digital goods after a tax is instituted? Alternatively, could we not just have a fixed tax contribution on goods each year rather than making it piecemeal per digital good sold? I find it weird to tax goods unless the existence of the tax is to change behavior. (not sure if that is the goal here?)

The problem with that is that either a) you go under the margins and each sale is a loss, meaning that the company will offer no services at all; b) you stay under the margins, but not enough for the investors to keep investing (they expect higher profits elsewhere) and so the company now has no investors; c) you cut into the margin so much that it is not worth it for the company to continue developing new stuff.

In the case of c they will most likely continue to develop new stuff, based on their revenues elsewhere, but at that point the high tax areas are leaching of other low tax areas where the company can afford to fund innovation.

That assumes that you can find out when a company increase prices based on higher taxes, as opposed to anything else, which you cannot do.

The only real solution is to tell the retirees that they are not getting the money they counted on; that is hardly unfair as I am sure nobody here expects there to be any retirement funds for them, except what they can save up.

The article says it's a response to a reduction in sales tax collected, so it would seem the goal is to collect revenue. A prohibition on raising the price seems unlikely; that's not usually the case with other things that act like sales taxes.

It's always amusing that no one talks about more efficient ways to use revenues, than blindly increasing tax, when it comes to the government. Has ANY government service become any better, over time while taxes have constantly risen?

There are certainly jurisdictions that are arguably under taxed because they only have the funds to provide meager services. See: Kansas Experiment.

Aren’t lots more government services digitized now versus 20 years ago? Lots of forms and records you needed to be in-person to access are now available online. Many cities have open data programs where they make large data sets freely available via API or query. In Chicago, my local library and school have improve programming options over the past 10 years. Those are a few examples.

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