As Woodstock officials weigh whether to increase the city’s sales tax rate, local entrepreneurs are divided over how a hike would impact their businesses.
A proposal to raise the sales tax by one percentage point means Woodstock shoppers would pay 8 percent on general merchandise, the joint-highest rate in McHenry County, according to data from the Illinois Department of Revenue.
Woodstock Lumber’s Mark Kammermeier believes an increase would be bad for local businesses, particularly those like his, which specialize in big-ticket home improvement products. Kammermeier said his family’s business sells building materials to customers throughout northern Illinois and southern Wisconsin, some of whom might be scared off by higher taxes.
“A sales tax increase hurts all our customers wanting to make [home] improvements,” Kammermeier said.
Currently, the total sales tax rate in Woodstock — which is divided among the city, state and Regional Transportation Authority — is 7 percent, the same as in unincorporated McHenry County and many other local municipalities. McHenry’s rate is 7.5 percent, while Crystal Lake and Algonquin charge 7.75 percent. Lakewood and Lake in the Hills are the only municipalities in the county with a sales tax of 8 percent.
“The current 7 percent tax is a very competitive and fair rate for this community,” Kammermeier said. “Our store ships building materials as far away as 300 miles because of our high quality, competitive pricing and fair sales tax rate.”
The proposed tax increase, allowed now that Woodstock has home rule, is included in the city’s budget for the next fiscal year, but it will need to be discussed in a public hearing and approved by the City Council before it can go into effect. The higher tax would apply to general merchandise, excluding groceries, medications and vehicles.
City officials floated the idea of a sales tax increase as a way to offset a recent reduction to the property tax levy. In March, the City Council voted to cut the city’s property tax collections by 10 percent, a move that reduced the city’s revenues by about $924,000.
The sales tax increase would bring in about $2.34 million in additional yearly revenue, according to estimates from City Hall. Officials have said some of that money could be used to fix city streets.
Read Between the Lynes bookstore owner Arlene Lynes thinks that’s a good tradeoff.
“[Raising taxes] is never a favorable thing, but at the same time, I have listened over and over to the residents complaining about their property taxes,” said Lynes. “So the fact that the city did do [a 10 percent property tax reduction] means we have a city government that listened to their residents.”
Lynes isn’t worried about losing business to stores in other towns.
“People have already expressed, by shopping with us, that we are an important enough destination that they want us to stay here, so they are willing to support us with our pricing, and we’ve earned it,” Lynes said. “We show we’re a good community neighbor.”
Tom Dougherty, who owns jewelry store Studio 2015, said he opposes tax hikes “if I don’t know what it’s for or how to justify it.” In this case, he said, Woodstock will have to decide what’s fair.
“Where’s the tipping point? Do you need 8 percent? Can you go to 7.5?” Dougherty asked. “… I think it’s of great interest to our community, it’s of great interest to people who are invested in businesses and who want to bring a great product and a great price to people, and if they get taxed out, what do we do? That’s the question to ask in Woodstock, is what’s the tipping point?”