Cook County, Illinois, where Chicago is located, has a sales tax rate of 1.75%, which brings Chicago’s sales tax to 10.25%, one of the highest in the nation.

The Cook County Board resolved to reduce the county portion of the sales tax to 1.25%. Most major media organizations call it a “half-penny” decrease to make it sound minor, but in the overall financial outlook, it’s huge.

Todd Stroger, the Cook County Board President, vetoed the rollback on Saturday. Stroger says “”We cannot hold our budget process hostage to revenue reports that we won’t have in hand until after January of next year.”

Cook County and Chicago’s ridiculously high tax rate hurts poor people the most: they may not have the access to drive to Lake County (where sales tax is over 2% lower) for their large purchases, and small purchases made weekly can add up to a huge burden for households with minimal income.

Cook County, like most government bodies, has a big problem: it spends too much money on bureaucracy and unneeded services, passing on those costs through a variety of fees and taxes including the sales tax.

There’s something fishy about the expansion of government during supposed economic booms: if people are making more money, why do they need more government? Doesn’t it make sense that times of economic progress should mean less reliance on the State?

It’s a problem we’re seeing all over the country with states, counties and cities fearing bankruptcy due to their splurging in recent decades. Yet the real problem isn’t that consumers are spending less or earning less, causing governments to take in less in taxes or fees (they are), and it isn’t even that the governments are overspending (they are). The biggest problem with local and state governments is that they don’t have the power to do what the Federal government does to raise money: print more of it.

Since 1913, the U.S. government put the power of the dollar in the hands of the secretive and elusive Federal Reserve, a non-government private bank that is in charge of setting interest rates. When you hear that the Federal Reserve lowered interest rates, it means one thing: they printed new money.

When new money is printed, it hurts everyone who has money in the bank or in their wallet. New money causes old money to be worth less as prices go up due to monetary inflation. This is the policy of the Federal Reserve: print new money, destroy the value of old money, and call it a day.

State and local governments can’t print money, so they have to raise taxes and fees, or cut services. I’d prefer to see Cook County cut services significantly, passing on the savings to the taxpayers who will seek out those same services in the free market. But the grossly belligerent and powerful county never wants to reduce its power or financial-greed appetite. They won’t cut services, not in booms, not in busts.

There’s a solution that has existed since the dawn of this Union of States, right in the Constitution: demand a return to real money backed by gold or silver, rather than “fiat” money backed by promises and force.

In Article I, Section. 10 of the U.S. Constitution, it says: “No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.”

How is it that our states (and cities, and counties) have ignored this? When the states use real money, such as gold or silver, there is no ability of the Federal government to destroy its value. They can stick to a wise budget, within their power and privilege, and not have to worry that their budgets will need to keep rising to offset the purchasing power lost when the Federal Reserve prints new money, daily.

Yet they won’t do it, even though it is the law of the land. Many governments rely on Federal Reserve-created economic “booms” which allow the local governments to increase their incomes and increase their budget, thereby increasing their power. When the inevitable busts happen, and they always do (thank you, Federal Reserve), the local governments can cry to the taxpayer and threaten to reduce services if taxes aren’t raised. It’s win-win for the local governments, who don’t really care about the taxpayer, they care about keeping their power solid, expanding it as much as possible during times of crisis.

If you waste your time voting, at the very least ask your local politicians why they don’t stand by the Constitution and require the states to address payments in gold or silver. It makes little sense to do otherwise, and it will keep the states in excellent financial health regardless of what the Federal government does to the power of their paper dollars.

Related posts:

1. Cuyahoga County Sheriff gives raises to niece, friends amid 21 layoffs
2. Making money and making laws do NOT go hand in hand
3. Obama: Don’t lower taxes, RAISE them: significantly
4. Government market control without the Federal Reserve
5. Ron Paul and deconstructing the federal mess
6. How to fix the Federal Reserve, fiat money, and fractional reserve banking
7. Ron Paul on ending the Federal Reserve
8. Ron Paul’s hard money is only part of the answer.
9. How to go international with your services
10. Gold News Report, July 14, 2006