Saturday, July 4, 2015

Chicago To Tax The Cloud This Fall

Chicago, deep and debt and facing a $1 billion gap in 2015 without a pension fix, has found a way to tax the cloud by extending city ordinances governing two types of taxes — the city amusement tax and the city personal property lease transaction tax. The taxes cover many products streamed to businesses and residents. They also cover use of various online databases that could especially affect businesses.

Chicago, a city desperate for cash, is looking to expand the tax base regardless of the social and economic consequences. Cloud taxes place all Chicago based tech start ups using or selling the cloud services at a disadvantage to other major technology hubs located in the suburbs, other States, or countries after September 1st. This move contradicts Emanuel's well-publicized efforts to support a tech community. Clearly city officials are more worried about self-preservation than encouraging investment that drives future economic growth.

Capital is mobile. If 'could taxes' makes start ups less competitive, they'll move. The migration of productive, taxable human capital, will shrink the tax base and leave city officials wondering why tax coffers are shrinking rather than expanding.

The trend towards aggressive, creative taxation will accelerate as the economy (EAI) turns down sharply after 2015.

Headline: 'Cloud tax' upsets Chicago tech community: 'Life just got 9 percent harder'

Chicago’s new 9 percent tax on streaming and cloud services appears to have the local technology community agitated and, more than anything, confused.

Reports on Wednesday of the “cloud tax” took many Chicagoans by surprise, leaving providers and consumers of streaming and cloud services scrambling to understand the implications. Technology companies, among the heaviest users of cloud services, are likely to be taxed for the services they use as well as those they provide.



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