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10.25% sales tax?!?! This is Chicago's new reality

A cash register screen indicates a customer is entering their PIN number at a Target store in Miami.
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A cash register screen indicates a customer is entering their PIN number at a Target store in Miami.

Why do people like me often say the government is greedier than any crooked Wall Street banker?

Why do we think politicians like Bernie Sanders who push for more welfare and more socialist policies are actually the biggest enemies of the poor?

Why do we always mistrust anyone who insists the answer is to simply raise taxes on the rich, but only the rich?

Take a gander at the astounding 10.25% sales tax about to go into effect in Chicago and the rest of Cook County and you should be able to figure it out. Because this sticker shock sales tax rate that will hit the poor the hardest is only necessary because of the local government's horrific mismanagement of the millions and billions of taxpayer dollars it's already wasted.

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The immediate problems is pensions. The city of Chicago alone has a $20 billion unfunded liability and when Moody's Investors Service dropped the city's debt rating to junk, it forced $2.2 billion in accelerated debt payments. So Cook County has to borrow more money now at higher interest rates to pay those newly due bills AND it has to increase sales taxes to that whopping 10.25% rate effective in January to help pay the interest on it all. It's an endless cycle.

Chicago's public pensions include the retirement funds for all city workers, but to really make this sales tax story hit home let's focus on the public school employees. The Chicago Public Schools are a particularly discouraging institution. Four out of ten students don't graduate... ever. Only 26% of those who do graduate are ready for college work according to the ACT subject matter tests. And a University of Chicago study shows that 91% of the students who do graduate and get into college still need to take remedial classes before they're allowed to start normal coursework. It's so bad that even Chicago's Democrat Mayor Rahm Emanuel has been locked in a years-long battle with the city's teachers union in hopes of raising standards and accountability. So far, the students and parents haven't seen any dramatic results.

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And now we have the insult added to the injury. Imagine you're a single mom raising a child going to one of the many failing Chicago public schools. Some of your paycheck is already going to pay for the salaries and pensions of the failing administrators and teachers, but now you'll be paying them even more every single time you go to the store, shop online, or just about every time you open your wallet.

This is the real war on the poor, and it's not being waged on them by Wall Street or a CEO. The aggressors here are the local governments, the teachers unions, and everyone in the news media who falls for it when they say they're raising taxes and costs to "help the children."

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And it's also not simply a case of improving the management. Sure, it would be better if more conscientious, skilled, and hard working government officials found a way to fix the pension mess without hurting so many innocent people. But as one great Chicagoan taught us, it's not really about the people running the system when the system itself is so inherently broken. That Chicagoan was the Nobel laureate economist Milton Friedman who explained in 2004 very clearly why the pension costs in Chicago and just about every other government grow so out of control:

"There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you're doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I'm not so careful about the content of the present, but I'm very careful about the cost. Then, I can spend somebody else's money on myself. And if I spend somebody else's money on myself, then I'm sure going to have a good lunch! Finally, I can spend somebody else's money on somebody else. And if I spend somebody else's money on somebody else, I'm not concerned about how much it is, and I'm not concerned about what I get. And that's government."

There simply aren't enough people on the planet, let alone in Cook County, who can be trusted to wisely spend somebody else's money on yet somebody else. It's a crucial reason why as many essential projects funded and managed by the government need to be wrested from its control. Schools belong at the top of that list, and parents of all ethnic and political persuasions have been trying for decades to do just that only to see the government and its teachers unions win almost every battle along the way. Now, these schoolchildren and their parents in Chicago have an extremely regressive tax to add to the list of their war wounds.

Yesterday I wrote about how conservative and free market advocates need to start their arguments for capitalism with the altruistic reasons first. This story is a great place to start. Too much government power and failure is dooming too many poor people in Chicago to educational failure and economic ruin. Leave the fact that so many businesses are likely to move beyond the Cook County line for later in the argument.

And the Chicago story needs to be front of mind every time we hear someone like Senator Sanders or Hillary Clinton defend public sector spending and unions on the campaign trail. And the reason is not because they hurt the rich or the job creators, but because they hurt the poor. And unlike those rich people and business owners in Cook County, the poor have nowhere else to go.

Commentary by Jake Novak, supervising producer of "Power Lunch." Follow him on Twitter @jakejakeny.