* From a reader…
I was wondering if I can ask you for some advice? Almost two years ago I met with [redacted] to discuss a change to the way Illinois collects property that that would generate almost $30 billion in additional one-time revenues over time without increasing taxes. [Redacted] thought it was a really good idea and placed me in touch with [redacted]. I spoke with [redacted] and he also thought it was a very good idea. Needless to say, nothing ever happened. Do you have any suggestion as to how I might bring this idea to the attention of people with real authority? I am an attorney now involved in business and I think this idea would really help the State of Illinois.
Any suggestion you might offer would be greatly appreciated.
* I told him to send me the info…
Illinois collects property taxes in arrears. In 2015 Illinois collected 2014 property taxes and in 2016 Illinois will collect 2015 property taxes. At the end of the world, Illinois will still be behind one year in the collection of property taxes.
Based upon 2014 figures, Illinois can generate at least $27.7 billion in additional property tax revenues over time if it could collect the prior year taxes and collect taxes in the current year to fund 2016 appropriations.
When real estate is sold in Illinois, the buyer and seller prorate property taxes. The seller gives a credit to the buyer for the unpaid taxes and the buyer agrees to assume liability for unpaid taxes. Property tax prorations cover both the prior tax year, if still unpaid, and the current tax year. Even when property is sold after the second installment of taxes has been paid, none of the current year taxes have been collected.
By transitioning the Illinois property tax system when property is sold, funds paid by the seller to the buyer for prior year and current year property taxes would be paid by the seller to the state to retire the prior year and outstanding current year property tax liability. After the closing, the new buyer will then pay its taxes in advance as is the practice is most sates. No property owner would pay more in property taxes as a result of the transition even though at least one additional year of property tax revenue would be collected.
In other words, rather than prorating property taxes between the buyer and seller, the seller would pay what would otherwise be the prorated amounts to the state and discharge the tax liability. No one would pay more in taxes, tax revenues would just be collected faster without any detriment to the current property owners. By implementing this change, approximately $27.7 billion of Illinois unfunded pension liabilities would be addressed over time in current dollars. The $27.7 billion in property taxes could be paid into the State of Illinois teachers’ pension system or the City of Chicago teachers’ pension system for property located in Chicago.
I note that Illinois is one of thirteen states that collect property taxes in arrears; other states include Alabama, Colorado, Florida, Indiana, Iowa, Michigan, Nebraska, Ohio, South Carolina, South Dakota, Texas and Wisconsin.
 $27,706,994,500 in property taxes were extended in 2014 according to the Illinois Department of Revenue, 2014 Property Tax Statistics, Table 1.
The realtors would probably hate this idea because it would drive up the cost of some home sales, and it probably wouldn’t raise a huge amount of money every year, but it would give locals a boost.