* This state does this all the time and we never seem to learn. We need to narrow the spending base and broaden the tax base. Instead, we broaden the spending base while constantly narrowing the tax base. It’s lunacy…
When state lawmakers pushed through a trio of tax breaks in spring 2017, the idea was to ease some of the financial pain caused by Mayor Rahm Emanuel’s series of major property tax hikes on Chicago homeowners, especially senior citizens.
The changes, however, also had an unintended consequence: Thousands of homes in south suburbs such as Harvey and Park Forest fell off the tax rolls, meaning those homeowners no longer pay any property taxes at all, and an even greater number are paying less.
While that’s good news for many, it’s also resulted in tens of millions of dollars in property taxes being shifted onto remaining homeowners and businesses. They are now being hit with even higher bills in an impoverished, long-struggling, largely African-American region where an outsized property tax burden already made it difficult to attract the retail shops and industry needed to reverse economic woes made worse by the Great Recession.
Adding to the economic challenge is an impending change to a business tax break that was a prime development tool for the area. As of Saturday, Cook County will require businesses that get the job-creation perk to pay prevailing wages, which could increase labor costs. South suburban mayors say that will lead some businesses to avoid setting up shop in their towns, and also further a trend of companies crossing borders to northwest Indiana or Will County to escape high property taxes.
How could they possibly not know the consequences? When one person pays less, somebody else is gonna have to pay more. This phenomenon is much slower-moving with income and sales taxes, but, eventually, the revenue base becomes so narrow that the rates have to go up. Property taxes, however, produce a near-instant reaction because of the levy. Somebody always has to pick up the slack almost right away.
This is not some advanced economic theory, people. It’s elementary school-level math.
- Anon - Thursday, Aug 30, 18 @ 3:07 pm:
“We need to narrow the spending base…”
Why?
- DarkDante - Thursday, Aug 30, 18 @ 3:12 pm:
==Why?==
Easy answer, we have structural deficit at the state level to the tune of $1.2B and growing. In order to reign this in, we could simply raise a lot more revenue (taxes) or cut a lot of expenditures (reduce services), but the better solution is often to do both, simultaneously, so that tax raise aren’t too punitive and service cuts are so draconian.
- DarkDante - Thursday, Aug 30, 18 @ 3:13 pm:
Some bad typing by me there, but I think what I’m saying is clear…?
- My Button is Broke... - Thursday, Aug 30, 18 @ 3:17 pm:
And remember Gov. Rauner used a vote on a bill that increased the general homestead exemption (very similar to this) against Rep. Ives in the primary. It is hard for legislators to vote against this stuff when its put in front of them.
- Anon - Thursday, Aug 30, 18 @ 3:18 pm:
@DarkDante, so what would you cut? And what’s the impact, on a human level, of imposing your brand of severe austerity? Illinois is a low tax state in a low tax country. The Rauners and Pritzkers of the world should be taxed to the hilt before a penny is cut from the state budget to appease the purveyors of tired old deficit tropes.
- DuPage - Thursday, Aug 30, 18 @ 3:19 pm:
Cook county got a special tax rollback? Cook county already had low assessments and low, low taxes compared to the collars.
- Perrid - Thursday, Aug 30, 18 @ 3:22 pm:
I agree we need to spend less, but I’m not sure what exactly cutting the spending “base” means. Spend the same amount of money (per person) on less people? That’s what broadening the tax base means, spread the same revenue requirement out among more entities.
Not sure if I’m being pedantic or if that is literally what is being proposed.
- Rich Miller - Thursday, Aug 30, 18 @ 3:29 pm:
===not sure what exactly cutting the spending “base” means===
We have a set spending base every year.
- Chicago 20 - Thursday, Aug 30, 18 @ 3:32 pm:
- “ We need to narrow the spending base…”
Rauner tried that and failed miserably. There are no easy cuts left.
- “We need to expand the tax base…”
Illinois corporate income tax revenue is dropping like a rock thanks to the IPI, corporate welfare and their well paid lobbyists.
It’s a systemic problem where the middle class gets hammered, the wealthy buy influence to avoid taxes and the working poor get abused with scarce opportunities with starvation wages and no benefits in the name of revitalization.
Ensuring prevailing wages are paid on these projects is a step in the right direction.
- Not It - Thursday, Aug 30, 18 @ 3:38 pm:
As long as the pain happens after the next election the pols don’t care.
- Anon - Thursday, Aug 30, 18 @ 3:40 pm:
“We have a set spending base every year.”
That…doesn’t answer the question. But, assuming that there’s some kind of artificially imposed legislative limit on spending, why do we have that? Abolish it.
- City Zen - Thursday, Aug 30, 18 @ 3:40 pm:
==Illinois is a low tax state in a low tax country==
What country is your Illinois located in?
- Rich Miller - Thursday, Aug 30, 18 @ 3:43 pm:
===Rauner tried that and failed miserably===
No he didn’t.
- Dead Head - Thursday, Aug 30, 18 @ 3:46 pm:
Since corporations got such a good income tax cut, and didn’t raise wages, seems like they could afford to pay higher property taxes.
- Conn Smythe - Thursday, Aug 30, 18 @ 3:55 pm:
I’m going to “sorry not sorry” the premise of the piece here, which is that the HO and senior exemption puts the squeeze on the locals to raise the levy harsher based on a smaller base. They’re going to raise the levy anyway. They fight every bill every year tooth and nail to protect their ability to go to the max under PTELL because they’re petrified of what happens if they don’t. It may be having an outsized effect on the south suburbs but that’s a separate discussion than saying the GA should increase the exemptions.
- Rich Miller - Thursday, Aug 30, 18 @ 4:01 pm:
===puts the squeeze on the locals to raise the levy harsher based on a smaller base===
Um, no. The levy can remain the same, but it’s the levy. When one group of payers stops paying, others have to make up the difference. That’s what I mean by narrowing the base.
Again, this ain’t that hard.
- WhoKnew - Thursday, Aug 30, 18 @ 4:02 pm:
Speaking of Insanity…
Looks like AFSCME finally got the courts to issue orders for the Govenor’s Office:
http://www.afscme31.org/news/labor-board-compliance-officer-issues-order-on-step-increases
- Lester Holt’s Mustache - Thursday, Aug 30, 18 @ 4:02 pm:
==How could they possibly not know the consequences? ==
This accusation is a bit hyperbolic, isn’t it? I think we’re all aware that legislators know the mathematical consequences. It’s the voters who don’t understand the elementary-level math. They don’t do nuance, and they don’t do math. When voters stop electing candidates that tell them they can cut taxes and still pay for everything we get with “reforms” and “cutting waste”, then you’ll see a shift on this stuff. And not a moment sooner.
- Rich Miller - Thursday, Aug 30, 18 @ 4:03 pm:
===This accusation is a bit hyperbolic, isn’t it?===
Not at all. Legislators passed the bill, not the voters. To claim, as the Trib did, that this was unintended is goofy.
- Dance Band on the Titanic - Thursday, Aug 30, 18 @ 4:08 pm:
It no longer shocks me to see how little understanding many elected officials have regarding how a tax levy works. Perhaps they failed elementary and middle school math.
- My Button is Broke... - Thursday, Aug 30, 18 @ 4:09 pm:
On the one side, I guess this fits the narrative of Speaker Madigan raising property taxes on businesses to benefit his law firm. However, it doesn’t help that much since Governor Rauner signed the bill…
- taxedoutwest - Thursday, Aug 30, 18 @ 4:17 pm:
==elementary school-level math.==
I think I have heard something like that earlier this week!:)
I couldn’t agree more with what you are saying. Many are talking about Corp. taxes, but it’s the small businesses (S Corps) that employ most Illinoians, and JB is going to whack them next year, and Rich’s summations will grow not only mathematically but exponentially
- Conn Smythe - Thursday, Aug 30, 18 @ 4:36 pm:
“Um, no. The levy can remain the same, but it’s the levy. When one group of payers stops paying, others have to make up the difference. That’s what I mean by narrowing the base.”
They can, but they don’t. They go up every year as a function of CPI. So to suggest that bumping the homeowner’s is the straw that breaks the camel’s back is not entirely the full picture is all I’m sayin.
- Big Jer - Thursday, Aug 30, 18 @ 5:59 pm:
===narrow the spending base====
Rich, can you elaborate what you mean by narrowing the spending base, i.e. specifics.
The state already does not fund K-12 adequately( hence property taxes), is not funding infrastructure enough, and many social service agencies have closed or are still digging out from the budget impasse.
My sense is you are not referring to cuts in services but something else. Thx.
- Anonymous - Thursday, Aug 30, 18 @ 7:31 pm:
And, of course, those outside of Cook County didn’t get the same benefits.
- Anonymous - Thursday, Aug 30, 18 @ 8:14 pm:
Eliminate all exemptions..problem solved
- muon - Thursday, Aug 30, 18 @ 8:23 pm:
For what it’s worth, at least 24 members of the House and 1 in the Senate did the math and didn’t like the unintended consequences. That’s based on the no votes to SB473 HA3 last year.
- Joe M - Thursday, Aug 30, 18 @ 10:01 pm:
The State of Illinois had been steadily narrowing the spending base for higher ed since about 2004. That hasn’t worked well for the state or higher ed.
- Joe M - Thursday, Aug 30, 18 @ 10:04 pm:
A reminder: Illinois is in the bottom 10 of the 50 states in state expenditures per capita. They were in the bottom 1 or 2 for quite a few years until they raised the state income tax to higher than 3% and quit skipping pension payments. I would say they have narrowed the spending base.
- Da Big Bad Wolf - Friday, Aug 31, 18 @ 7:12 am:
==On the one side, I guess this fits the narrative of Speaker Madigan raising property taxes on businesses to benefit his law firm.==
Madigan can’t raise property taxes. Property taxes are raised by local governments.
We really need to fund schools with income taxes like almost every other state does.