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Dealing with the property tax issue is decades overdue

Monday, Jan 7, 2019

* My Crain’s Chicago Business column…

Outgoing Gov. Bruce Rauner talked a lot about high property taxes in Illinois. But, like most everything else, he never actually got anything done about them.

Rauner’s idea was to freeze local property taxes and allow local governments to strip almost all collective bargaining powers from teachers and other unions, which would then drive down wages and benefits to balance local budgets. But that idea was simply too radical for this state.

Gov.-elect J.B. Pritzker has also promised property tax relief, but he hasn’t yet said how he would achieve it. Pritzker has rightly blamed high property taxes for businesses and residents leaving Illinois. But total up all local property tax revenues and compare them to statewide taxes and you’ll see what a daunting task this is.

In 2015, about $29 billion in local property taxes were levied statewide, according to the Civic Federation. That number is higher now, but the latest projection from the governor’s budget office is that Illinois will take in about the same amount, $29 billion, from income and sales taxes this fiscal year.

Decades of inaction, incompetence and partisan games have allowed a big problem to grow into a gigantic monster.

Click here to read the rest before commenting, please. Thanks.

- Posted by Rich Miller        

41 Comments »
  1. - Grandson of Man - Monday, Jan 7, 19 @ 9:44 am:

    Winning the election was the easy part. The hard part is coming, if Pritzker and Madigan (see new TV commercial) put their words in action. They need to agree to a progressive income tax plan and property tax relief, get the votes in the GA and sell it to the voters.

    The Rauner plan was a cruel and terrible idea, and rightly had no chance in Illinois.


  2. - Lucky Pierre - Monday, Jan 7, 19 @ 9:47 am:

    Why haven’t property taxes been reformed in Illinois?

    Because the most powerful Democrats in Illinois are property tax lawyers who run ads about being on the side of the middle class in the fights ahead


  3. - FifthColumn - Monday, Jan 7, 19 @ 9:47 am:

    “but the latest projection from the governor’s budget office”

    Those projections are being produced by one
    Hans Zigmund. Lou Lang should remember him as the author of the IDOR “study” that sunk the last chances of the progressive income tax. That “study” spooked legislators so bad they abandoned it without challenging whether the numbers were correct or not. Zigmund is a master at the dark arts of data analysis and manipulation. He is a self professed devotee of Austrian economics and trained at Mercatus Institute. Any shop where he is in charge cannot be trusted. Why Pritzker is still using him for anything is beyond me. Talk about leaving the fox in the hen house.


  4. - BC - Monday, Jan 7, 19 @ 9:52 am:

    An overlooked component of the new school funding formula, the property tax relief pool, provides a path forward on this. It can work as a de facto tax swap if the GA continues to pump new dollars into it. Where should the new revenue come from? I think some version of the Speaker’s millionaire surcharge is more politically doable than a progressive income tax.


  5. - Anonymous - Monday, Jan 7, 19 @ 9:58 am:

    ==Decades of inaction, incompetence and partisan games have allowed a big problem to grow into a gigantic monster==

    Like many things in this state. Specifically, the pension lack of funding.


  6. - cannon649 - Monday, Jan 7, 19 @ 10:09 am:

    Buzz word man JB is now going to have to get going to have to details. Can he sale MJM


  7. - Shemp - Monday, Jan 7, 19 @ 10:33 am:

    The State creates rules and plans and then asks locals to fund them with limited means. Municipalities have been pushed by local fire and police pension plans that are set and regulated by statute with no local input, but funded locally through pension levies. While IMRF chugs along, as the poster child for a well-run pension system, the State’s ineptitude has created so much fear in a statewide system, that every fire and police union opposes a consolidation of the systems.

    Bottom line, any property tax roll back (at least to cities, particularly downstate) is going to need a dollar for dollar replacement from LGDF or the pension crisis at the local level will deepen or fire and police departments are going to see significant cuts. Of course that could be difficult since the State recently enshrined in law that staffing be a mandatory bargaining topic for fire. We keep pinching locals at the State level and act like there is no ramification, meanwhile local voters don’t see these changes that are slowly but surely squeezing local governments.


  8. - blankster - Monday, Jan 7, 19 @ 10:43 am:

    Speaking of property taxes and pensions you have to wonder what the stock market declines of last years mean to those funds.


  9. - lake county democrat - Monday, Jan 7, 19 @ 10:59 am:

    Broadly speaking, isn’t raising property taxes progressive while raising the income tax (in its present form) technically flat/effectively regressive? Richer people will have more expensive homes or live in more expensive apartments (where tax increases will cause the rents to jump).


  10. - PublicServant - Monday, Jan 7, 19 @ 11:00 am:

    From what I’ve seen so far, JB is taking all the right steps to be inclusive. And, get this, actually be a leader. Whatever is proposed in the many areas that need attention in this state, I think you’ll see a lot more of the 60/30 lined up on the dais with Governor Pritzker, and some of those 60/30 will be Republicans.


  11. - Anotherretiree - Monday, Jan 7, 19 @ 11:06 am:

    ==GOM Progressive income and property tax relief== Add to that a Service tax, and taxing retirement income and maybe we can pull out of this. And adding to Blanskters question, the next recession may prove fatal to Illinois finances regardless.


  12. - City Zen - Monday, Jan 7, 19 @ 11:09 am:

    ==An overlooked component of the new school funding formula, the property tax relief pool, provides a path forward on this.==

    Hundreds of school districts fighting over a $50 million rebate to be spread across thousands of homes is probably not going to make much of a dent to offset the actual cost to the residents in those districts.


  13. - wondering - Monday, Jan 7, 19 @ 11:10 am:

    The shift of state fiscal responsibility to local property tax is politically unavoidable. The proof is in the history. The property tax needs to be repealed by law or constitutional amendment. Along with it, the sales tax should be eliminated. Only with an income tax revenue stream will we have anything approaching an equitable system.


  14. - Rich Miller - Monday, Jan 7, 19 @ 11:12 am:

    === isn’t raising property taxes progressive===

    No because it’s not based on the ability to pay.


  15. - blankster - Monday, Jan 7, 19 @ 11:13 am:

    How about doing what some other states do - At 65 some or all of the school portion of your property tax bill is removed?


  16. - anon2 - Monday, Jan 7, 19 @ 11:14 am:

    === Why haven’t property taxes been reformed in Illinois? ===

    The record shows that Pate killed Edgar’s plan to swap an income tax hike for property tax relief. The fact is the GOP has opposed every proposal to hike the income tax. Without significant new revenues, genuine property tax relief is just a pipedream. Pols who advocate freezing or rolling back property taxes without a big state tax hike know it’s just empty rhetoric.


  17. - RNUG - Monday, Jan 7, 19 @ 11:34 am:

    == No because it’s not based on the ability to pay. ==

    Rich, I’ll partially disagree with you here. Presumably you buy a house that you can afford, so that is tied to your ability to pay. Now I will agree that circumstances change, such as divorce, loss of a job, retirement or even inheriting a home, that would result in owning more home than you could normally afford.

    Don’t know how feasible it would be here, but maybe Illinois should look at something like California’s Proposition 10 plan that got passed, where your property taxes are more or less frozen to the purchase price of the house.


  18. - Not a Billionaire - Monday, Jan 7, 19 @ 11:38 am:

    Gavin Newsome is talking about raising California taxes….so Illinois will be cheaper in 2021 . A serious cut in practice needs 7 billion and then the money for the pension so that won’t be this session but maybe some sort of down payment to help pass the constitutional amendment.


  19. - Langhorne - Monday, Jan 7, 19 @ 11:39 am:

    Any proposal labeled “tax swap” is doomed. It automatically generates unrealistic expectations that for every dollar my locality pays in, i get one dollar back.

    The 70s gave us the new or expanded homestead and senior
    exemptions. And the ever popular tax caps. So its an old problem.

    Taxing retirement income, and expanding sales taxes to services, are logical, productive, options. Which guarantee enormous opposition.


  20. - SSL - Monday, Jan 7, 19 @ 11:51 am:

    I have my doubts that lowering property taxes can actually be accomplished. It sounds nice, but is there the political will to actually do it?

    I’ll wait to see JB’s plan. A few more months won’t hurt, will it?


  21. - Not a Billionaire - Monday, Jan 7, 19 @ 11:56 am:

    RNUGs idea. Pass it now.


  22. - Shemp - Monday, Jan 7, 19 @ 12:08 pm:

    I believe RNUG is referring to Prop 13. It was a killer for local governments and forced them to get creative with new taxes. California’s education ranking tanked after the schools lost funding. It’s had other effects too:
    https://www.latimes.com/opinion/op-ed/la-oe-friedersdorf-prop-13-20180604-story.html


  23. - JS Mill - Monday, Jan 7, 19 @ 12:20 pm:

    =Why haven’t property taxes been reformed in Illinois?=

    You clearly do not know what the word reform means.

    ===An overlooked component of the new school funding formula, the property tax relief pool, provides a path forward on this.==

    Hundreds of school districts fighting over a $50 million rebate to be spread across thousands of homes is probably not going to make much of a dent to offset the actual cost to the residents in those districts.=

    This was a political gimmick to enable politicians to point and say “see, we gave them a chance to lower your taxes”, but as CZ pointed out the pool of money is an absolute joke. And the state cannot be counted on to pay up.

    A similar bamboozle for political gain was the law that basically allows parents to pass on paying for their kids lunches even when they can pay. It is now costing schools millions, and you will hear about it when the big districts start to hurt.


  24. - Hieronymus - Monday, Jan 7, 19 @ 12:23 pm:

    @blankster - Monday, Jan 7, 19 @ 11:13 am:

    “How about doing what some other states do - At 65 some or all of the school portion of your property tax bill is removed?”

    In the absence of any other change, that would only shift the overall burden to every other property tax payer.

    The whole of society benefits from an educated populace, including the empty-nesters.


  25. - Pot calling kettle - Monday, Jan 7, 19 @ 12:33 pm:

    As a long time school board member of a rural school district, I am very comfortable saying that if the state sends us more money (we currently get 18-20% of our revenue from the state), we will reduce the local property tax. No need for language dictating a reduction. Our property tax rate is based on what we need to spend to educate the students minus state revenue. If state revenue goes up, property taxes will go down. The same is true for many districts.


  26. - thechampaignlife - Monday, Jan 7, 19 @ 12:50 pm:

    I would like to see a tax swap paired with an incentive for consolidation. Maybe something like 10% more in LGDF if 2 local districts merge.


  27. - wondering - Monday, Jan 7, 19 @ 1:07 pm:

    -The whole of society benefits from an educated populace, including the empty-nesters.- Oh? Tell me….$6000.00 annual benefit to me for educating someone else’s kids? I will gladly go without the benefit, I will sacrafice/snark/. My kids went parochial. People want kids….pay for them. Don’t freeload off the retired. Tax my retirement income….great swap for not taxing my property for kids I don’t have.


  28. - RNUG - Monday, Jan 7, 19 @ 1:36 pm:

    An observation … this is nothing new. I’m over Medicare age and I remember my parents being upset at having to pay property taxes for the public schools while sending their kids to private (Catholic) schools.

    Swapping (loosely) personal property taxes, etc. for the flat income tax was a good start on proper school funding.

    But there was a couple of problems with that swap. First, on average, the new income tax was higher than the old taxes it replaced. Most people didn’t realize it at the time. Second, the General Assembly expanded spending so much that, by FY75, spending exceeded revenue. (Side note: this is why the State started shorting the five pension funds and we ended up with the IFT decision.)

    So if history is any lesson, any income / property tax swap will likely generate more State level revenue / less savings than people think it will … say maybe, best case, $0.75 reduction for every $1.00 in new income tax. And the initial rates will probably only hold for the first 2 to 5 years because I expect the State spending to increase faster than the revenue will increase.

    /personal rant

    This State really does need to have a serious discussion about what State and local government spending is required and what is optional and might be reduced or eliminated. And a discussion about the regulatory burden … I don’t want to see protections eliminated but we do need to ask if every regulation is providing a public good at least equal to the cost.

    /end rant


  29. - Hieronymus - Monday, Jan 7, 19 @ 2:11 pm:

    @wondering - Monday, Jan 7, 19 @ 1:07 pm:

    So, are you in favor of only those taxes that fund services from which you benefit directly?


  30. - Southwest Sider - Monday, Jan 7, 19 @ 2:45 pm:

    I think we are in dangerous territory with real estate taxes in the South Suburbs. These areas, unfortunately lost some of their traditional tax base - and local real estate taxes are really high. Especially for commercial real estate. Not surprisingly, there are lots of vacancies, store closings and abandoned real estate.


  31. - VerySmallRocks - Monday, Jan 7, 19 @ 4:30 pm:

    It’s time to play tough love on property taxes, where voters everywhere should turn down every request for a millage or other increase, period. This will be very painful, and primarily schools (2/3 of my property tax bill) may need the funds. But until there is enough sustained pushback to get a fair, progressive income tax with a property tax reduction through the constitutional slog (which may take


  32. - Mama - Monday, Jan 7, 19 @ 5:23 pm:

    In Illinois, public schools need property taxes in order to educate Illinois’s children because the state is not paying their fair share.


  33. - MyTwoCents - Monday, Jan 7, 19 @ 5:29 pm:

    What an ignorant opinion from wondering. I’m assuming s/he asks every single person s/he interact with (doctors, nurses, lawyers, etc.) if they were educated at public or private schools. Wondering, if your house ever caught on fire or if someone in your family ever had a medical emergency I don’t think you would care if the people coming to help you were educated in a public school or private school, and odds are most were educated in a public school. Public education benefits society by providing a better educated populace.


  34. - Anonymous - Monday, Jan 7, 19 @ 5:42 pm:

    Fair share of state funding? Please define what faire is.


  35. - Huh? - Monday, Jan 7, 19 @ 5:46 pm:

    This is a bait and switch. Basically it comes down to whether we are paying out of the left pocket vs the right pocket. Which is worse, writing a big check twice a year for property taxes or having the deduction from the pay check.


  36. - RNUG - Monday, Jan 7, 19 @ 8:29 pm:

    == Which is worse, writing a big check twice a year for property taxes or having the deduction from the pay check. ==

    My guess is most people would say the pay check because (a) small chunks aren’t as visible and (b) people will figure the other guy with the bigger income will get stuck with more of the bill.


  37. - Blue Dog Dem - Monday, Jan 7, 19 @ 9:00 pm:

    RNUG. congrats on the annual award. You and Sue were worthy winners. Maybe Rich can immortalize AA with a category down the road. I will miss his wit and wisdom.


  38. - The Shadow - Monday, Jan 7, 19 @ 9:43 pm:

    RNUG, Prop 13 is a hugely regressive proposal. It continues to concentrate wealth in the hands of older populations who already hold most of it anyway. The tax burden is then shifted to less established, generally younger populations who can least afford the higher taxes, but must absorb the burden if they wish to purchase a home and start establishing wealth. Not the answer.


  39. - Honeybear - Monday, Jan 7, 19 @ 10:15 pm:

    “serious discussion about what State and local government spending is required and what is optional and might be reduced or eliminated.”

    Agreed, and it will be nice to know that this time it doesn’t automatically mean destroying labor unions in some way.


  40. - RNUG - Tuesday, Jan 8, 19 @ 8:28 am:

    -blue dog- and everyone else,

    Thanks.

    A couple of my friends who know me also kind of outed me with congratulations … not a big deal being somewhat outed. Only use the pseudonym because a couple of relatives still work for the State.


  41. - Working Man - Tuesday, Jan 8, 19 @ 12:36 pm:

    To Grandson of Man and anyone else who thinks a progressive income is right or fair, go scratch.
    Really?, your solution is to lower one tax while raising another or adding new? Goodbye Illinois.


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