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* Pat Gauen on the property tax freeze…
I know that many people feel property taxes are fundamentally unfair. But the freeze plan would do nothing to fix that. The state could use some of the higher income taxes to bolster aid to schools and local governments, but there is so far no guarantee of it.
Unable to resist an income tax hike much longer, politicians desperately need the freeze as political cover. It may help them keep their jobs at election time, after frustrated taxpayers start paying the real cost of long-failed leadership.
As described so far, the freeze would not promise to put a single extra penny into schools or local police departments or fire districts and the like. And with a few exceptions, it wouldn’t let the officials elected to run those services add an extra penny either.
That last paragraph is not quite accurate. The Senate’s package broadened the sales tax base, so locals would get a bit more money from their share of the tax. And if the income tax rate rises, the locals could get some more money from that as well through the revenue-sharing Local Government Distributive Fund.
* But there is another big problem with this property tax freeze idea that has mostly gone unspoken.
One of the ways of getting out of this budget mess by not increasing too many taxes is by sweeping the LGDF and shifting pension costs down to local schools, community colleges and universities.
But you can’t do that and freeze property taxes without causing gigantic damage to those local entities (universities, which don’t have a property tax stream would likely be forced to raise tuition, which is also not a good thing).
And if you did do those sweeps and cost shifts without a freeze, you’d undoubtedly force local property taxes to rise, which is something the governor says is a horrible thing.
You could do the shift with a freeze if you did things like eliminate collective bargaining rights, I suppose, but good luck passing that bill.
Any thoughts of your own?
posted by Rich Miller
Friday, Jun 9, 17 @ 2:03 pm
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For me, it boils down to this in the overall…
===You could do the shift with a freeze if you did things like eliminate collective bargaining rights, I suppose, but good luck passing that bill.===
That’s really the math bringing it back also to the Turnaround Agenda.
The math by ending prevailing wage / collective bargaining to lower costs make the property tax freeze math “possible”, not perfect.
I keep looking for 60 and 30, 71 and 36, the combinations needed for the passage, they don’t exist for Rauner with the Labor demands.
So, math dictates a possible avenue, the politics refuse to make that a viable option.
Ignoring the math of monies and “noses”… both need to work.
Both.
Comment by Oswego Willy Friday, Jun 9, 17 @ 2:10 pm
It’s a poll-tested but poorly thought out talking point. Where property taxes may be lower, income taxes are higher (e.g., Iowa).
Perhaps now would be the time to consider the justice and efficiency of our tax system as a whole.
Comment by JPC Friday, Jun 9, 17 @ 2:11 pm
We know that when the income tax was 5% we could pay our bills and catch up on the backlog. If we implement a property tax freeze, any increases in education funding would have to come from the state. To me, that means we’d need to raise the income tax to 6% before a property tax freeze would be palatable to school districts and local governments. Is that realistic or way too high?
You can expand the sales tax to certain services, and maybe expand gambling and possibly close some loopholes, but to better fund schools, I don’t see an alternative to a much higher income tax rate, above the 5% rate we know the state requires for its own, current operations.
Comment by 47th Ward Friday, Jun 9, 17 @ 2:13 pm
Since Rauner is all about eliminating collective bargaining — I assume this was the ask since the get-go. And this ask — it isn’t going to change until Rauner is out of office.
Comment by Mr. K Friday, Jun 9, 17 @ 2:13 pm
Taxes are going up…that’s a fact. Just pick one and get it over with. Yeesh.
Comment by Under Influenced Friday, Jun 9, 17 @ 2:14 pm
I’m not sure how a tax freeze would work for Champaign, which last November passed a $184M school bond referendum by a wide margin, raising property taxes about 10% or so. Does a freeze mean that the bonds can’t be issued?
Comment by OldIllini Friday, Jun 9, 17 @ 2:18 pm
IL could shift the teacher’s pension to the districts while still paying a portion of the annual contributions. Many states do it this way (CA for example). This would remove around $70 billion from the state balance sheet while limiting the damage to the districts.
Also include a voter override option to increase property taxes during the freeze - also done in many states. No need to reinvent the wheel.
Keep university pensions at the state level, since they’ve been punished enough and as you said can’t levy taxes, and it’s not a huge amount for the state.
Comment by Three-Finger Brown Friday, Jun 9, 17 @ 2:18 pm
The property tax freeze would replicate the State fiscal crisis at local levels. It is part of the plan to shrink all levels of government.
Comment by Last Bull Moose Friday, Jun 9, 17 @ 2:19 pm
Oldillini - voter approved bond payments are exempt from the freeze.
Comment by Three-Finger Brown Friday, Jun 9, 17 @ 2:21 pm
Rich, one clarification. You stated “And if the income tax rate rises, the locals could get some more money from that as well through the revenue-sharing Local Government Distributive Fund.” This has not been the case in the past, and likely wouldn’t be in the future. When the rate used to be 3%, the locals received 10%. When the rate went to 5%, the locals share was reduced to 6% of that total (or the same as 10% of 3%). Same thing now with the rate at 3.75%, the locals receive 8%. So the locals would not likely see any more revenue with an income tax increase. The state would keep it all for themselves as they have in the past.
Comment by Smalls Friday, Jun 9, 17 @ 2:25 pm
Sweep LGDF and freeze property taxes. The pain must be felt throughout the state.
Comment by Blue dog dem Friday, Jun 9, 17 @ 2:39 pm
Let’s see, some 80% of the roads in Illinois are local roads, mostly under township supervision. I personally have been working for local governments for over 40 years. NO township road districts receive sales tax. We receive Motor Fuel Taxes, (and the last increase in it went all to the state), and property taxes. Freezing property taxes isn’t going to help the state finances, it is only going to hurt local roads ( and cities, and cemeteries and park districts and schools and drainage districts and water supply districts and….)
Comment by downstate commissioner Friday, Jun 9, 17 @ 2:41 pm
==To me, that means we’d need to raise the income tax to 6% before a property tax freeze would be palatable to school districts and local governments. Is that realistic or way too high?==
That’s about the lowest rate in the Wisconsin progressive tax system. 6% sounds reasonable to me, especially if it included property tax relief.
Comment by AC Friday, Jun 9, 17 @ 2:42 pm
How would this affect tax progressivity? Income tax hikes are flat since we don’t have progressive taxation. Would exchanging property taxes for income taxes make things worse? Or do the tax hikes on property owners tend to get pretty “evenly” passed along to those who rent?
Comment by lake county democrat Friday, Jun 9, 17 @ 2:45 pm
The premise of most of the commenters is that schools and local governments are all run efficiently and there are no cost-saving opportunities. They need to spend less and tax less.
If they need more money, the prop tax freeze legislation allows them to ask the taxpayers for more via referendum. When IL has the 2nd highest prop taxes in the US, something is wrong and needs to be fixed.
Comment by Freo Friday, Jun 9, 17 @ 2:46 pm
Will a Property Tax freeze - freeze the assessed value or just the percentages? My assessed value goes up every year by $2,000-4,000.
Comment by Rufus Friday, Jun 9, 17 @ 2:47 pm
You simply cannot raise the income tax in Illinois without giving property tax relief. While the Income Tax in Illinois is only middling, the property taxes are among the highest in the nation. We already have one of the highest overall tax payer burdens in the nation. Our economy is underperforming other states. Raising the income tax/corporate tax without providing any offset to businesses and taxpayers would just exacerbate the exodus of jobs and workers.
Prevailing Wage and Collective Bargaining changes are both designed to help local governments control their spending so they can deal with a freeze. Dems don’t want those changes. Fine. School funding formula reform would also work. Dems only want reform if it includes even more extra money for CPS. If they back off on that demand its still possible to improve school funding.
At least everyone seems to be able agree on Consolidation and, to a lesser extent, contracting services.
So you freeze property taxes. You sweep LDF. Local governments face a cash crunch. They aren’t able to get more revenue, so they need to cut spending. Wages and benefits will be mostly off the table as will the cost of construction. So they’ll need to consolidate or contract out services to reduce their costs.
This is a good thing. We have way too much local government, which is why property taxes are so high in the first place. Starving them of revenue will help them shrink down to the size they should be, the size that’s common in every other state.
As for universities, maybe it’s time we set their budgets by line item. Administrative costs have exploded over the last few decades while spending in the class room has stayed flat or declined. They don’t need to raise tuition, they need to stop with the administrative bloat.
Comment by Phil King Friday, Jun 9, 17 @ 2:48 pm
Seems a little reckless to shift those costs to local level.
Keep it simple.
House should negotiate a 4 yr prop tax freeze, in exchange for the progressive income tax language on the 2018 ballot.
When the income tax framework is changed and the cash is flowing, that’s the time to shift big line items around. In an Illinois dream world (normal for other states), that is when the property tax levy for schools would be REMOVED from the property tax bill. With that 60% reduction, property owners may be more in the mood to pick up a few other things.
Comment by cdog Friday, Jun 9, 17 @ 2:48 pm
==Or do the tax hikes on property owners tend to get pretty “evenly” passed along to those who rent?==
Speaking as someone with a rental house, property taxes definitely have an impact. The question is, how much of that would result in reduced rent, and how much would go into the landlords pocket? For me personally, it probably means I’d be more willing to update the property at the current rent than I otherwise would.
Comment by AC Friday, Jun 9, 17 @ 2:50 pm
- Three-Finger Brown -
They could shift the current costs going forward and save $1B or $2B annually. Whatever you do, the State is still on the hook.for the $70B (TRS) or about $95 B (TRS + SURS) shortfall.
Comment by RNUG Friday, Jun 9, 17 @ 2:53 pm
No one ever talks about the role of Tax Increment Financing in high property tax rates. Municipalities are allowed to take tax money away from schools, police departments, fire departments, libraries, and parks which forces them to increase tax rates on the remaining property tax payers. Business owners in TIFs still pay their full taxes. It just gets diverted for the municipalities to spend. 40% of the City of Chicago is in a TIF.
Comment by Confused Friday, Jun 9, 17 @ 2:54 pm
- Phil King -
That won’t pass in that form.
That’s the whole point.
Collective bargaining, prevailing wage… Nope… Non-starters.
Comment by Oswego Willy Friday, Jun 9, 17 @ 2:54 pm
Am I wrong to think Illinois has a high tax burden at the low end (on account of the flat tax, property tax, and fees) but not at the high end?
Raising any tax on this system hits the poor and allows the disingenuous to claim we have a high tax burden (in general), when we have a high tax burden (at the low end). We have in other words and unjust and inefficient tax system.
Comment by JPC Friday, Jun 9, 17 @ 2:58 pm
*** Local governments face a cash crunch****
Local Governments have been facing a cash crunch since the great recession especially in those areas where homeowners were under water and many of the homes were foreclosed on. Many local governments had to trim staff and services then and now you want them to take another hit? I don’t know about you but 73% of my property tax bill goes toward the schools and unless the State changes the formula it appears that they will stay that way. Taxes are the privilege we pay to live in a society that provides water, roads, schools, libraries etc. I value those things and am willing to pay my fair share.
Comment by Cable Line Beer Gardener Friday, Jun 9, 17 @ 3:01 pm
This has been the GOP, IPI, Rauner goal all along. GOP budget plans included dumping the pension costs onto locals and keeping LGDF. IPI has long supported these idea.
The goal is to cripple local schools/governments, break the unions and drive down salaries and benefits. That’s the entire reason IPI exists.
That’s the end game in all of this.
Comment by Michelle Flaherty Friday, Jun 9, 17 @ 3:03 pm
Last Bull Moose nailed it at 2:19.
What happened to the Turnaround Agenda? Is it now down to a 2 to 4 property tax freeze, without collective bargaining modifications?
Rauner is desperate for a simple-to-sell win. He hides his desperation beneath a shield of bravado. He realizes the TA won’t pass under this GA. He needs to survive and pick up GA seats to realize his proposed ideological changes to our laws.
He can’t win by bragging about changes to worker’s compenation. So he’s shifted to something simple and popular for purposes of survival. “I’m the Governor who froze your property taxes!”
Comment by James Friday, Jun 9, 17 @ 3:04 pm
A property tax is not real. DuPage County pays some of the highest in the nation. how would a freeze work? They keep saying it but don’t explain. Is it my EAV that freezes? Is it my % that freezes? Is it my last fiscal number that freezes?
Until someone explains from the Gov’s office these are just words in a political campaign.
Comment by DuPage Bard Friday, Jun 9, 17 @ 3:16 pm
I have always thought the two primary purposes of the property tax freeze are to provide political cover for legislators and for Rauner’s obsession with prevailing wages. As the President of a local taxing district I can say prevailing wage rates are not an issue. The largest portions of our budget goes to operational and capital costs. A freeze will only hurt us in trying to fulfill our mission and will do nothing to dig us out of the hole we’ve been placed.
Comment by Past the Rule of 85 Friday, Jun 9, 17 @ 3:22 pm
Freeze property taxes and do a pension shift at the same time? Get ready to kiss abunch of programs buh-bye!! at your local school district.
Then, when housing values start declining because young buyers are selecting other properties, you’ll have something new to hone labor.
Actions have consequences.
Comment by Lynn S. Friday, Jun 9, 17 @ 4:00 pm
Loss of sales tax revenue for Springfield due to Online Retail is over $4 million for this fiscal year.
Comment by PlayK8 Friday, Jun 9, 17 @ 4:14 pm
My idea, is a big shift and change of thinking, but something that I think both sides would love and hate. The biggest cost of all property ta bills are the schools, and within that are employee compensation.
So how about this…
#1 Ask for a graduated income tax. Specify that x% amount of money from the increase must be put in a k-12 employee compensation fund.
#2 All districts will receive X amount of money per student that is to be used for employee compensation only. HOWEVER, any district receiving money from this account MUST, LOWER the amount $ for $ they have allocated for employee compensations. If a district wants to pay more than what the state is offering, then it must pass a referendum to increase money for that district only.
Example: state give a district $10million a year for this fund. District currently pays out $11 million. District has to decrease how much they collect from property taxes by $10mil and is on the hook for $1 mil. They renegotiate a contract and want to increase that number to $14 million. The extra $3 million would need to be voter approved.
Comment by Person 8 Friday, Jun 9, 17 @ 4:25 pm