| If rising prices weren’t inflicting enough pain on everyone, this year, Chicago, residents are also facing a $76.5 million property tax increase that will disproportionately hurt low-income, cash-strapped homeowners and renters. Seeing Double Taxes https://www.youtube.com/watch?v=U27hyw9m9es Unfortunately, this is only one of many property tax hikes in recent years that have led to Chicago property taxes nearly doubling in a decade. Rising pension debt and high property taxes are a perfect storm for Illinois homeowners. It doesn’t motivate people to work harder, but encourages them to leave the state instead. Relatively higher costs in Illinois explain why property values increased nearly 39% less in Illinois this past year than the rest of the country. While homeowners in other states experienced a large increase in housing wealth in 2021, Illinois homeowners weren’t as lucky. It’s a problem we have to solve. How bad is it? Illinois ranks No. 2 among states for the highest property taxes. The median property tax rate statewide is 2.27%. And every year it feels like they go up a little more. In fact, residential property taxes have gone up 83% across the state since 1996. Look at what’s happened in Chicago over the past decade. |
| Renters, you’re not immune. Historically, low-income families have paid an unfair share of property taxes. In addition, renters are also negatively affected because landlords shift most of the increased tax burden to tenants. That means tenants are the group that will suffer the most since they won’t reap the benefits of the rise in property values thanks to the pandemic. In addition, because housing prices have increased during the pandemic – due in large part to a shortage of housing units – many low-income renters and prospective buyers have been kept on the sidelines, and rents have increased. Rents in Chicago have increased by 8.5%. The increase in property taxes will push rents even higher. How did we get here? Because the city’s budget includes large increases in debt service and pension payments. Pension fund contributions are increasing by 24.7% from the prior year. That adds up to nearly $1 billion in pension spending increases since Lori Lightfoot became Chicago’s mayor. Over the decade, the cost of the city’s public pensions has increased 239%, despite spending for city services only growing 18% during that same period. The local pension crisis drives property tax hikes as mayors and other local leaders struggle to keep up with the growing financial burden. Local leaders have been saddled with pension systems created by state law and have virtually no power or options to reduce costs or improve sustainability on their own. But homeowners can afford it, right? Not so fast. Wages aren’t keeping up with inflation. Falling worker earnings mean that scheduled property tax increases will disproportionately hurt cash-strapped – liquidity constrained – families. In addition, it is renters who will suffer the most from the tax hikes because research shows that landlords shift most of the increased tax incidence to tenants. And for most former Illinoisans, the combination of higher taxes and worsening services is likely a major reason many of them fled to other states. The 2020 Census marked the first time in 200 years that Illinois lost population between decennial Census counts, which was driven by the migration of Illinois residents to other states. Help is on the way. Protecting homes starts with lawmakers, whose priority should be to make sure families have homes that aren’t robbed of value. The only way to fix Illinois’ property tax problem is to let people vote on pension reform. Lawmakers have a chance to stop property taxes from continuing to go up each year – fortunately, they also have the blueprint. A “hold harmless” pension reform plan developed by the Illinois Policy Institute for the state’s pension systems can save roughly $2.4 billion for the state budget the first year and more than $50 billion through 2045. The plan would also totally eliminate the state’s pension debt during that time, rather than the 90% reduction state leaders hope for. It accomplishes all of that while preserving every dollar of pension benefits promised to public workers for work already performed. Similar reforms to local pension systems could offer significant property tax relief to overburdened homeowners, free up resources for spending on current services, or finance a combination of the two. In 2022, Chicago’s pension costs will consume more than $2.3 billion of the city’s budget – 21.4% of the city’s own source revenue. Pension costs already exceed the city’s total property tax levy of $1.7 billion this year. Amending the Illinois Constitution to allow for adjustments to the future growth in pension benefits for current workers and retirees can accomplish at least one of two progressive objectives: increase city spending on its poorest residents, or stop further property tax hikes that disproportionately hurt low-income and middle-income families. |
