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By: Mark Glennon*

Federal Reserve Bank of Chicago

An audible gasp went out in the breakout room I was in at last month’s pension event cosponsored by The Civic Federation and the Federal Reserve Bank of Chicago. That was when a speaker from the Chicago Fed proposed levying, across the state and in addition to current property taxes, a special property assessment they estimate would be about 1% of actual property value each year for 30 years.

Evidently, that wasn’t reality-shock enough. This week the speaker and two of his fellow Chicago Fed economists published that proposal formally. It’s linked here.

It surely ranks among the most blatantly inhumane and foolish ideas we’ve seen yet.

Homeowners with houses worth $250,000 would pay an additional $2,500 per year in property taxes, those with homes worth $500,000 would pay an additional $5,000, and those with homes worth $1 million would pay an additional $10,000.

Are they blind to human consequences? Confiscatory property tax rates have already robbed hundreds of thousands, maybe millions, of Illinois families of their home equity — probably the lion’s share of whatever wealth they had.

Property taxes in many Illinois communities already exceed 3%, 4% and even 5% of home values. Across Illinois, the average is a sky-high 2.67 percent, the highest in the nation.

In south Cook County they already average over 5%. Most of those communities are working class, often African-American. The Fed says maybe you could make the tax progressive by exempting lower values, but that’s very difficult to do and, if you did somehow exempt the poor and working class, the bill pushed to the others would be astronomical.

Those rates have already plunged many communities into death spirals, demanding an immediate solution, but the authors apparently would pour on more of the accelerant.

Don’t they understand that people won’t build on or improve property when property taxes are that high? When taxes are 3 percent to 6 percent, any value you add to your home is going to be taxed at that high rate forever. Have they never been to our communities with countless disrepaired, abandoned homes and commercial properties, which are the result?

Get this, which is part of the their reasoning: “New taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes. In addition, current homeowners would not be able to avoid the new tax by selling their homes and moving because home prices should reflect the new tax burden quickly.”

In other words, just confiscate wealth from current owners because they will pay, whether they stay or not, through an immediate reduction in home value.

This proposed tax would only address the five state pensions. What about the other 650-plus pensions in Illinois, particularly those for overlapping jurisdictions in Chicago which are grossly underfunded? One author was asked that at last month’s seminar and they, without explanation, he said they didn’t bother to cover that.

I’ve earlier met Rick Mattoon, one of the Chicago Fed authors of the proposal. He’s a smart, likeable guy who I thought had lots of interesting information. For the life of me, however, I can’t understand how he would put his name on this proposal.

Property can’t leave, so seize it. That’s the basic idea.

UPDATE 5/14/18: The original version of this article said the proposal was that of the Federal Reserve Bank of Chicago. In fact, it reflects the opinion of the three authors only. The article was changed accordingly.

UPDATE 5/16/18: This article has received over one million pageviews including republications at various other outlets. ZeroHedge alone received over 925,000 pageviews on it.

*Mark Glennon is founder and Executive Editor of Wirepoints.

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Bob

Mike,
Paid TRS instead of a pay raise – 6 of one half another. NOBODY mentions what I call the “fraud tax”. Billions in Link, Unemployment, Comp, – you name it that could be saved and used to prop up Constitutionally protected (OKed by citizens vote) benefit. Several of the comments below just confirm we do need IQ tests to vote.

Mike

Board paid TRS using salary schedule add on, instead of a pay raise, was instead of, or addition to, other hikes and perks, at the time board paid TRS using salary schedule add on hike was granted? The claim can always be made instead of. Look (well good luck finding a consolidated history) at the wide variety of hikes and perks granted over the years. More, more more. And where’s the disclosure to the taxpayer at the time the perk was provided, be it newspaper articles, press releases, district newsletters, etc.? Where is the cba or administrator contract change document… Read more »

Bob

Secrets? It is right in the contract signed on to by elected Board Members. Perks are granted in lieu of $ That State Constitution was voted on by the Convention AND the taxpayers of the state. At that time the state had been abusing the “required payment” to TRS from the start. If the “contractual” language was designed to get the General Assembly to act they failed. By the way “contractual” is a simple legal term that was explained in pamphlets and newspapers before the vote, as required by law. Missing required payments is like missing credit card payments –… Read more »

Mike

Board paid TRS is almost never disclosed to taxpayers at the time it is negotiated. Not by the press, not by the school district, or anywhere save a taxpayer reading the resulting contract word for word, which is generally not released to the public until months AFTER the board approves the perk. And that is IF the taxpayer knows what language to look for, and the meaning of the language. But board paid TRS is disclosed to union members prior to their ratification of the agreement. And once again, rank and file teachers are allowed to vote on the agreement,… Read more »

Bob

It seems my reply sailed off to cyberspace so let me redo. You made one incorrect and one misleading statement.There was no year from 1971 to 2011 that the full “required payment” was made and in fact no year from the formation of TRS in 1939. It was obvious to the new Convention that something needed to be done so they added the contractual language. That created no change. The shorted payments created a situation where 75% of payments would d go to past abuse – if made. The 1970 Constitution did not require funding, just obligation. You also used… Read more »

Mike

The comment that included 1971 – 2011 was about union lobbyists lobbying legislators to hike pension benefits while pensions were already underfunded, which is a stupid practice. If the union leaders and its members were so concerned about pension security, they should have been lobbying for full funding of pensions, and after fully funded, then lobbying for benefit hikes. The comment had nothing to do with employer contributions. But speaking of employer contributions. The state employer pension contribution rate is now approaching 50% of payroll for the 5 state pension funds in FY 18 and FY 19. About 50 cents… Read more »

Bob

No you said – “while pensions were underfunded, almost every year from 1971 to 2011,after the pension sentence was added to the state Constitution”.. Again since 1939 the General Assembly has never met the “required payment” to fund the rules they made. The comment had to do with Assembly funding, which is what you said, erroneously. You are wrong (again) on employee TRS contributions. The rate is @ 10% of a teacher’s salary. This is one of the highest in the country. This is paid by the teacher unless it had been contracted differently. You are wrong again, there is… Read more »

Mike

“Union lobbyists lobbied for pension benefit hikes, many which were passed by state legislators and became law, while pensions were underfunded, almost every year from 1971 to 2011, after the pension sentence was added to the state constitution.” It says “BENEFIT HIKES,” neither “CONTRIBUTIONS” nor “ASSEMBLY FUNDING.” And I was referring to the EMPLOYER (STATE aka TAXPAYER) contribution being almost 50% not the EMPLOYEE contribution. And there most certainly is a Teachers Retirement Insurance Program (TRIP). Here is the website. https://www2.illinois.gov/cms/benefits/Teachers/Pages/default.aspx There is no TISH. There is a THIS (Teachers Health Insurance Security Fund). TRIP is the program. THIS is… Read more »

Bob

THIS, you are right not TISH, bifocals. Since July 1, 1995 that is where contributions have gone.I checked your sites and you are also correct that TRIP continues to be name for the program. I was in error as I thought THIS was the new acronym. I stand corrected and wiser.

You are correct, on that point.

Kvetch 22

My dimming recollection is that unions nationwide were lobbying to get “contract” language into state constitutions all during the 1960s. This is because they were becoming aware of the “California Rule” about pensions being protected from cutbacks on the theory that those cutbacks would constitute a prohibited “impairment of contract” under both state and federal constitutions. Prior to that time, many courts had ruled that government pensions were mere gratuities. The unions also developed the theory that pensions were “deferred compensation” — you could pay me now but I’ll agree to let you pay me in the future. Both of… Read more »

Bob

I might direct you to two articles. One is the February 1993 Illinois Municipal Review article titled “State Pension Raids Rampant in the 1990s” and the other the 1991 Fortune Magazine article “The Great Pension Robbery”. I don’t know about California in the 1960s but in 1992 Gov. Wilson seized $ 1.9 billion from the state’s $63 billion public employee retirement system. The “contractual” language in California was not as pointed as Illinois. Of course “contractual”just means obligation and not required payments – even though a “required” number is supposed to be given to the General Assembly, for them to… Read more »

Mike xyz

Here are the two articles. Illinois Municipal Review (IMR), February 1993 issue, State Pension Raids Rampant in the 1990’s, by State Comptroller Dawn Clark Netsch, pages 15 – 16. http://www.lib.niu.edu/1993/im930215.html Fortune Magazine, January 13, 1992, The Great Pension Robbery, by Mark D Fefer. http://archive.fortune.com/magazines/fortune/fortune_archive/1992/01/13/75954/index.htm Both articles deal with multiple states. In the case of Illinois, the money was not taken out of the pension funds. The money was diverted prior to arriving to the pension funds, among various other accounting gimmicks. Meaning, the annual contribution from the state to the pension funds was shorted. During budgeting this is a practice… Read more »

Bob

Thanks for all the breakdown! How about a spread sheet of the cheating in Illinois and the total “fraud taxed”.

Bob

That is a great collection of info. How bout a breakdown of the various frauds perpetrated on this state and totals?

nixit

Bob – Regarding your WEP observation, might I ask how much of your lifetime wages would you consider were pensionable vs social security eligible? Any idea what that ratio might be?

Bob

I have well over 40 quarters but some of my gas pumping early ones are not considered “quality” or whatever. In the oddest twist, many years of my summer school teaching was Social Security and not TRS. The only explanation I got was that is was many years before they realized that was happening(?). No idea on your question. Obviously my teaching wages exceeded my various other enterprises. My forst teaching salary was $6,900 (yes you read that right). My last was $45,000 (yes you read that right – that is with 34 years experience, three certificates, and three degrees).… Read more »

nixit

Thanks. I understand why WEP rules are in place but agree they are too extreme in Illinois. But even without WEP, any worker whose lifetime income overwhelmingly qualifies as pensionable and not subject to social security taxes shouldn’t expect much from Social Security. It’s there for those who paid into it their whole careers (for meager wages) or shortened their careers to raise the kids.

BTW, if that $6,900 teaching salary was before 1975, then it was more than my first job in Finance.

Bob

My first salary was $6,900/year. My last, 34 years later was $45,000. Sloppy Math gives me 850,000 for my teaching. Pumping gas ( minimum wage then $1.99/hour), mowing grass, detasseling cron (12 hours a day/$1 a hour!), working for Joy Mfg. delivering mine parts, painting houses in the summer, teaching summer school (yes, for years teaching summer school was Social Security and not TRS. No good explanation ever found. I would guesstimate that would add up to a quarter of my teaching total.

Mike

If the summer teaching required a teachers license then that should have counted to TRS.

However not sure how that may have changed over the years as the legislators are always tinkering with the school code and pension laws.

That’s a rip off if you were paying into social security for summer teaching and then can’t collect because of WEP.

When did you retire?

Where you a member of a union?

Bob

TRS members who taught summer school prior to July 1, 2002 had their $ sail off to Social Security. It was on that date that Social Security made the change to send Summer school work to TRS. I was never able to get an explanation as to why the practice of sending summer school money to SS and not TRS ever got started. I retired from teaching about a decade ago. I taught an extra year so my school didn’t have to pay the ERO penalty. In effect I taught that year for @$11,000 and saved the school $45,000. I… Read more »

IL resident

Sell off the “forest preserve” land for development. There are SOOO many prime parcels in Northern IL that builders would fight over. And they are not “beautiful”

https://en.wikipedia.org/wiki/List_of_protected_areas_of_Illinois

american

Those politicians who stole the pension funds should all be prosecuted for it. Just because they were legislators doesn’t allow them to break laws and steal. They should all serve five years in the Illinois state prison system.

Bob

I don’t believe that politicians stole the pension funds. They just mismanaged it, but that is almost as bad as stealing from it. Why should the taxpayers have to pay for their mistakes?

Bob N

The idea is really harmful. But looking at some of the responses let’s not forget the the people paid into the pension funds and if the state hasn’t raid the funds they would be strong. So to say they pensioners should go to bankrupt court isn’t fair either. I was dumb enough to move in to Illinois.

Mike

Here is some Illinois pension fund education. Some, actually many, government employees did not pay into the pension funds. In the majority of school districts in Illinois, the teacher and administrator contribution to the TRS pension fund is little to nothing, thanks to the school board agreeing to the board paid TRS perk. Furthermore, the most common form of board paid TRS is salary schedule add-on which hikes gross pay. TRS is the biggest pension fund in Illinois. And the state not making the full annual required contribution to the pension funds is just part of the reason the funds… Read more »

nixit

Most folks aren’t aware the state used to pick up the pension contributions for state employees. The 1991 AFSCME contract called for picking up the entire employee contribution (4-5.5%) PLUS raises of 2.5% in 1992 AND two raises in 1993 (2% in Jan, 5% in July). Like CPS, this was another employee pension pick-up that was done in lieu of a raise the first year but remained on the books after that while still handing out raises. How did the state propose to pay for it? Early Retirement Option in which employees could purchase up to five years of service… Read more »

Mike your being dishonest about public sector pensions.

Mike

So what got under your skin?

The part about public sector grandma and grandpa retiring 10 – 15 years before private sector grandma and grandpa?

Allowing public sector grandma and grandpa to play with their grandkiids, vacation, relax on the beach, etc. while private sector grandma and grandpa work and extra 10 – 15 years?

bob

So sell short IL businesses trapped by state taxes. Looks like an investor windfall.

So these democrats say tax current property owners and hold them hostage because their homes are now worthless and they couldnt sell them if they tried. Got it. Thats very Progressive of them and its also just another example of why Democrats shouldnt opine or have anything to do with economics or taxes. What dont these assholes get about Illinois having the highest out migration of any State ?

IL resident

MCS: YOU…..NAILED……IT !!

Screw thw pensions. Disband public sector unions. Let the crooks all fight it out in court. Bankruptcy court most likely.

Mike

Only an audible gasp?

No hysterical laughter?

No union style hootin, hollerin, and protesting with immediate texts of outrage to their favorite news outlet?

No calls of action to the brothers and sisters for a rally the next day?

Should I stay or should I go?

If I go there will be trouble.

If I stay there will be double.

Way2confused

Those are liberals for you. They think you should give them all your money and they’ll “take care of you” because you’re too stupid to handle your own finances.

The Raven of Zürich

May 13, 2018 Greyerz – A Terrifying Trip Down The Rabbit Hole With Alice In Horrorland As the world edges closer to the next crisis, today the man who has become legendary for his predictions on QE and historic moves in currencies, spoke with King World News about a terrifying trip down the rabbit hole with Alice in Wonderland. Alice In Wonderland May 14 (King World News) – Egon von Greyerz: “We are now in the final stages of a journey which future historians will describe as unreal as Lewis Carroll’s Alice in Wonderland. Just like Alice called the ‘Mad… Read more »

Kvetch 22

I understand that gold may be a reservoir of value, but I don’t see how it would be a practical medium of exchange. Isn’t it likely that currency will be printed to pay bonds and entitlements and that inflation will result? Understandably, debtors will be able to pay their dollar denominated debts with increasingly worthless currency. Governments may tax people out of their homes but home values will drop leaving less value to tax. Cash savings will lose purchasing power. What happens to stock prices in this scenario? What should an old guy with some savings do with his 401(k)?… Read more »

So many questions! Nobody is sure what the outcome of the next crisis will be because we don’t know how the Fed will react. I believe it is likely to follow a similar path to the Great Depression, with falling commodity prices, rising gold and silver prices, destruction of the dollar and falling bond markets (increased interest rates – inflation), falling stock market. A reset will be needed which is likely to be based on the IMF’s SDR as a global international currency, which will put USA into a difficult position for the coming years by not having the benefit… Read more »

world with end

Buying a residence in IL where property values are generally falling is a bad idea for a number of reasons, but here are two important ones: 1) it’s a bad financial investment, and 2) if your municipality has to keep paying too large of a percentage for retiree costs, it won’t have money to fund essential services, like police and fire protection, and road repairs. Who would want to live in such a community? Also, until the pols rigorously attack the problem of the huge, unfunded pension and health care benefits liabilities, many more people will move out of IL.… Read more »

The Raven of Zürich

As Danielle DiMartino Booth points out in her book, “Fed Up: An Insider’s Take on Why the Federal Reserve is Bad for America”, the Fed is controlled by a cabal of over 1,100 Ph.D economist academics who live in a theoretical hall of mirrors echo chamber, and who disregard those that lack such academic credentials from a handful of elite universities. These people live in a theoretical world of thought experiments. Weimar Ben Bernanke admits in his memoir, he was a naive patsy for Wall Street banksters. EXCERPT from Ben S. Bernanke’s “The Courage to Act:A Memoir of a Crisis… Read more »

Excellent description of where we are and where we are going. I am a Boomer and now retired to write about all this and much more, well done. I am conscious that my generation have been blessed because cheap energy fuelled the expansion and prosperity these last 70 years. When we were teanagers, we earned more than our parents; now we are pensioners our income is generally higher thatn our children’s. So unfair, but a matter of fact because of the distorted, corrupt economic system which is rapidly failing. I believe that a crisis event is due in the near… Read more »

Denver

Illinois has to pay its obligations w/o relying on the rest of the nation to pick up their corrupt budget deficit.

This is as good a way as any.

Adolf Obama

“Has to”

Uh, no they don’t. See the recent history of Detroit.

Terry L

No, we don’t, lets go after all the politicians who stole all the money they promised the pensioners, the go after and Union lobbyist who started all this crap. The money will run out

Raybbr

No government employee pays for anything. The taxpayer does. Public employees are paid with wealth confiscated from those that produce wealth. The taxpayer pays their taxes, mortgages, for their cars, etc. Anyone here ever get a “thank you “ from them?

JDP

👍🏻

Worsham Abbott

If you live in Illinois you should get out now.

An excellent description of how TPTB are scrabbling in the dark to find solutions to an impossible conundrum, and all of them will fail because the root of the problem is the very system itself. Only a global crisis and major economic reset will invoke the necessary corrections to our extreme wealth inequality and fraudulent financial system. The key is to understand how our present economic and financial system works. I believe that a crisis event is due in the near term – some 2-3 years max. I have written a book (100,000 words) and have a draft e-copy available,… Read more »

Kvetch 22

The web link for requesting your book did not work for me.

pm

Sorry but military pension are ridiculous. People who were in lifelong logistic chain retiring at before 50 and then living off the taxpayer. If you are getting a taxpayer funded pension it should start at FRA for SS.

J L

What are you talking about?

Jarold boyce

But they wont get ssi to . Just the pension. If the stock marker flourishes then the money will grow and offset people living longer. The state pension is fucked because they dip into it and cut hiring at the same time.

Tough Love

And THIS, all so the Public Sector “moochers” can get all that they were “promised”, no matter that those promised pensions are 3 to 5 TIMES greater in value upon retirement than those of similarly situated (in wages, age at retirement, and years of service) Private Sector workers, AND were “negotiated” with NOBODY looking out for the Taxpayers’ best interests.

Absolutely disgusting !

Linda M

I sure didn’t vote for those pensions, why do I have to pay for them?

Bill Bergman

Has Greg Hinz written any fawning article about how the Chicago Fed “has the facts” yet?

chet everett

Greg Hinz is the sort of person so blind to the faults of those intent on destroying regular homeowners that one can easily see the role of the press in encouraging nations like Venezuela to accept ruinous dictators

dede

No more pensions – all 401k. Period. Someone retires that’s it.

MR. A. B. JAMES

get rid of taxpayer paid pensions. place all present and future taxpayer pension monies into social security. just like all other taxpayers.

Ted Dabrowski

Why don’t public employees pay (save for) their own pensions, not partially but fully. That actually should go for all retirement plans. Employers and taxpayers would save alot. The government and private employers could increase the salary somewhat for the employees but forget about the employer paying into an employee retirement plan. I will definitely be voting for the upcoming law to mandate a 2/3 voter approval for any tax increases in California.

Paul

Shame on them.You can thank the Federal Reserve for Destroying the purchasing power of every American by manipulating the markets,keeping interest rates artificially low and ruining the dollar as a store of value.Artifically low interest rates have imploded pension funds.Manipulating markets and house prices has created a bubble that will leave a mark.

Carolyn

And so people who have no pensions should have to pick up the tab for those who do. With or without low interest rates there were some very risky and downright criminal investments that went south. So whose fault is that? Certainly not the taxpayers forking over “makeup money”.

jaherzrent

Those “at fault” could never pay back all the damage they have caused. Legislators and judges are probably “immune” from lawsuit. Taxpayers are the primary source of government revenue so if pensions are to be paid, taxpayers will have to pay them. As you point out, this results in people with no pensions having to part with their own money to pay people who have “earned” pensions. Taxpayers should band together and elect legislators and a governor who take a stand to support bankruptcy of public entities that over-promised pensions. The bankruptcy court could try to work out a fair… Read more »

Charles Walters

What is happening in Illinois will be the future of California unless the legislature is held under control. An initiative that provides any property tax increase, all categories, must be approved by 2/3’s of the voters to include parcel and any other real estate attached taxes. People and companies are already leaving California. That leaves only 48 states to move to and Hawaii is probably not one of them.

Charles Walters

Forgot to add: Reduce and control California State employee pensions which have become excessive. Perhaps mirror the military pension system where no more than 75% of last 3 years for 30 plus years service can be paid. This would apply to every pension that is bankrolled by CalPers (taxpayers). Additionally, a taxpayer initiative would be appropriate that would prohibit the Legislature or local governments from forcing changes to CalPers financial investments based on political, political correctness. Keep those who manage the CalPers pension funds focused on maximum return on investments, not chasing some political correct dream. CalPers has a terrible… Read more »

Carolyn

Amen!

Larry Littlefield

“Get this, which is part of their reasoning: “New taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes.” Exactly. That’s the only way out. The only way younger generations can take some value back from Generation Greed. I’ve been advocating this for two decades. And, by the way, make sure everyone is billed separately for those taxes and fees that go for actual services, and those that go to pay for Generation Greed’s debts and other… Read more »

Missy

You are the author of your own destruction. And I have no sympathy. You’re an idiot. Go read some Milton Friedman and learn how wealth is created. Your method will create abject poverty.

Larry Littlefield

So you demand that someone wave a magic wand and make the consequences of 30 years of generational self dealing go away?

The burden of unfunded, spiked and retroactively increased pensions is just one small part of what has gone on.

“Go read some Milton Freedman.” You should hear what some people who consider themselves “leftists” have to say when I point out that Generation Greed is Generation Greed.

Ideology, political party, just an excuse to point fingers in a circle.

world with end

I wouldn’t group an entire generation with the greedy pols and unions leaders in IL. That’s one of the things that makes this situation so sad: the pols and union leaders are a very small part of the IL population, but they screwed it up for millions of residents.

Larry Littlefield

The non-Greedy minority of Generation Greed should have stood up for their children and grandchildren long ago. But they were always happy to vote for anyone who offered them more in exchange for less. Where did it come from? They didn’t care. Illinois had a tax burden at about the U.S. average for decades, despite having better schools than the U.S. average, more transit than the U.S. average, and more corruption that the U.S. average. How was this miracle accomplished? By robbing the future (now the present) to benefit the present (now the past). https://larrylittlefield.wordpress.com/2015/04/14/taxes-2012-census-of-governments-finance-data/ You want high taxes? Try… Read more »

pm

Someone needs to organize a protest outside their building next time they meet…

I think the fed proposal is more of an academic exercise than a possible solution. It basically proves the point that Jeanne Ives has been making that you can have your salary, your pension or your house, but you can’t have all three. In this case, the fed is working under the assumption that you can’t get rid of the pension and salaries, so they have to take your house.

Erik

As insane and economically suicidal as this idea is I expect it to become reality. We’ll soon have both a governor and legislature committed to the idea that pension promises must be kept through massive tax increases.

chet everett

Madigan lackeys like Rich Miller, who has become wealthy with state agencies subscribe to his “insider news” will no doubt promote this as some kind of well-thought-out solution instead of the insider scheme that it is …

nixit

It’s not just state agencies that subscribe to Rich Miller’s blog. There’s a paper trail of numerous union PAC’s that also subscribe. Since the subscription price typically falls below an amount necessary to call it out specifically on LM-2 reports unions file with the feds, it’s hard to tell what unions subscribe unless they report it via their PAC reports.

Devalues real estate , rents and prices are based upon ability to pay , not set in stone , vacancy is the prime leveler

Nick T.

Rauner would probably oppose this, Pritzker would probably support this. Nothing guaranteed but….

Paul

Is there someone you can bribe, er I mean a lawyer you can retain to lower your taxes?

Douglas

Paul, Mike Madigan’s law firm specializes in the service you seek.

Evan Bour

Ummm Actually property can leave atleast homes can.
We have had full homes picked up and moved.
Is it difficult and expensive? Yes but its not impossible.

DHDohm

Well if you can’t get a VAT, a SAPT (state added property tax) is the ticket. This is desperation and it’s palpable. The imminent municipal bond crisis combined with the massive Fed induced derivatives crises means a Greek solution with more taxes and an insured deposit MF Global wraparound. Fun times.

nixit

So for a $250K home, you can either pay a $75K special property assessment over the life of your 30-year mortgage OR take that $2,500/yr, invest it at a 5% rate of return, and have $175K waiting for you when your mortgage is completely paid off. In other words, a $250K swing, or another way of putting it, the value of your home. Suppose a working family making $80,000/yr lives in that $250K home. This levy would be the equivalent of them having an effective state income tax rate of 8%. EIGHT-FREAKIN-PERCENT! Another way of putting it, this family would… Read more »

Paul

While it may be unrealistic what the Fed is proposing, it forces the State of Illinois to deal with the problem they created. It is does not require the federal government to intervene. Yeah, the reality of this will quickly set in and the government of Illinois will topple and therefore will have to make the necessary changes. What’s key here is the Fed is making it quite clear to Illinoisians that you folks are about to enter a period of pain. I wish this wasn’t so but look at how the legislature, the courts, and the unions are behaving… Read more »

Charles

Consider that Puerto Rico would be an excellent model of government failure. Will be interesting to see how that plays out and would likely be a model for Illinois.

Mark M

I see your point. This proposed special property tax – and it oh so special- puts a hard reality into the math problem -especially since it would only address the state pensions and not municipal ones. Make the pain less abstract, and proposes the same medicine for the muni pensions, too. A person making 80 thousand a year in some jurisdictions would find it sensible to cease working, at least if domiciled in Illinois. Yes, as Mr Glennon indicates, the Fed’s idea is absurd, but it does illuminate that Illinois must solve its problem, and the almost impossibility of doing… Read more »

Bob Out of here

Did Ralph Martire write that column?

Freddy

April Fools! Right! This is the best April fools joke I heard in a long time. The Chicago fed are overdosing on opiods. I do agree that exempting all homes under $10 million would be a good start. That is from all property taxes.