It’s very unlikely ever to become law, so why the firestorm about that proposal for a new statewide property tax devoted to Illinois pensions?
Our initial article on it has now been viewed over a million times when you include many republications on other sites. (The one linked here alone was clicked over 900,000 times). Many other commenters and publications around the country covered it.
The real significance of the proposal is the subject of my monthly article in Crain’s Chicago Business this week.
If you don’t already know, three economists at the Chicago Federal Reserve Bank formally proposed that Illinois levy a a a new, annual statewide property tax of 1% for 30 years or as long as it takes, dedicated solely to state pensions.
First, it illustrates how detached from reality our establishment is.
The proposal wasn’t just the theoretical musing of some ivory tower economists. The idea was presented at this year’s annual conference co-hosted by The Chicago Fed and the Civic Federation, The Civic Federation being perhaps the establishment’s most prominent voice on fiscal matters. The conference was devoted to our pension crisis. Last year, the central theme was much the same — that Illinois is property-rich — so there must be some way to take it to pay for pensions.
But as I wrote in Crain’s, “How blind can they be to the disaster already inflicted by Illinois property taxes? Suicidal property tax rates have robbed hundreds of thousands, maybe millions, of Illinois families of their home equity—probably the lion’s share of whatever wealth they had.” Illinois already has the highest property tax rates in the nation.
It’s about confiscating property to pay pensions. The proposal’s authors were open about that, writing that property can’t flee like people can, and that the new tax would immediately reduce values.
And who were the other panelists at that conference? Mostly the same folks who got us into this mess, none of whom offered either a realistic assessment or meaningful solutions:
There was former Gov. Jim Edgar, who blew the state’s best opportunity to fix its pensions when our economy was buzzing, and offered only bland platitudes with no solutions. Eric Madiar, Senate President John Cullerton’s pension expert, preached again about the “consideration model” of reform, yet nobody has ever documented even its meager claimed savings. Other experts included former state Sen. Elaine Nekritz, who played a key role in the SB1 reform proposal from 2009, which wouldn’t have accomplished much and was doomed in the courts; and Jeff Johnson, president of Chicago’s municipal pension, who earlier this month tweeted: “There’s no pension crisis.”
Following the conference, Madiar, Nekritz and Johnson were the guests on Chicago Tonight to present their views unchallenged.
Come on, Civic Federation, WTTW.
The second reason why the story is significant is that it showed the depth of our pension crisis. With Illinois property taxes already averaging 2.67% per year, another 1% would mean a 37% increase. That would cost property owners, I calculate, about $10 billion per year.
That’s about twice the cost per year of last years income tax increase. Yet that would only cover the unfunded liabilities for the five state pensions. The proposal didn’t even attempt to address the 650 other pensions, most of which are in critical condition. And never mind Illinois’ unpaid bills and all the other problems at the state and local level.
So, thank the authors of the study. They helped prove the case that the establishment that wrecked us can’t fix us and that our problems are colossal.
–Mark Glennon is founder and Executive Editor of Wirepoints.