By: Mark Glennon*
Eureka! They figured out a way to tax wealthy folks trying to flee Illinois: A progressive real estate transfer tax, and the idea seems to be getting popular.
An Op-Ed yesterday in the Chicago Sun-Times by Daniel Kay Hertz of the Center for Tax Budget Accountability and Marisa Novara of the Metropolitan Planning Council made the case for it in Chicago. Evanston already voted in favor of it Tuesday.
Chicago today has a real estate transfer tax of $5.25 per $500 of property value, but the city should stick pricey homes with a higher rate, say the authors.
They weren’t specific about what rates they favor, but the ballot measure passed in Evanston, as Crain’s reported, calls for a transfer tax increase of 40 percent to establish a new rate of $7 for every $1,000 of value for sales between $1.5 million and $5 million and an increase of 80 percent to establish a new rate of $9 for every $1,000 of value for sales over $5 million. Evanston’s current rate is $5 for every $1,000 of value.
If the concept flies, nobody knows where the rates will eventually end up.
You may remember a recent proposal by three Chicago Federal Reserve bank economists to establish a statewide property tax. Their express reasoning was that property can’t flee, so that’s what Illinois should tax. Proponents of progressive transfer taxes don’t say it, but their true rationale undoubtedly is similar. Think you’re going to sell your expensive home and move to Tennessee? Sorry, that will cost you.
The statewide property tax idea set off a firestorm of objections. Our article on it alone had over a million pageviews, and preemptive ballot measures opposing it passed overwhelmingly in a number of Illinois areas on Tuesday. The general public doesn’t like the idea of the statewide property tax, but a transfer tax only on the wealthy? Why not? Maybe that’s why Evanston Now reported their city may “start a trend.”
Mayor Rahm Emanuel has already opposed the idea, but he will be gone next year. A proposed Chicago ordinance is pending to put the idea on the Feb. 26 election ballot, as a referendum question. And Hertz’s comrade at the CTBA, Ralph Martire, is on the budget committee of Governor-elect Pritzker’s transition team. So, we’ll have to see how far this goes.
This is scary stuff – seizure of property before it can escape.
*Mark Glennon is founder and Executive Editor of Wirepoints.
A set of state lawmakers want to extend CPS’ current school closing moratorium to February 1, 2027 – the same year CPS is set to transition to a fully-elected school board. That means schools like Manley High School, with capacity for more than 1,000 students but enrollment of just 78, can’t be closed for anther three years. The school spends $45,000 per student, but just 2.4% of students read at grade level.
Hopefully, all media will get the message, in Illinois, too.
Ted joined Tom Miller of WJPF to talk about Illinois’ highest-in-the-nation property taxes, why lawmakers don’t want to touch the tax’s cost drivers, just how much Illinoisans’ tax burden has grown over the decades, why Gov. Pritzker failed to meet his promise to reform property taxes, and more.
Well, it will keep Chicagoans out of Texas…
from the st article, the writers advocate for increased real estate transfer tax go to affordable housing. but currently-instead of using for affordable housing, the city /cha is sitting on millions in unused section 8 voucher federal housing $, or used to funds to pay off pension debit in advance. and nobody on the left says anything
City income tax on tap for sure. Targeted to the rich that make more than fill in the blank here of 1%
Actually, a city income tax will be targeted at commuters and upper middle class.
I think it will be $125k or more, where do you think it will fall?
Just wait for the next step, rent controls combined with steeply rising property taxes on single family homes. A whole lot of aspiring and enterprising families who sought to build wealth through the acquisition of single family rental units are going to feel a whole lot of pain. They won’t be able to pass in the full impact of the property tax increase the way very large multi-unit properties can.
As always the Democrats and government always wage war on those trying to move up the ladder in society.
The joy of stealing other people’s money. And with 50% of Americans on the take, you have a ready mob ready to support the theft.
Let me guess ,,,,,, “it’s for the children “!!!!!! Lolol
Consider the higher transfer tax your bail (ing out) money.
If Illinois and it’s localities start increasing or adding taxes for exiting Illinois it should make some fun headlines around the country. How about………
“Illinois…Cant afford to live there, can’t afford to leave.”
“Welcome to Illinois. Leaving will cost you.”
I would guess that it won’t take many more people moving to produce a glut of homes. It seems a lot of cities in IL are building lots of units in their city centers. Lots of condos and apartments. Lots of rentals. As single family homes sit longer and longer on the market prices fall. A few more foreclosures. Lower prices…viscous cycle…those able to sell – rent. When the job goes away because businesses close they move. The next downturn increases the fall velocity… Jeez I sound like chicken little…
Maybe the ghosts of Khrushchev and Ulbricht can convince Fat Boy to build a wall around Illinois to prevent emigration. He’ll use union labor and call it the Anti Rich-Not-Paying-Their-Fair-Share Protection Barrier
So I’ll 2nd mortgage my house in IL for more than it’ll be worth in 4 years, buy or build in TN, switch primary residences, then walk away from my vacation home in IL, file chapter 11 and protect my new home in TN
eff ’em
thanks for the idea, assuming the original Illinois mortgage is non recourse?
Illinois is a recourse state, so you do things in order (you’ll want to strategize and work with an attorney- worth every dime) and get the debt (mortgage) discharged (eliminated) using bk. Works so well, it even eliminates transfer fees. If enough people get desperate enough to do this en masses to escape IL, imagine the inescapable chaos for those left behind! My bet is those who have to go this route will be happy to pay an additional 1-2% on their next auto loan! Small price to pay for being free.
So they’ve already eaten up most of the equity in your home with enormous property taxes, now the want to take the rest of what’s left.
If you’re a person selling, and you originally didn’t intend to leave Illinois entirely. Would the tax still apply? I missed that. How would the state know where you are moving to?
It applies to all sellers.
I predict a corresponding yet minuscule reduction in the lowest rate to lure everyone into the plan, which will then be raised back to the original rate within 5 years.