By: Mark Glennon*

A commenter here recently asked it this way: “How high would income taxes have to ramp in order to offset reducing Illinois’ property tax burden to that of Indiana, Iowa or Wisconsin?”

That’s a great angle to look at it from because you learn much by seeing that math. Don’t worry, we’ve done the math for you below. You’ll see that no meaningful property tax relief is possible without major, structural reforms that cut spending. You’ll also see that Governor JB Pritzker’s property tax relief task force cannot be expected to come up with much. Its report is due out by the end of this month.

The reason is simple. The numbers are overwhelming. Meaningful property tax cuts can’t be achieved without real spending reforms.

Here is the answer to that commenter’s question:**

  • If we cut Illinois’ residential property tax rates to match Indiana’s and shifted the burden to the state income tax, we’d have to cut property tax rates by 56% and nearly double the income tax. Seventeen billion dollars of property tax revenue would be lost, which represents 92 percent of what Illinois collects on the state income tax.
  • Even to match Wisconsin’s property tax rates, which are fourth highest in the nation, Illinois would have to cut its property tax rates by 24 percent, and shifting that to the income tax would mean a $7.6 billion income tax increase – a 40 percent jump.
  • Iowa’s property tax rates are one-third lower than ours, and cutting ours to match theirs would mean a $10 billion income tax hike – a 54 percent increase.

For perspective on how big those tax hikes would be, consider that the pending progressive income tax proposal – the “Fair Tax” – is optimistically estimated to raise just $3.5 billion of additional revenue. So, it would cost five times that to match Indiana’s property tax rates through an Illinois income tax hike. New revenue from the Fair tax is less than half of what it would take even to match high-tax Wisconsin’s property tax rate.

That’s just part of the absurdity of claims that the Fair Tax will help cut property taxes meaningfully. The $3.5 billion of new revenue from the Fair tax has already been promised away several times over. Endless messaging from supporters says the tax would also provide for fixing the state’s structural deficit, investing in schools and health care, fixing our crumbling infrastructure, creating thousands of jobs, “paying off the Republican Party’s old bills,” assuring that domestic violence shelters are kept open, helping stabilize our pensions, putting us on a path to fiscal stability and more. Truly paying for all that’s been promised from the Fair Tax would require tax rates that become absurd, which we’ve estimated before.

Nor can you expect much help from the Property Tax Relief Task Force. It’s not charged with producing the kinds of drastic spending reforms that are truly needed, including genuine pension reform and the constitutional amendment needed for that. Besides, the Pritzker Administration has ruled that out. The task force now has over 80 members, making it difficult to see how it will agree on anything bold. They already rejected a measure on perhaps the most obvious, albeit small, reform needed, which is putting an end to lawmakers running property tax appeal businesses as side jobs.

What about the pending legislation to consolidate investment functions of suburban and downstate police and firefighter pensions? Isn’t it supposed to relieve the property tax burden? It will only save an estimated $164 to $500 million per year, according to Pritzker, and that’s entirely speculative. That’s only 1.6% of property taxes at best, and nobody knows whether any savings from the plan will really go into property tax relief instead of being spent elsewhere.

The initial aspect of the problem is that Illinois property taxes are monstrous – highest in the nation along with New Jersey. They total $31 billion across the state, which is far higher than any other source of government revenue for Illinois and its municipalities.

But the ultimate, core problem when you add them together with all other taxes imposed statewide and locally is that we end up as America’s “least tax-friendly state,” as Kiplinger Personal Finance recently put it. It’s that total that’s the problem.

Maybe the Property Tax Task Force will suggest at least some of the reforms that would help, such as consolidation of school districts and other units of government. But returning Illinois to competitive levels of taxation and services will require a long list of reforms small and large that address the state’s total tax burden. They include real pension reform, collective bargaining reforms, ending unfunded mandates imposed by the state on municipalities and much more.

In summary, any meaningful property tax reduction, such as matching rates for neighboring states, would require reforms that our political establishment won’t consider.

*Mark Glennon is founder of Wirepoints.

** Calculations based on the following: Average, real property tax rates in IL, IN, WI and IA are 2.14%, 0.94%, 1.61% and 1.43% according 24/7 Wall St./Tax Foundation and are for residential property. Comprehensive average rates for commercial and other property tax rates are not available but IL rates for those properties exceed the rates in IN, WI and IA by larger margins than for residential, according to a recent Lincoln Inst. study. Consequently, reflecting those rates would make the cost of matching those other states larger than reflected herein. Illinois property tax collections are from the Illinois Department of Revenue and total personal income tax revenue is from GOMB.

newest oldest most voted
Notify of

Surprise to J.B. as if the property tax goes up much, or more, some will just pack the items, and not pay on the amount that they still owe on the home, or any major repairs. And I see empty homes that have not one that will purchas, even if the have a job, because they Job check will see an increase, so the money is not there, as they weill be paying more tax to replace the car to go to work, So the houses are stitting with not buyers. I have been out in the low income that… Read more »

mqyl

Did anyone notice the 10 percent property tax increases in Cook County for 2019, while properties values continue to stagnate or depreciate? It’s legal for Cook County to raise taxes like that, but it shouldn’t be. This is another great example of taxpayer abuse.

Poor Taxpayer

The best day of your life is the day you move out of Illinois.
There is no hope, DOA, a goner for ever.
The Greed of the cops, teachers and firemen have destroyed the quality of life for the honest hard working taxpayer. Leave HIGH TAXES, POOR SERVICES AND LOUSY WEATHER.

Hank Scorpio

Here’s my residential proposal: – Value of home = square footage of the lot and height of the structure. – Tax rates are applied to these two FIXED values. – Tax rates are capped and cannot rise more than x points per year. – Any change to this system cannot take effect until 5 years after passage to prevent homeowners from being screwed by a sudden change. No more of this b.s. paying extra because you remodeled your basement or added a garden or sunroom. No more uncertainty about what you will be paying in the near future. No more… Read more »

Many homes are 40 or more OLD, and people still live in them, because they have not jobs due to closing and moving out of Illinois, so those homes need to drop in amount per year, to the low figure, and like me being to old to make a long move, that cost money, and nothing avaiable that I can afford. Same goes for 75 percent of Old people.

DDB

You folks have a lot of keyboard solutions.. maybe you all should run for office. Property tax has been flawed for a long while. We all know that fair, responsible taxation is necessary for society. The disagreement is what is fair and responsible. Not many could say what their sales taxes are and who gets what share, but they’re all over their property taxes. It’s pretty funny that a lot of levies have held flat but taxes rose a bit due to increased homes values. People are protesting their increased home value to have their taxes lowered. I guess increased… Read more »

joe strzalka

You have it wrong. Taxes don’t rise or fall due to assessed home values. Taxes are determined by the taxing bodies, assessments are all about splitting the pie.

In Illinois, in average we pay $2,408 in taxes per $100,000 in home value, in Wisconsin it is only $1,924, in Iowa it is $1,678. In Illinois there is a tax of 54.98 cents per gallon of gasoline. It is 32.9 cents per gallon in Wisconsin and 30.5 cents per gallon in Iowa. The problem is not in taxes, the problem is in the role of the government; what the government is supposed to do and how we pay for it. Politicians voted for themselves a lot of things to do and to be paid much more generously than most… Read more »

debtsor

He’s just a troll.

Rick

My property value in Lockport declined $5000 in the past 3 months. It may go up a little then it levels down again. It’s basically been flatlined since 2014 or so. Property values are declining, that means lower property taxes, eventually. Luckily I already downsized, homes 300k and up will decline more. If school enrollments decline that too will mean lower property taxes if teachers are released. I think as the whole state goes into decline and values go down and the state becomes less and less desireable property taxes will have to decline too. If they implemented a retirement… Read more »

Freddy

Will county is under PTELL rules since 1991. With Ptell they can collect what was LEVIED (not billed or collected) from the year before any deductions are calculated like homeowners/senior/veteran/etc. Ptell limits increases to home tax’s on the way up by 5% or 1/2 of inflation whichever is less. But in declining home values markets such as in Rockford (2019 is up 6%) rates exceeded 5% many times one year was 11% thus reducing home values year after year. So basically if all home values in Lockport drop 50% in 1 year the tax rate can double but if values… Read more »

Freddy

I need to add my home in Rockford was valued at $162K (taxable value) with the homeowners deduction in 2009 and tax’s of $5,744.52 and in 2018 taxable value is $146,589 and tax’s are $6,972.76. This is because of Ptell rules

The Truth Hurts

“Property values are declining, that means lower property taxes, eventually” If all other properties also decline then your property taxes will not decline. Property tax rates are calculated by taking the amount of revenue to be collected in the overall taxing district divided by the total district property value. If the total revenue to be collected remains the same and property values decline in value by 50% then the rate just merely doubles to ensure the total revenue collected is the same. As far as school enrollments…releasing teachers would lower variable cost but fixed cost probably wouldn’t be reduced by… Read more »

NB-Chicago

What about outlawing local pension pickups for pensions paid by state (ie teachers) going forward or would that require const anendment?

The Truth Hurts

That would be allowed but I doubt you would get the desired result. CPS tried this in the prior contract but it didn’t really happen. Teachers just negotiate to have their salary raised by the amount that you are now requiring them to pick up. My guess is that teachers around the state would just do the same. Now the teachers have a higher base salary when calculating their lifetime pension benefits. This idea if implemented would make you believe that you accomplished something but actually our pension liability would most likely increase.

debtsor

As you can see from the above nearly 10 year old tax bill, 63% ($3,153 of the $4,999 total tax) comes from just three entities: The community college – the high school – the elementary schools. Not sure if it’s like this across the state but it’s like this in Cook County, which has nearly half the state’s population. The rest is just relatively minor stuff that is difficult to make cuts. The Village expenses seems reasonable for a town of 50,000 people, and the mosquito abatement district is just a few dollar. Even Cook County’s taxes are only 10%… Read more »

Mike Williams

When Illinois hits rock bottom, and the courts are in the thick of it, we can only hope that part of the solution is to privatize as many entities as possible… but I doubt that will happen.

riverbender

Those spending programs buy votes at no cost to the benefactors of those programs. In my area as tax rates soar the people instead bring up the new splash pad given to the taxed public by certain politicians. That’s how it works in Illinois and why I am always so confident things will get better until the whole State collapses financially. I hope I am wrong but my feelings are otherwise. Will people ever wake up?

Charles

Splash pad could that perhaps be in romeoville,

Poor Taxpayer

The best day of your life is the day you move out of Illinois.
Illinois is a goner, DOA, there is NO HOPE.
The GREED of the government worker has destroyed the quality of life for all the honest hard working taxpayers in Illinois. Move and take the fruits of your labor with you. Much better life in almost any state you pick to move to. Illinois has HIGH TAXES, BAD SERVICES AND WORSE WEATHER. Why stay and pay, pay and pay and get nothing for it. Enjoy the fun and sun and lots of low taxes.

mqyl

I checked some of the new property tax bills for some Cook County residents. The bills are all about 10 percent higher than last year. Meanwhile, property values continue to stagnate or decline. Unfortunately, that’s not a surprising scenario for IL. That’s not a good scenario in which to live. Most people have a breaking point that will cause them to move out of the city, county, or state. Some people think that they’ll outsmart the system by renting, driving fuel-efficient cars, etc. Even in that situation, much of what you touch/enjoy/ingest/experience has an unreasonably high tax or user fee… Read more »

MikeH

Color me cynical, but I’m guessing the tax force’s biggest “conclusion” will be telling Jabba that we need a graduated income tax.

DDB

Yeah, Lurch left a lot to clean up after..

Platinum Goose

Exactly, what was Rauner thinking trying to reform things for the taxpayers. Glad Jabba is in there now, at least he’ll look out for the crooked politicians and their union cronies. Can’t wait for his next tax/increase that will pay for more union pork.

DantheMan

By living in this state you are basically giving your approval to it’s conduct. Your dollars are supporting the states agenda. At the core of the Illinois agenda is quite simply…stealing. Yes, some minimal level of tax is needed to support basic infrastructure. Taxing anything beyond what an efficiently run state needs is stealing. We know that Illinois is stealing because it has more layers of government that most states. We know that Illinois is stealing because other states tax far less for similar services/results. We know Illinois is stealing when we see higher public salaries and/or pensions in Illinois… Read more »

Indy

Amen. Those that continue to live in Immoral Illinois are enabling this madness. Either move out or enjoy being berated, trashed talked, looked down upon with pity and shown zero respect by the rest of America.

Mike Williams

Obviously, some people truly are trapped by various health issues themselves or the health issues of someone close to them. All the others that aren’t trapped, are participating in an immoral system. They can claim they are being forced, and not participating willingly, but when you make that argument year after year, it wears thin. On the other hand, the true magnitude of Illinois problems have only really come to light in recent years, so if people need a little more time for an exit strategy, I applaud that effort.

Freddy

I just read an article from the New York Times “A $76,000 monthly pension”. This is in the state of Oregon. We all know reforms are needed here but the reforms made in Oregon benefited state workers at the expense of taxpayers. The state passed a law that state employees pay tax’s on retirement income at 9% but at the same time gave them a 9.89% raise. When you read the article it seems it could and probably will get much worse here for taxpayers.

Hank Scorpio

What about the assessment side of the problem? Am I wrong in believing that assessors can arbitrarily value your house to whatever they want, no matter what the actual free-market would pay? If so, cutting property taxes down 1 time doesn’t solve the fact that they can go right back up in a few years time. Give me a 30 year property tax freeze and I MIGHT consider buying a home in Illinois…

mqyl

It certainty seems like the tax assessor in IL determines your assessment based on how much money the city/county/township, etc. needs. That’s why a percent change in your assessment has no relationship to the percent change in your property value, even though it should, of course.

Freddy

Usually assessments are based on comparable properties in close proximity to your home especially in the quadrennial reassessment year. But the yearly tax rate is determined by the amount of money that is needed by all the taxing bodies. That is why it takes so long to determine your new tax bill sometimes 5 months or so. My alderwoman here in Belvidere has a winter home in Florida and when she gets her new assessment there she also gets the tax bill at the same time. Then if she chooses she can protest the amount. Here we only get one… Read more »

joe strzalka

It is a leap of faith to assume that the facts of your protest matter. It is likely they may have a quota of reductions to give out to make it look like protests and facts are being recognized. It’s absurd to assume they can see 5 or 7 percent reductions in value because you pointed to a few other properties. It’s a game with a predetermined outcome.

Bob out of here

Assessor just determines value, not rates. When you look at historical data, even during the bottom of the bubble, the overlapping entities did not take in less money. The only thing that changes is your proportional share, not the total money collected. “The City’s aggregate property tax levy is divided by the equalized assessed value (“EAV”) of all property in the City to determine the tax rate that will be applied to an individual taxpayer’s property. The tax rate is applied to the EAV of the taxpayer’s property to determine the tax bill. Changes in EAV do not affect the… Read more »

riverbender

I remember going to an assessment hearing once and was practically laughed at by the board that had seemingly unlimited subjective reasons why my property was a certain value despite the hard objective evidence that I presented. Next time I got a real appraiser and, only because I was required to, presented it to the board assuming the next step was at the State level. That time the board practically fell over itself to apologize to me, gave me the reduction and advised me next appraisal should simply be given to the Assessor who would “consider it” and probably not… Read more »

Joe strzalka

At the end of the day the board of review will care more about who files your appraisal and appeal rather than what’s in it