Chicago getting into the Tax Act
Cook faces lower tax rates, but higher bills
Most homeowners likely to pay more
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County urged to expand tax break
August 26, 2003
Soaring property values stir fears of big tax bills
August 24, 2003
Appeals encouraged, could trim reassessment increase
August 24, 2003
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Understanding your assessment
By Mickey Ciokajlo and Ray Long
Tribune staff reporters
Published August 27, 2003
If there is good news that can be gleaned from the higher property tax bills to be shipped out this week to Cook County homeowners, it is that the increases have not shot up anywhere near as fast as property values have.
But the vexing news for homeowners weary of the annual upward creep of tax bills is that the political landscape in Illinois, a state that relies heavily on the property tax to fund schools, public safety, sanitation and other local services, is hardly ripe for serious reform.
If anything, the budget meltdown in California, a crisis in part tied to a generation-old property tax revolt, is leading many government finance experts to question whether reliance on the property tax--however politically odious--is such a bad thing.
"People don't like the property tax the way it is," said Fred Giertz, professor of economics at the University of Illinois. "But the reason it has staying power is there are few good alternatives."
Cries for change have increased in recent weeks as Chicago homeowners, particularly those on the North Side, have been shocked to receive reassessment notices of increases that average 40 percent or more depending on where they live. Under the county's complex tax system, those reassessments will be used in calculating tax bills to be sent out a year from now.
Last year, it was residents of the county's south and west suburbs who received similarly shocking reassessment notices. On Tuesday, county officials released tax rates that will be used to translate those new assessments into actual bills that will come due by Oct. 1.
Most tax rates in the affected suburbs have been significantly lowered from a year ago to partially compensate for the big assessment increases. The net effect is that most homeowners will have to pay more, but the increases won't come anywhere near what the reassessments might have suggested.
In Oak Park, the average increase in residential property assessments rose 43.48 percent, the most of any community in the south and west suburbs. But as property values rose, the tax rate charged to homeowners dropped 25 percent to partly compensate. That means that the actual tax bill for an average Oak Park home would jump 17.4 percent.
"A lot of people thought that meant that their tax bills would go up by 43 percent, which is not quite accurate," said Oak Park Township Assessor Ali ElSaffar, noting a big task in his office is to explain the idiosyncrasies of the property tax system to homeowners. "It's one of the biggest things we have to do. There was some panic in Oak Park."
Intensifying the property tax angst of many homeowners is the complicated formula employed to calculate taxes. In Cook County, property taxes are paid one year in arrears, so homeowners in Chicago who have received shockingly high reassessment notices in recent weeks won't know how much of that will translate into bigger bills until this time next year.
The bills that Chicago residents will soon receive will show very modest increases--for example about $82, or 1.5 percent, for the owner of a home with assessed value of $200,000.
For tax purposes, authorities divide the county into three geographic areas and reassess property in one each year on a rotating basis. The system typically means hefty tax-bill hikes for homeowners in the year following the reassessment of their part of the county and far more modest hikes in the next two years.
Further complicating matters, County Assessor James Houlihan's office substantially understates the assessed value of residential property, meaning that the "$200,000" home in the example above would fetch far more on the real estate market. The best way to determine what the assessor says your home is worth is to search a database of official assessment values on the Internet at www.cookcountyassessor.com.
Demands for an overhaul of Illinois' tax structure are nothing new and always seem to intensify each year around the time reassessment notices go out.
State officials have seen many proposals over the years to limit property taxes and boost revenues for schools with so-called tax swaps, a maneuver that would substitute higher income taxes to compensate for lower property taxes.
Proposals unpopular
None has moved very far, largely because politicians know talk of raising income taxes can poison their careers. In 1994, a tax-swap proposal unraveled the Democratic campaign for governor of Dawn Clark Netsch as Republicans seized on its impact on the income tax while ignoring the corresponding decrease in property taxes.
Despite that history, Houlihan is trying to revive the concept, although in a much altered form that will also include a reduction in sales taxes that he believes will prove more comprehensive, politically palatable and address a pressing need for more school funding.
"It is a difficult change," said Houlihan. "It deals with money out of your pocket. It deals with Illinois' history of not talking openly about tax policy. It deals with winners and losers."
Arthur Lyons, director of the Center for Economic Policy Analysis in Chicago, said Houlihan's plan would need much more scrutiny and public discussion to be adopted.
Lyons said that one potential problem with the approach is that swapping higher income taxes for lower property taxes would result in a shift of the tax burden in Illinois away from business.
Under the current state tax structure, individuals shoulder a far higher percentage of the burden than business when it comes to income taxes, so hiking that tax would only increase the disparity. As for property taxes, business properties are currently assessed at a much higher rate than homes, so lowering the property tax would disproportionately ease the burden on business.
Another problem, he said, is that relying more on state-generated revenues than local ones makes schools and municipalities more reliant on the funding whims of Springfield.
A similar phenomenon occurred in California after Proposition 13, the landmark 1978 referendum proposal that severely limited the ability of local governments to hike property taxes. As a result, the reliance of California's schools and municipalities on the state's income tax has grown dramatically.
Problem lies in bad times
"In the good times, you had tons and tons of money," said Nicholas Jenny, a senior policy analyst at the public policy research group. "In the bad times, it tends to disappear on you."
These are extremely bad times in California, with the state struggling to plug a $38 billion hole in its budget.
Since property values tend to remain recession-proof, property taxes have proved the most stable source of income.
The fluctuations in the income-tax revenue experienced throughout the country actually contributed to the downfall of a recent move in Tennessee to broaden the state's income tax, which is imposed only on stock dividends and interest income, according to the National Conference of State Legislatures.
"In the past couple of years, the efforts have been thwarted by arguments that states with broad-based personal income taxes have actually suffered because of their heavy reliance on personal income tax revenue," said Corina Eckl, the group's fiscal program director. |
