High property taxes a multilayered problem in Illinois
Property owners in Illinois are the hardest hit in the nation when it comes to taxes. And the property tax burden coupled with falling home values is crippling homeowners and leading many Illinois families to deduce that buying a home in Illinois just isn’t worth it.
"This is a very scary cliff we're heading toward," WirePoints writer Mark Glennon said during a recent edition of "Illinois Rising" radio program. "I think we're at the point where consumers are going to start concluding that buying real estate in Illinois, particularly homes, is not a safe bet because prices are, at best, flat if not going down. And they'll end up being trapped in an underwater mortgage."
Glennon added that there are 500,000 homes in Illinois that are valued at least 20 percent lower than the value of the mortgage.
The national median property tax rate is 1.31 percent. This translates to an average of $2,620 in annual property taxes for a home worth $200,000.
In Illinois, however, the median property-tax rate is 2.67 percent – the highest in the nation and double the national median – meaning a house valued at $200,000 will cost an Illinois homeowner $5,340 in property taxes each year, according to a 2016 study by CoreLogic.
In contrast, Hawaii has the lowest median property tax rate in the nation at 0.31 percent.
In 1990, residential property taxes accounted for approximately 3.6 percent of typical household income. Today, those taxes consume an average of 6.4 percent, according the Illinois Policy Institute.
This comes while salaries have remained relatively stagnant.
One reason behind Illinois’ high property taxes is the state’s nearly 7,000 units of government – a number that far exceeds that of any other state in the U.S. All these units require taxpayer funds to operate.
But more troubling than the high property taxes is the fact that some of Illinois' most powerful politicians seem to not only avoid high property tax bills but also profit from the high rates.
In a blog post in October, state Rep. Allen Skillicorn (R-East Dundee) questioned House Speaker Mike Madigan's (D-Chicago) low property taxes.
"Speaker Madigan only pays $2,568 on his 3,500-square-foot home to the Chicago Public School (CPS) district, yet we here in the suburbs we pay 76 percent more to our local schools," Skillicorn wrote.
Madigan, Senate President John Cullerton (D-Chicago), Chicago Alderman Ed Burke and other politicians who are tax attorneys stand to benefit when property taxes rise because the hikes often prompt property owners to challenge the assessed valuation of their properties, and the complex nature of the process often calls for the expertise of a tax lawyer. Madigan and Cullerton’s law firms provide assistance to property owners appealing the assessed value of their properties.
Austin Berg, a senior writer for the Illinois Policy Institute, highlighted the clear conflict of interest in an article titled "Meet the Politicians Getting Rich Off Chicago's Property-Tax Scheme."
"Illinois House Speaker Mike Madigan and Chicago Alderman Ed Burke both run law firms specializing in the lucrative field of Cook County property tax appeals, one of the most inefficient, corrupt systems in urban politics," Berg wrote. "Illinois Senate President John Cullerton is a member of a large law firm that handles a range of issues, including property tax law. The three have held political office in Illinois for a combined 126 years."
The value of a property is reassessed every three years in Cook County by the county assessor’s office and that assessed value is used to calculate property taxes.
Nearly two-thirds of roughly 400,000 property valuation appeals in Cook County were successful in 2013, with law firms receiving up to 50 percent of the reductions.
"It is a blatant conflict of interest," Berg told Chicago City Wire. "It's not surprising that some of the most successful property tax lawyers either have an extraordinary level of political influence or are politicians themselves."
And property owners lose out no matter what they do, Berg said.
"Any way you slice it, taxpayers lose," Berg said in his article. "Choose not to appeal your assessment and the government pockets the extra money. Choose to hire a politically connected law firm and that law firm typically pockets anywhere from 25 to 50 percent of the winnings. And each reduction for a politically connected business means an increase in property taxes for those lacking the right political connections."
Berg went on to say that Madigan and others “have made millions of dollars selling their political influence to large corporations.”
"It needs to stop,” Berg said. “There is no excuse."