Homeowners Face an Increasingly Unaffordable Burden from Property Taxes


In light of the April 4th elections municipal and school board candidates must address “the elephant in the room” ……… “homeowners facing an increasingly unaffordable burden from property taxes”.   Consolidation, would go a long way toward bringing down property-tax costs.

Property taxes are the single largest tax in Illinois, burdening residents far more than either income or sales taxes.
Illinoisans already know they pay high property taxes.

But what is not as well known is that property taxes are outpacing residents’ ability to pay for them. 

Over the past 50 years, whether measured in comparison to household income, economic growth, population or inflation, all classes of property taxes – residential, commercial, industrial, etc. – have placed an increasingly unaffordable burden on Illinoisans. 

Since 1963, Illinois property taxes have grown 2.5 times faster than inflation and 14 times faster than the state’s population.

And looking at residential property taxes alone since 1990 shows:
• Residential property taxes in Illinois have grown 3.3 times faster than median household incomes.
• Illinoisans’ residential property-tax burden – as a percentage of median household income – has risen 76 percent.
• If Illinois froze its residential property taxes today, it would take 28 years for residents’ property-tax burden to return to 1990 levels.

This long history of growth has resulted in an average effective property-tax rate of 2.32 percent in Illinois – the second highest in the nation, behind only New Jersey.Illinois will be in competition for the highest property taxes in the country.
Property taxes are the single largest tax in Illinois, burdening residents far more than either income or sales taxes.
Illinoisans already know they pay high property taxes.
But what is not as well known is that property taxes are outpacing residents’ ability to pay for them. Over the past 50 years, whether measured in comparison to household income, economic growth, population or inflation, all classes of property taxes – residential, commercial, industrial, etc. – have placed an increasingly unaffordable burden on Illinoisans. Since 1963, Illinois property taxes have grown 2.5 times faster than inflation and 14 times faster than the state’s population.
And looking at residential property taxes alone since 1990 shows:
• Residential property taxes in Illinois have grown 3.3 times faster than median household incomes.
• Illinoisans’ residential property-tax burden – as a percentage of median household income – has risen 76 percent.
• If Illinois froze its residential property taxes today, it would take 28 years for residents’ property-tax burden to return to 1990 levels.
This long history of growth has resulted in an average effective property-tax rate of 2.32 percent in Illinois – the second highest in the nation, behind only New Jersey.2  Illinois will be in competition for the highest property taxes in the country.

Although all property owners (residential, commercial, industrial, etc.) are paying more in property taxes now than they were 20 years ago, even after adjusting for inflation, the overall tax burden has increasingly fallen more heavily on residential property owners. Twenty years ago, residential taxpayers paid 52 percent of all property taxes. Today, they pay over 64 percent.
Thanks to the complex nature of property taxes in Illinois, it’s also difficult for taxpayers to know just where their tax dollars are going.
Property taxes are the main source of income for local governments in Illinois. The state has nearly 7,000 local government districts with the power to levy property taxes, far more than any other state. These local entities, from airport authorities to forest preserves to fire-protection districts, all levy property taxes that are layered on top of each other – making the total property-tax bill for Illinoisans more expensive and more opaque.

However, the biggest driver of property-tax growth throughout Illinois has been property taxes that fund schools, which constituted 63 percent of all property taxes in 2013
.

Since 1970, school-related property taxes have grown at the rate of 5.6 percent a year, 25 percent faster than the 4.1 percent average annual growth in inflation.
All areas in Illinois – whether Cook County, the collar counties or downstate – have experienced growth in property taxes in excess of inflation. Individually, almost every county in Illinois has seen a dramatic increase in its property-tax burden since 2000.

And it’s not that property taxes are high in order to keep other forms of taxation low. Overall, Illinois has one of the highest overall tax burdens of any state, meaning that Illinoisans are taxed more heavily across a majority of tax categories than most other Americans. In fact, Illinois has the ninth-highest state and local tax burden per capita and the 13th-highest burden as a percentage of income.

Fixing the problem

Illinois has attempted in the past to control the growth of property taxes, most notably through the 1991 Property Tax Extension Limitation Law, or PTELL. But the law has been largely ineffective in reducing the property-tax burden and has only added one more layer of complexity to an already overly complex, broken property-tax system.
In Illinois, capping the rate of property-tax growth is not enough. The state needs to reduce the property-tax burden for all Illinois residents. Freezing property taxes at current levels would achieve that objective by lowering the tax burden in relation to the economy and household incomes over time.

However, a property-tax freeze would only be a first step. Other reforms, such as reducing the number of taxing districts and creating new transparency and financial-planning requirements would result in greater efficiencies and would also reduce Illinoisans’ overall property-tax burden.

Illinois has experienced massive growth in property taxes over the past several decades. This growth has far exceeded the growth of population, inflation and the economy.
Illinois homeowners face an increasingly unaffordable burden from property taxes. When measured against median household income, Illinoisans’ residential property-tax burden is 76 percent higher in 2013 than it was in 1990.
And the state’s increasingly burdensome property taxes are not due to an attempt to keep other taxes low. Instead, property taxes are just one of the many high taxes Illinoisans face. As a result, Illinois has the ninth-highest state and local tax burden per capita, and the 13th-highest burden as a percentage of income.
Due to the burden that property taxes already place on Illinoisans, the state must take steps beyond just moderating the growth in property taxes, as PTELL attempts to accomplish.
Instead, Illinois should reduce the overall burden of property taxes to make them more affordable for average homeowners and to bring Illinois’ effective rates in line with those of other states.
A universal property-tax freeze would achieve that goal over time.
Additional steps to reduce the burden of property taxes include reducing the number of taxing districts and requiring taxing districts to implement financial plans to deliver services at lower costs.


By consolidating some taxing districts, overhead will be reduced, the number of highly paid executives and staff will be streamlined, and the overall burden borne by taxpayers will become more transparent.


Consolidation, therefore, will go a long way toward bringing down property-tax costs.

In addition, the General Assembly should consider requiring each district that levies property taxes to submit financial and implementation plans regarding how it will operate more efficiently by providing necessary services at lower costs. These plans will help bring greater transparency and accountability to the system.

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About royfmc

BS in Environmental Engineering from Northwestern University's McCormick College of Engineering MBA from DePaul University's Kellstadt's College of Business JD from DePaul University's College of Law
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