A proposal to levy a statewide 1 percent residential property tax would vault Illinoisans’ property tax burden to the highest of all 50 states.
The latest prescription for curing Illinois’ pension woes without reform? Crowning Illinois homeowners as the No. 1 property taxpayers in the nation.
Economists from the Federal Reserve Bank of Chicago released a report May 7 suggesting a 1 percent statewide residential property tax, on top of the property tax bills Illinoisans already pay. The revenue from this new property tax would go entirely toward paying down the state’s pension debt. (The report’s authors peg that debt at roughly $130 billion. Moody’s Investors Service has estimated it may be more than $250 billion.)
Under the plan, owners of homes worth $250,000 would pay an additional $2,500 in property taxes for the next 30 years.
Experts at the nonpartisan Tax Foundation ran this proposal against their 2018 State Business Tax Climate Index. The results aren’t pretty.
Illinois currently ranks 45th in the nation for its property tax burden, according to the Tax Foundation, with property taxes amounting to 2.03 percent of median income, or $2,087 per capita.
If the Land of Lincoln implements this new 1 percent property tax, the Tax Foundation estimates Illinois’ property tax burden would fall behind every other state, ranking 50 out of 50. That ranking takes into account property tax collections per capita, property taxes as a percent of personal income and capital stock taxes.
In the wake of this proposal, state Rep. Jeanne Ives, R-Wheaton, introduced a House resolution opposing the passage of a new, statewide property tax in Illinois.
To their credit, Chicago Federal Reserve economists have done residents the favor of laying bare the magnitude of pain that pensions can inflict upon homeowners. That is, if lawmakers fail to alter the state’s constitution to allow for changes to benefits.
Illinoisans already saw property taxes grow six times faster than incomes from 2008-2015 – driven in no small part by rising pension costs at the local level and the state level, where those costs crowd out funding for core services.
And that’s what’s even more frightening than a proposal for a multibillion-dollar property tax hike: The fact that it wouldn’t even be enough to fix the state’s debt problem.
This additional tax would do nothing to address tens of billions of dollars of retiree health care costs at the state level, or the billions of dollars in local pension debtalready creating financial crises in places such as Harvey.
The stakes for pension reform have never been clearer for taxpayers and their elected officials: Amend the Illinois Constitution and restructure pension benefits, or face a world of hurt.