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The state of the State

Property tax rates:
What's up, down and revolutionary?

Michael D. Klemens


Rising property taxes have made taxpayers angry and prompted state officials to react. Gov. Jim Edgar and the General Assembly have imposed caps on property tax growth in the five collar counties (DuPage, Kane, Lake, McHenry and Will) and slowed tax bill growth in Cook County. They have threatened to restrict property tax growth statewide.

Tracking done by the Taxpayers' Federation of Illinois suggests that Edgar and lawmakers have missed the mark. According to one measure of property tax burden, over the last 10 years growth has been fastest in downstate cities. In and around Chicago, tax burden has grown more slowly or even declined.

The Taxpayers' Federation annually computes the effective tax rate for 58 Illinois cities. The effective tax rate is the percentage of a property's market value that a taxpayer pays in property taxes. The federation uses Department of Revenue data to compute the equalized assessed value of a house. It totals property tax rates for all taxing jurisdictions to come up with the effective tax rate and tax bill on a typical house.

In October, the Taxpayers' Federation released its report on 1989 taxes (collected in 1990). East St. Louis (hardly a hotbed of the current tax unrest) had the highest 1989 effective tax rate, 5.798 percent. That meant the owner of a house worth $100,000 in the financially hard-pressed city would pay $5,798 per year in property taxes.

Next highest were three southern Illinois cities: Cairo with an effective tax rate of 4.552 percent; Benton with a rate of 3.510 percent; and Carbondale with a rate of 3.045 percent.

The cities with the lowest effective 1989 tax rates in the Taxpayers' Federation survey were all in Cook County. Northbrook was the lowest of the 58 cities studied, with a rate of 1.126 percent. Next lowest was the city of Chicago with a rate of 1.457 percent. Next was Oak Lawn with a rate of 1.482 percent. Next was Streamwood with a rate of 1.577 percent.

Ponder what that means. The owner of a $100,000 house would pay more than four times as big a tax bill in East St. Louis as would someone in Northbrook. The Carbondale homeowner would pay twice the property taxes of a Chicago homeowner if their houses were the same value.

Because the data have been reported annually for the same 58 cities, comparison with the report done 10 years before (1979 taxes collected in 1980) is revealing East St. Louis had the highest effective tax rate in both 1979 and 1989. The top three each year were East St. Louis, Cairo and Benton. Macomb and Kankakee were in the top 10 each year. On the other end. Northbrook had the lowest effective tax rate in both 1979 and 1989. Streamwood, Effingham and Belleville were also in the bottom 10 both years.

Although the cities with the highest and lowest effective tax rates remained the same, there were many changes. Rock Island went from 38th place on the 1979 list to fifth place on the 1989 list as its effective tax rate jumped 90.6 percent. Olney moved from 47th place to seventh with an 82.7 percent increase in its effective rate. Moline went from 49th place to 10th with a 79.3 percent increase in its effective tax rate.

Two cities that were in the 1979 top 10 list fell precipitously. Aurora went from seventh place to 39th as its effective tax rate dropped 5.2 percent. Crystal Lake fell from ninth to 33rd place; its effective tax rate increased 3.5 percent, but most other cities' rates grew faster.

Four cities at the bottom of the 1989 list saw decreases in their effective tax rates between 1979 and 1989, including: North-

8/December 1991/Illinois Issues

brook, down 7.4 percent; Chicago, down 13 percent; Oak Lawn, down 6.9 percent; and Oak Park, down 14.4 percent. The only DuPage County city on the list, Wheaton, saw its effective tax rate remain unchanged at 1.889 percent, but its position on the list fell from 17th in 1979 to 46th in 1989.

The numbers present a clear and convincing case that when effective tax rates are considered, Illinois' property tax problem is not in Chicago or the suburbs, but downstate.

Two caveats are in order. First, $100,000 buys a lot more house in East St. Louis or Cairo than in Northbrook or Chicago. Second, actual tax bills have increased most rapidly in suburban Chicago. Growth of suburban property tax bills reflect increased value of property. Downstate property values have not grown, but property tax rates have. When tax rates grow faster than property value, effective tax rates increase.

The issue of effective tax rates poses a dilemma that Edgar and state lawmakers should confront when they consider the question of property tax relief. Are properly taxes that increase because a house grows in value more unfair or less unfair than property taxes that increase on a house those value is stagnant or decreasing?

Sen. Richard Luft (D-46, Pekin), chairman of the Senate Revenue Committee, is toying with a scheme that would return property tax questions to the local level. Luft is wary of a state property-tax solution. He notes that the suburban property tax caps would have been meaningless for downstate cities like Rock Island and Peoria.

Luft wants to give citizens at the public hearings on every taxing district's levies the authority to reject a tax increase they find too large. To implement such citizen rejection would require some way to force a vote at the public hearing. The key, Luft says, is the dialogue between the local taxing body's officials and the local citizens. Either citizens could be convinced the increase was needed, or officials could be convinced to lower the increase, he says.

Luft says details, like how to prevent a meeting from being stacked, need to be worked out, but he believes town meetings and local control are preferable to state-imposed solutions. "I think the ultimate cap is the ballot box," he says.

Citizens making decisions without orders from some faraway capital now, here's a revolutionary idea.

December 1991/Illinois Issues/9

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