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Razzle-dazzle on property tax relief


If legislative sessions, like motion pictures, were accompanied by musical scores, "Sweet Georgia Brown" would have been a good choice as a theme song for this fall's meeting. That tune, so synonymous with the Harlem Globetrotters, is particularly apt for a session in which politicians tried to dazzle homeowners beset by soaring property taxes by tossing relief plans around like Meadow-lark Lemon and his teammates displaying their ball-handling wizardry in their famous pregame warmups. Unlike the Globetrotters, however, the legislature stumbled, bumbled and fumbled on the issue, then finally turned it over to the January session.

Before the buzzer, the House managed to approve one far-sweeping package, which the Senate rightfully rejected because of its outlandish price tag. House members later turned down a second unsatisfactory plan which included a $1,000 increase in the existing general homestead exemption, additional tax breaks for senior citizens, and authority for counties to have real estate taxes paid in four installments.

Though House Speaker Michael J. Madigan (D-30, Chicago) has promised another vote on the proposal in January, he and other legislative negotiators would be better advised to go back to the drawing board.

The major drawback in the second plan, which fell short on a 56-38 House roll call, is the proposed increase in the general homestead exemption, which now insulates from property taxes up to $3,500 in assessment increases over 1977 levels. Among its flaws, the increase would:

  • Boost property taxes still higher for renters, small businessmen, farmers and owners of other nonresidential property as some of the tax burden is shifted away from homeowners. Reducing the tax base causes higher tax rates for the remaining property to generate the total dollars levied. While some rates have statutory ceilings that can't be exceeded, others, like debt service and retirement, have no limits. Property tax demands by Chicago, Cook County and scores of other home-rule units are similarly unfettered.
  • Dilute the relief available for those who most need it by treating owners of expensive mansions with huge incomes the same as owners of modest bungalows living on fixed incomes. (The plan the House rejected did provide some targeted relief, lifting to $18,000 from $14,000 the income ceiling for eligibility in two state tax relief programs for seniors. The change would qualify an estimated 46,000 additional senior households for some $27 million in state circuit-breaker grants.)
  • Erode the tax base for schools and other local governments, undercutting last spring's efforts to beef up funding for education by a temporary income tax hike. Fully implemented, the $1,000 boost would slash school revenues by some $82 million, according to an Illinois Economic and Fiscal Commission analysis.
  • Do nothing for homeowners in most parts of the state, where the current exemption is not being fully utilized. In fact, residential property values have increased by an average of less than $3,000 in 60 downstate counties, according to an Illinois Department of Revenue study; perhaps that's why only 11 representatives from districts outside the Chicago area voted for the second plan.

More fundamentally, however, the package addresses the symptoms, not the cause, of higher property taxes. Simply put, it's "get-me-through-the-next-election" political relief for squirming incumbents, not meaningful long-term tax relief for beleaguered property owners. Moreover, the legislation does nothing to bring greater simplicity, fairness and predictability to what today is a complex, confusing and inequitable procedure by which property is assessed and equalized and taxes are levied and collected.

To move beyond Band-Aids, lawmakers must come to grips with a basic fact of fiscal life: Rising property taxes reflect increased spending by local taxing bodies.

December 1989 | Illinois Issues | 8

To rein in property taxes, therefore, spending must either be held in check or paid for out of some other revenue source. Spending could be limited, for example, by authorizing substantial levy increases only following approval by voters or by an extraordinary majority of a taxing body's board, as some have suggested. But simply making it more difficult for local units to raise additional revenue overlooks some very basic questions: What services should local governments provide? How should they be paid for? What services should property taxes support?

The foremost issue, of course, is that of funding local schools, whose levies account for about 60 percent of property taxes in the state. For years, lawmakers have toyed with various ways to ease the schools' reliance on property taxes, most often by substituting income taxes, either state or local. Although such musings have yet to bear fruit, they merit continued attention, especially given the virtual certainty of a court challenge to the constitutionality of the state's present school financing system.

But there are other areas worthy of review as well. Currently, for example, property taxes support retirement systems for municipal employees whose benefit levels are determined by the General Assembly, not local officials. Statewide levies for pension costs in 1988 reached some $247 million, according to the Economic and Fiscal Commission.

Real estate taxes also help pay for the court system, to the tune of about $300 million in 1988, even though circuit courts are totally under the control of the Illinois Supreme Court.

If state revenues, rather than local real estate taxes, paid pension and court costs, property tax billings statewide would be cut between 7 percent and 8 percent, according to the Economic and Fiscal Commission. But state income tax rates would have to go up about 15 percent to achieve dollar-for-dollar replacement.

Is that the best solution? Probably not. But until the legislature begins seriously examining such options, passage of meaningful property tax relief is about as likely as a Globetrotter loss to their customary foil, the Washington Generals.□

Charles N. Wheeler III is a correspondent in the Springfield Bureau of the Chicago Sun-Times.

December 1989 | Illinois Issues | 9

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