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Proviso Probe

Wednesday, September 02, 2009

beware of BS on property taxes

Adam Andrzejewski, Republican candidate for governor, posted the following to his Facebook page. I responded but my response quickly “disappeared”.
Adam Andrzejewski thinks that Illinois property tax is our most opaque tax. Most citizens have difficulty coming to grips with the complex terms, methods of determination, and appeals process. Furthermore, since many taxing bodies are represented on the same property ...tax bill, there is a lack of fiscal accountability. My objective is to create understanding through simplification and instill accountability through financial caps.

Property taxes weren't always so high. Forty years ago we had higher income taxes (and inheritance taxes) and low property taxes. Now the United States has lower federal income taxes, but Illinois has higher property taxes.

The Republican agenda at the national level has been to cut the federal income tax and devolve services to state and local government in the name of “local control”.

(At least part of the “local control” movement has its origins in the racist “state's rights” movement. “State's rights” was the battle cry of the segregationists who objected to the federal government using its power to enforce civil rights for African-Americans.)

In this expanded format, I will acknowledge the Democratic Party didn't resist the push to cut federal income taxes (and the inheritance tax) significantly. The Democrats now hold strong majorities in the U.S. House and Senate and aren't pushing to undue the tax policies of the Republicans.

The property tax has problems. If you buy a bicycle for $250, it's pretty clear what one should pay if the sales tax is 11%. If you make $50,000, it's pretty clear what one should pay if the income tax is 3%.

But how much tax should one pay on a piece of property? The same house could sell for a wide range of prices on any given day depending on the eagerness of the buyer and seller.

Andrzejewski is absolutely correct that the system of determining property taxes lacks precision. The Cook County Assessor has a secret formula. Based on my experience preparing hundreds of property tax appeals, the formula is pretty good. But assigning values to properties that haven't sold recently... it's a best guess.

Andrzejewski's second objection is bullshit. So what if multiple taxing bodies are on the same bill?

If Andrzejewski has concerns/objections about lack of accountability in government spending money he should advocate for laws that end the practice of paying taxes to one unit of government and then having that unit of government give grants to other units of government. This practice undermines accountability far more than having multiple line items for elementary school district, high school district, county, village, etc. on one tax bill.

Andrzejewski wants to simplify property taxes. In most tax systems simplicity is in tension with fairness. There are various programs that make property taxes more complicated: the senior exemption, the senior freeze and the homeowner exemption. Also, commercial and residential properties are taxed differently. Is Andrzejewski advocating elimination of any of the special programs? Perhaps advocating residential and commercial property get taxed the same way?

Or maybe Andrzejewski wants to have a flat tax where every homeowner in a community pays the same tax rate?

Republicans get so used to peddling bullshit that sounds good, sometimes it seems they can't have serious discussions about policy.

Capping property taxes is one of those ideas that sounds good until you get into the details.

Local government needs more money to operate from year to year. While I haven't done an analysis, I'm pretty sure this is driven by a few factors.

1.Health care costs increase faster than the rate of inflation
2.Schools are expected to do more (smaller classes, more special needs obligations)
3.TIF districts diminish the tax base forcing the remaining tax base to pay more
4.Government uses tricks to raid future revenue to delay the need to raise taxes (The City of Chicago leasing parking meters for 50 cents on the dollar is an egregious example of getting the money now while raiding the revenue stream for 99 years.)

The system isn't set-up so that local units of government can make do with the same amount of money from year to year. The system forces local units of government to raise taxes periodically.

I've met Andrzejewski. He invited me to take a trip to Kankakee with him. He's a nice guy. And sincerely concerned about reducing corruption. But just because someone's heart is in the right place doesn't mean that the policies s/he's advocating will work or are good policies.

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