Any homeowner glancing at the property tax bill that just arrived could at first glimpse say this tax stuff is simple.
It’s all neatly laid out, how much goes to the city or the local school or mosquito abatement district. Nothing more complicated than a Visa bill.
But venture beyond what the tax collector gets and everything suddenly gets hazy.
There’s no need for embarrassment: The property tax system in Illinois is a quagmire. It is complicated, filled with jargon that even the most well-versed in the system don’t always grasp and rife with rules that change from place to place.
Some experts say it also has helped elevate the art of buck-passing. When the tax bills jump, the assessor can blame the city, which can blame the schools, which can blame the multiplier.
Yet when reforms have been tried over the last decade, they have often either complicated things further or, worse still, done little except raise taxes.
Complexity is only half the problem. The property tax system also has evolved into what is now the least equitable way of raising money to pay for government, experts say.
Two centuries ago, when the property tax was imported from England, the environment was different. Only the rich owned real estate and therefore only they were taxed.
That, of course, is no longer the case. And yet the amount of tax anyone pays on their house is only remotely related to wealth.
Take the same $150,000 house and drop it in South Barrington, one of the most affluent communities in the metropolitan area, and in Harvey, one of the poorest.
When the tax bills come due Sept. 1, the owner of the South Barrington home will pay $2,560. The owner of the Harvey house would have to fork over $7,210.
And yet no tax in Illinois is more important. Of every $100 that goes to fund government in Illinois, $27 comes from property taxes compared with about $18 from sales taxes and $16 from the income tax. Nationwide, the average is $22.
In 1992 alone, taxpayers across the state paid $10 billion in real estate taxes, compared with $5.7 million from the income tax and a like amount from the sales tax.
Few would argue Illinois has a system on its hands that at best can be called Byzantine. Some experts would also argue this point: Illinois still ain’t ready for reform.
“I think the chances of eliminating the property tax system altogether are slim to none because it annually provides about $10 billion to fund local government and it would require massive increases in the income tax to replace it,” said Cook County Assessor Thomas Hynes.
Over the years, there certainly have been attacks on the state’s tax system. Former Chicago Comptroller Ronald Picur counted 429 separate pieces of property tax legislation approved by the General Assembly between 1981 and 1991. Little of it was directed toward changing the system.
Rather than reform, Picur, who is now director of the Office of Governmental Accounting at the University of Illinois at Chicago, found that nearly a third of the legislation increased the authority of local governments to raise taxes. What legislative changes there were to the system, were aimed at aiding the governmental participants rather than helping those who pay the bills.
That isn’t to say there hasn’t been some tinkering. One of the most significant changes came two years ago when state lawmakers in a bit of horse trading exchanged tax caps for the collar counties for implementing a kind of assessment freeze in Cook County.
Though caps have held down the rate of increases, they also have been criticized as a patchwork solution that doesn’t really attack the real problems of the property tax.
As for the assessment freeze-which is supposed to stop local governments from trying to raise more money by exploiting assessment increases rather than taxing solely on what is needed-the reviews are still out.
Any homeowner who saw bills jump by 30 percent or more would be unimpressed. And experts like Toni Hartrich of the government watchdog group the Civic Federation contend the so-called freeze has only complicated the system further and delayed even bigger tax increases a year.
“I don’t think tax caps are a permanent solution to property tax problems any more than I think the homestead exemption is,” said former state Revenue Director Douglas Whitley.
“Consistently, the legislative solution to rising property taxes is the homestead exemption, which is nothing more than a political Band-Aid,” he said. “It is intended to be an appeasement of the voting population.”
There is no shortage of things to change. Among the most frequent complaints: assessments that don’t always value every property by what it’s worth, leading to a disparity in values; an appeals system that makes it difficult to challenge an assessment and leaves it to the property owner to prove the number is wrong; a multiplier intended to equalize property values across the state that penalizes homes that are most fairly valued.
Experts say attacking any of these matters would help. But in the end, they say, this is just one bad tax.
Some say the solution is obvious. To cure the problem, simply shift the burden from the property tax to the income tax, particularly to fund education. About two-thirds of a tax bill typically goes to schools.
Such solutions have been offered almost annually in Springfield. So far, they all have experienced the fate that befell the bill pushed by Hynes this year.
Hynes’ measure would have reduced property taxes for education by $1 billion over four years by replacing property tax dollars with an equal amount of income taxes. The bill was placed on interim study, which is the legislative equivalent of throwing something into the La Brea Tar Pits.
So if there are so many flaws and the solution appears obvious, why does nothing change?
“I think the problem is that everyone has to be a winner and that’s unlikely, that’s why nothing has happened,” said one tax expert.
Indeed, like most pieces of legislation, there are going to be winners and losers when it comes to overhauling the tax system.
For instance, in places like Rosemont or Oak Brook or Braidwood which have huge tax bases because of property like shopping centers or nuclear plants, property taxes have yielded benefits that would be lost by shifting to income taxes.
In Cook County, where the owners of commercial property pay a larger share of the taxes than homeowners because of the county’s unique way of assessing property, tinkering with the system could result in a shift in the burden.
State Sen. Aldo DeAngelis (R-Olympia Fields), chairman of the Senate’s Revenue Committee, said even local governments have a stake in keeping the property tax-even though public officials complain about it. Since 1975, he said, the cost of living has grown by 160 percent, but property taxes have gone up by 336 percent.
But if local governments, and particularly school districts, have some stake in maintaining the status quo, DeAngelis said, so do the trial lawyers. After all, a complicated system requires an attorney as navigator.
In fact, a specialized field of law has developed in Illinois practiced by a small number of attorneys who file tax or assessment protests, usually for the owners of office buildings or factories, in a quest for a lower bill. Among the firms that has specialized in this field is that of House Speaker Michael Madigan.
Also standing in the way of reform, some say, is public fear that tax reform is really a misnomer for tax increase.
“There is a great deal of distrust of government and whenever you talk about changing the tax mix, it takes a high degree of acceptance on the part of the public that it will work out for you,” Whitley said.
“There may be all kinds of good policy reasons for doing it, but when it is all said and done, people will think I raised their taxes,” Whitley said. “Why would I want to risk losing office just to have a cleaner, better system?”
