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Jack up property taxes for pensions, say three Chicago Fed economists

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Ouch.  

 

Jack up property taxes for pensions, say three Chicago Fed economists

 

Quote

 

 

 

Illinois homeowners, who already pay some of the nation's highest property taxes, should pay about 40 percent more for the next decade to wipe out the state's crippling pension debt, according to a trio of economists at the Federal Reserve Bank of Chicago.

The economists argue that paying off the state's $129.1 billion in unfunded pension obligations cannot be done with revenue from new taxes such as a tax on marijuana sales or on financial transactions.

 

"In our view, Illinois' best option is to impose a statewide residential property tax," they wrote, in part because it would be fair: "Illinois residents who have benefited most from the past services of governmental employees are more likely to be homeowners, so it seems reasonable that they should pay a larger share of the costs."

 

They are proposing a statewide tax of 1 percent of a home's value. Under their plan, the tax bill on a $500,000 house would go from about $11,600 to $16,600, an increase of $5,000, paid each year for 10 years.

 

The economists—Thomas Haasl, Rick Mattoon and Thomas Walstrum—calculated that a property tax equal to 1 percent of a home's value could plug the state's pension gap in 10 years.

Illinois homeowners pay an average of 2.32 percent of their home value in property tax every year, which according to WalletHub is second only to New Jersey's 2.40 percent.

But rates vary widely in the state. The economists note that Lake Forest homeowners pay about 1.7 percent of their home's value in property taxes, while in nearby Waukegan they pay 4.4 percent.

The proposed increase would amount to a 43 percent increase on the average that Illinois homeowners pay.

 

"We already have people leaving the state over property taxes," said Mabel Guzman, an @properties agent in Chicago who said one pair of clients moved to northwest Indiana in 2017 in part because of lower taxes there, and another is making plans to sell a Chicago home and build one in Northwest Indiana.

"Taxpayers in Illinois are not going to be happy to see this," said Carol Portman, president of the Taxpayers Federation of Illinois. In particular, Illinoisans selling their homes "could expect to get a lower price than they were expecting," as buyers plug the higher monthly tax bill into what they can afford to spend on housing each month, and as a result trim something off the price they'll pay for a house.

 

The price adjustment would be small, but in Chicago's poorly recovering housing market, where many homeowners are underwater and others don't stand to make enough of a profit to fund a move up to a pricier house, the additional tax "is another nibble around the edges of a home's value," Portman said.

 

 

..snippage

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PLEASE EXCUSE THE ANNOYING COMMERCIAL BREAKS IN THE CONVERSATION:

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People will be leaving in even more of a flood than they had been.  

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Different tax, different geography, same effect.  Except this time, it is businesses that are leaving:

 

http://komonews.com/news/business/amazon-fires-back-at-seattles-proposed-head-tax-pauses-construction-projects 

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