Chicago’s commercial property taxes 2X U.S. city average, kill opportunity
Chicago’s high commercial property taxes hurt both businesses and homeowners. The result is less business, fewer jobs and growing inequality across communities.
Chicago’s high commercial property taxes are driving out businesses, and a new report shows it’s hurting the homeowners left behind.
Chicago businesses paid 4.08% of their properties’ values in property taxes in 2023, the Lincoln Institute of Land Policy reported July 23. That was over double the 1.81% average the report found across the largest cities in each state.
Detroit was also called out for its high rate of 4.05%. While Detroit’s rate was driven by its notoriously low property values, Chicago’s high commercial taxes were attributed to high local government spending and a tax system that focuses on shifting the burden to businesses.
The high property tax rates are across Cook County, not just in Chicago. Ford Heights, a south suburban village, had residential and commercial property tax increases ranked among the top 10 nationwide in 2020.
Commercial property taxes increased for businesses in that community by 42%. Once a hub for transportation and industry, Ford Heights has become an opportunity desert, burdened by a staggering 19.19% effective commercial property tax rate in 2019. The median effective commercial property tax rate in Cook County that year was 8.26%.
This discrepancy is partially caused by migration. As manufacturing businesses flee to escape the growing costs, the local tax base erodes, shifting a heavier burden onto remaining businesses and residents.
The Cook County treasurer’s 2023 tax bill analysis found in the south and southwest suburbs, 4% of the tax base had been shifted from businesses to homeowners. This is the cycle: overtaxing commercial properties makes it less profitable to do business, so companies leave, depleting the village economy and leaving residents behind to shoulder the same or a growing tax burden.
Residential properties in Cook County are assessed at 10% of their fair market value, while commercial properties are assessed at 25%. Initially designed to protect homeowners, rising taxes have squeezed businesses out of the state, leaving homeowners vulnerable when the companies decide to leave.
Ford Heights isn’t alone. Across Cook County, communities with shrinking commercial tax bases are stuck in the same downward spiral: as businesses leave, the burden shifts to residents, driving tax rates higher and accelerating decline.
Elected leaders need to look for ways to reduce the property tax burden, such as controlling public pension growth. Until that happens, more communities will suffer, and more opportunities will disappear.