A property tax freeze isn’t enough
One in six Illinois homeowners are seriously underwater.
Imagine your boat has sprung a leak. You’re adrift. You’re frightened. You bail water, frantically. The hole is growing larger.
But one other passenger is on board. He seems confident.
“I have a solution,” he says with gusto. “I will guarantee the size of this hole stays the same.”
You stare at him blankly.
“And in exchange for this guarantee, I will add a pile of bricks to the boat.”
This is the state of debate when it comes to Illinois taxes.
First, the leak: Illinois is home to a housing crisis. The Land of Lincoln has one of the highest shares of “seriously underwater” homeowners in the nation, according to a 2017 RealtyTrac report. When a homeowner is “underwater,” it means she owes more on her mortgage than the actual value of her home. “Seriously underwater” means she owes at least 25 percent more than her home is currently worth.
About 1 in 6 Illinois homeowners are seriously underwater. That’s 70 percent higher than the national average. And that’s not the whole story. Certain areas of the state are drowning.
Northern Illinois communities such as Round Lake (where 25 percent of homeowners are seriously underwater), Waukegan (37 percent) and Rockford (29 percent) are all home to property woes.
And downstate communities are far from immune. East St. Louis (41 percent), Alton (20 percent) and Belleville (18 percent) are all above the state average.
In certain parts of Chicago’s south suburbs, it is not uncommon for half of homeowners to be seriously underwater on their mortgage.
The same homeowners gasping for air on their mortgages are those shouldering the nation’s highest property tax burden. Thousands of local governments in Illinois have refused spending reforms for decades, and property tax bills continue to rise to pay for that behavior.
In many communities, the hole in the boat is cracking to form a full-blown fissure.
A property tax freeze is a nice gesture for those families trapped paying twice for their home – once to the bank for an underwater mortgage and just as much to the government in property taxes. But that’s not enough. They need substantial relief.
And yet, lawmakers think freezing property taxes gives them permission to hike the state income tax – a pile of bricks on a sinking ship.
The Illinois Policy Institute commissioned a poll on this subject in May. Pollsters asked likely voters: “Do you favor or oppose a state budget that includes raising the state income tax?”
Nearly two-thirds of respondents opposed.
But what about the property tax freeze? Surely they’d take such a deal, right?
Nope. More than half of respondents said they opposed “a state budget that includes raising the state income tax but also includes a property tax freeze.”
By itself, a property tax freeze with a massive income tax hike is not a fair compromise. Illinois voters clearly know this. Even among those the budget impasse directly affects, a plurality (49 percent) of respondents preferred a cuts-only, no-tax-hike budget.
A good bargain would be a property tax freeze with reforms that work to address the cost drivers that make those bills so high in the first place.
Among those: real pension reform based on the 401(k)-style plan currently offered to state university workers, collective bargaining reform and ending the free handouts from Springfield that fuel local overspending.
One can only bail water for so long. State lawmakers need to patch the hole.