‘Fair tax’ ads falsely promise property tax relief that income tax hikes can’t deliver
Every state without an income tax has lower property taxes than Illinois. The progressive tax amendment includes no property tax reforms, so there’s no guarantee property taxes won’t rise as income taxes rise.
Illinois Gov. J.B. Pritzker has personally funded the “Vote Yes for Fairness” campaign to the tune of $56.5 million. Numerous television and online commercials promote various false and misleading claims about Pritzker’s proposed progressive tax amendment. At least two of these ads claim the so-called “fair tax” will “lower property taxes” for families across Illinois.
That’s wrong. The progressive income tax amendment does absolutely nothing to lower Illinois’ second-highest in the nation property taxes.
To help win support from lawmakers skeptical about voting for the progressive tax amendment, Pritzker in 2019 pushed for the creation of a 90-member Illinois Property Tax Relief Task Force. Some Democrats in the Illinois House had initially indicated they might not support the proposal due to the lack of relief for overburdened property taxpayers, and Pritzker was trying to satisfy their concerns.
However, the task force never issued a final report with recommendations to lower property taxes. Pritzker has signed no legislation that would help local governments structurally reform their biggest cost drivers or place limits on property tax increases. The group’s Republican members refused to sign off on a draft report that mainly rehashed old ideas, said state Rep. Mike Murphy, R-Springfield, a member of the task force. He said substantive ideas were rejected, and the draft contained only vague suggestions.
Without explicit reforms to lower costs to local governments or revenue-limiting measures such as a property tax freeze, there’s no reason to expect higher income taxes would result in lower property taxes. Property taxes fund local government spending, not the state’s. Illinois’ high property taxes are primarily driven by out-of-control pension costs.
In fact, all seven states that do not tax personal income have lower property taxes than Illinois.
Moreover, there is no statistically significant correlation between income tax burdens and property tax burdens across the 50 U.S states. In other words, higher state income taxes are not associated with lower property tax burdens.
Property tax relief was also promised to Connecticut taxpayers, the last state to adopt a progressive tax in 1996, but the promise was broken. Instead, the state’s property tax burden continued to rise at historic rates, increasing 35%. That’s on top of a 13% jump in middle class income taxes under Connecticut’s progressive tax, another broken promise.
The idea that higher income taxes will allow for lower property taxes by increasing state spending on education and funding for local governments is not new. It has not worked out that way in practice.
Education funding is one of the few areas of state spending that increased after adjusting for inflation during the past 20 years, growing 21% in real terms. But that spending was outpaced by a 501% jump in pension spending and a 127% increase in spending on state worker health insurance. Yet from 1996 to 2016, Illinois property taxes rose from around the average for U.S. states to the second highest in the nation despite increased state spending on education.
State income tax hikes in 2011 and 2017, along with a new school funding formula in 2017 that provided $350 million in annual increases for state education spending, have not delivered any property tax relief.
To achieve real property tax relief, Illinois must pursue structural spending reforms that lower the cost of local government, not income tax hikes. The progressive income tax doesn’t even raise enough revenue to close the state’s structural deficit, according to S&P Global Ratings, let alone solve local governments’ financial problems.
Efforts to reduce redundant and overly expensive bureaucracy in Illinois school districts could save taxpayers $708 million in unnecessary costs if they reduced administrative spending to the national average. Those savings could be reinvested in classrooms to improve student outcomes or returned to overburdened property taxpayers. Consolidation of Illinois’ 7,000 units of local government, the most in the nation, would also provide meaningful relief.
Ultimately, lowering property taxes enough to make the state competitive will require amending the Illinois Constitution to allow for real pension reform to solve the local pension crisis. Chicago alone has more pension debt than 44 U.S. states. At least 20 midsized cities, with populations around 25,000, have at least one public safety pension fund that is less than 50% funded. Pension debt per capita in those cities ranges from around $1,800 in Carbondale to nearly $5,600 in Melrose Park.
If voters approve Pritzker’s “fair tax” amendment on Nov. 3, they’ll be granting permanent new taxing powers to Springfield politicians that will make it easier to raise taxes on the middle class and to start taxing retirement income. In return for these powers to raise everyone’s taxes more easily in the future, proponents of the progressive tax are offering only empty promises. They are offering no solid property tax relief.
“Fair tax” backers have already been caught using various types of misleading information to promote the tax increase. A Pritzker-funded group paid over $10,000 to promote a fake tweet on social media, for example. Three Cook County retirees and the Illinois Policy Institute filed a lawsuit over the misleading language being presented to voters on the ballot, which reads like an advertisement in favor of the amendment rather than the neutral explanation required by law.
Claiming the “fair tax” will lower property taxes is yet another in dishonest claim.