Fake property tax relief: 3 reasons HB 156 fails taxpayers

Ted Dabrowski

Former Vice President of Policy

Ted Dabrowski

Craig Lesner

Budget and Tax Research Director

Craig Lesner
April 12, 2017

Fake property tax relief: 3 reasons HB 156 fails taxpayers

Despite being sold as property tax “relief,” new legislation in Springfield would only shift property tax burdens on to certain taxpayers, while complicating an already confusing property tax system.

A new proposal Illinois politicians have dubbed a “comprehensive tax relief package” is little more than a campaign gimmick in preparation for next year’s legislative elections.

House Bill 156, proposed by state Rep. Michelle Mussman, D-Schaumburg and co-sponsored by state Rep. Katie Stuart, D-Edwardsville, would increase property tax exemptions for some taxpayers, but it is not the “comprehensive” solution Illinoisans need to lower their ever-growing property tax bills, which are the highest in the nation.

The bill would increase the standard homeowners exemption to $8,000 per eligible household, increase the exemption for seniors over the age of 65 to $6,000 annually and creates a $2,500 annual exemption for disabled veterans and those 75 and older. It also creates exemptions for long-time homeowners and allows some seniors to defer their taxes until they sell their home.

The House passed the bill 108-1-0 April 6. That’s likely because many politicians didn’t want to go on the record as having voted against property tax “reform” for seniors and veterans, fearing any “no” vote would be used against them in next year’s election campaign.

But a “no” vote is absolutely the right decision on this bill.

HB 156 does nothing to stop the overly burdensome growth in Illinois property tax bills, even for seniors and veterans. It simply shifts more of the property tax burden on property owners who do not receive an exemption, The bill also fails to address the cost drivers pushing taxes higher and squeezing working-class workers and seniors out of their homes in the first place. And it does nothing to reform how government spends money, nor does it remove the excesses and duplication of local governments.

Instead, the current proposal just shifts an ever-growing property tax load to other groups of taxpayers – in particular the commercial and industrial property taxpayers. That gives job creators just one more reason to leave Illinois.

True tax relief won’t come to taxpayers – including seniors and veterans – without first freezing the total tax levy at each local government level and then attacking the underlying causes that push up taxes in the first place. To bring those taxes down, new laws must also allow and empower local leaders to negotiate better contracts with local unions.

Here are the key three reasons why HB 156 fails taxpayers:

1. The bill does nothing to address why the cost of government – and property tax bills – continues to grow.

The real driving force behind increasing property tax bills is the rising cost of government.

Illinois’ has too many duplicative units of local government that pay out-of-control salaries and pensions to the bureaucracies that run them. That includes everything from unnecessary townships to overlapping school districts to mosquito abatement districts. Most Illinoisans live under three layers of local government – municipal, township and county. Meanwhile in most other states, residents never have more than two layers of government.

Those layers of governments dole out state-mandated wages for government construction projects far higher than what taxpayers can afford, overly expensive perks to employees through collective bargaining and runaway workers’ compensation costs.

Those items have pushed Illinois’ average property tax burden to the highest in the nation. HB 156 fails to address any of those issues. Without addressing and reforming the rising costs of government, the property tax burden on seniors and veterans – two of the groups this bill claims to help – will continue to grow, too.

2. Since the proposal doesn’t lower the overall tax burden, it just shifts the burden to other taxpayers.

Even with all the exemptions for homeowners, the proposed bill does nothing to reduce local government spending. That means those who don’t get exemptions must pick up the tax reduction given to some. That’s the case whether you are a homeowner that doesn’t get any exemptions or a small business that’s ignored.

Carol Portman, president of the Illinois Taxpayer Federation, says she is still evaluating the numbers, but Illinoisans can expect at least a $6 billion reduction in residential assessed property values. And that means commercial and industrial will have to pick up the slack.

Portman says:

“We are still in the process of estimating some of the newer and more complicated features of the bill, but our preliminary calculations of the consequences of the increase in the homeowners’ exemption are that approximately $6 billion of EAV will be removed from the state-wide tax base.

“To keep total taxes the same, local governments will need to increase their tax rates by roughly 2%. That increase will fall most heavily on commercial and industrial properties, which do not qualify for the homeowners’ exemption.

“Essentially, it’s a shift of tax burden from one group onto another, and not necessarily a tax decrease, even for homeowners. The other exemptions will require additional tax rate increases, and the higher rates will hit all property owners, whether eligible for exemptions or not.”

At first glance, somebody else footing more of the property tax burden may sound good to some homeowners, but a tax shift like the proposal in HB 156 is not good for Illinoisans.

Taxpayers need more jobs, not tax hike proposals that chase even more job creators over the border.

3. The bill makes an even bigger mess of an overly complicated property tax system

Most Illinois homeowners don’t understand the property tax system in Illinois and why their taxes seemingly always go up, even when a property tax cap law exists in large parts of the state.

Not only does HB 156 not fix the problem, it makes the system even more convoluted by adding more complications and exemptions.

These proposed “reforms” create more confusing paperwork, longer wait times to get answers to questions and all-around bigger headaches for taxpayers – more bureaucracy in the name of tax relief.

The need for real reforms

Instead of superficial “reforms,” Illinoisans deserve tax relief that tackles the state’s core spending problems.

The Illinois Policy Institute instead has done just that by laying out a three-step plan for comprehensive property tax reform in its Budget Solutions 2018. First, the plan freezes the total tax dollars local governments can raise going forward.

The plan then eliminates many of the state subsidies that fuel excessive spending at the local level. Currently, billions in state subsidies allow local officials to spend money where it’s most politically expedient – all without have to answer to local taxpayers. Those subsidies prop up unnecessary perks and expenses, including salary spikes, pension sweeteners and workers’ compensation costs that would otherwise be unaffordable.

Last, the plan eliminates the costly state mandates that push up government costs and gives back spending control to local governments. Freezing property taxes and ending state subsidies won’t be enough to fix Illinoisans’ tax burdens. Local officials must also be given greater control over their own budgets so they can reduce the burden on local taxpayers and reform how local government is delivered.

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