State Tax Breaks Are Hurting Chicago's Suburbs

While some homeowners are now paying nothing in property taxes, businesses and local governments are feeling the pinch.
by | November 2018
View of Chicago skyline from the suburbs
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Some of the suburbs south of Chicago have been struggling for years. Their populations are growing older and poorer, and many of their businesses are seeking greener pastures across the Indiana state line. A property tax giveaway enacted last year by the Illinois General Assembly has made their revenue problems much worse.

The suburbs have been victims of a series of unfortunate events. Chicago Mayor Rahm Emanuel has repeatedly raised the city’s property taxes to fund schools and buttress problematic pension funds. That led state legislators to come up with the idea of giving senior residents in the city a tax break. The way things worked out, however, they extended tax breaks to everyone in Cook County. That meant much less tax money going into suburban treasuries.

Given low property values in the southern suburbs, some people are now paying nothing in property taxes. The suburb of Harvey saw 700 homes come off its tax rolls, costing it 5.6 percent of its assessed value. “Some seniors are not paying taxes at all,” says Hazel Crest Village President Vernard Alsberry Jr. “It’s created a burden for our other taxpayers.”

The losers in this process include local commerce. In response to the state action, Cook County decided to do away with a 10 percent tax break for small businesses. As a result, some commercial property owners are seeing their rates go up for two different reasons: the decline in residential tax bills and the cancellation of the business tax incentive program. This “double whammy,” Alsberry says, has already brought some development programs in the south suburbs to a halt.

Taxes on some commercial properties in the area are now two or three times as high as their mortgage payments. Things are likely to get worse when new tax bills are issued in January. It’s simply a matter of the air having to go somewhere when the balloon gets squeezed. “You have a finite amount of property in a county,” says Laurence Msall, president of the Civic Federation, a public policy research group in Chicago. “If you remove properties from the tax roll, you’re going to be shifting the burden to the non-exempt properties.”

In the south suburbs of Chicago, that means some commercial properties can’t even be given away, because the projected tax burden is greater than their underlying value. Residents and businesses are faced with ever-higher tax bills while receiving declining services due to the fiscal mess. To bring that vicious circle to a halt, Alsberry and his neighbors are lobbying both county and state officials for some relief.

For legislators, it was fun to pass a tax cut bill when the downside mattered only to a tiny share of constituents. But this “dissipation of responsibility,” as Msall calls it, makes it hard for the localities to remedy the situation. “The legislature is legally able to change the exemption levels and is not, at the end of the day, responsible for making up that reduction in local finances,” Msall says. “The full impact is on our local governments.”