The Policy Shop: Property tax pain at home – and relief abroad

This episode of The Policy Shop is by writer Patrick Andriesen

Compare Illinois’ median property tax bill to Alabama’s.

Illinois’ is higher. Add Alabama’s and West Virginia’s bills together. Illinois’ is still higher. Take Alabama’s, West Virginia’s, Arkansas’, Louisiana’s and South Carolina’s bills and total them all up – Illinois’ is still higher.

If you owned five houses, one in each of those states, your property taxes would be $361 cheaper than for one house in Illinois.

The median homeowner in Illinois paid $5,055 in 2022, the latest data from the U.S. Census Bureau shows. Illinois has the second-highest property tax rate in the U.S., pays double the national median and sees local governments take the equivalent of about 2% of each property’s value a year to operate.

Within Illinois there was a lot of variation on those median bills: Lake County property owners paid the most at $8,609 and Pulaski County the least at $694. The counties are at the extreme opposite edges of the state.

Speaking of edges, Illinoisans could save big just by moving a county over – if that county were in a neighboring state. Homeowners would have saved an average of $1,595 in property taxes in 2022 in Illinois’ 39 border counties by moving across the state line into a similar value home in the other state’s neighboring county.

Homeowners in 18 of the border counties would have seen their median property tax bill cut in half by moving across the state line. Will County homeowners stood to save the most – $3,035 – by moving across the border to Lake County, Indiana.

Homeowners in the U.S. pay an average of about 1% of their home’s value per year in property taxes. Illinois is double that, but there’s a wide variety among the 102 counties.

McHenry County homeowners pay 2.5% of their property values on average, which is the highest rate in Illinois. Overall, McHenry County property values put the median tax at $7,068 to rank No. 5 in the state. Gallatin County homeowners have the lowest rate, paying just under 1%, with a median bill of $1,123 that was near the lowest in the state.

In Illinois, a homeowner’s property tax bill is based on two primary factors: the assessed value of the property and the amount of revenue the local taxing districts request to operate the next year.

Schools levy most of the property taxes – about two-thirds across Illinois. Illinois has nearly 7,000 local government units with the power to demand property taxes, far more than any other state.

Chicago Public Schools is one of those taxing bodies, extracting $3.8 billion of its $9.4 billion budget from property taxes this past year. The current budget is $9.9 billion, but that doesn’t include the demands being made by the Chicago Teachers Union for its new contract.

Those demands tally over $10 billion, meaning Chicago property taxes are sure to rise again. But while CTU is pushing for a contract guaranteed to drive up property taxes, it wants its own taxes cut.

CTU is working to cut the tax bill on its headquarters by $543,352 – which would take about $301,000 from Chicago Public Schools.

The union, through its foundation, paid $568,221 in property taxes for 2023 on its headquarters near the United Center. The taxes reflected a market value of $10.7 million.

But the Cook County Assessor put the market value at $19.4 million in 2024 when it did its regular three-year reassessment. That would have yielded a property tax bill of over $1 million, according to the appraiser hired by the Chicago Teachers Union Foundation.

The private appraiser set a market value of $9.2 million – lower than the county’s old market-value assessment. If CTU succeeds in its tax appeal, it would pay less in property taxes than it did in 2023.

The appraisers argued the property tax would be burdensome on renters and discourage buyers.

It’s pretty bold to claim your property taxes are “burdensome” and then ask other taxpayers for a blank check. Remember, CTU President Stacy Davis Gates said the union contract demands “will cost $50 billion and 3 cents. And so what? That’s audacity. That’s Chicago.”

That may be Chicago, but it’s not a healthy Chicago. It’s not a Chicago that encourages people to stay or that encourages development of housing people can afford.

Property taxes are driving people out of Illinois. The state had a total loss of 548,916 people in a decade, entirely because of moves to other states. Over 50% of Illinois voters polled cited high taxes as the main reason they would move out of the state if given the chance.

So, what to do?

Illinois’ progressives think the answer is to go after millionaires, with former Gov. Pat Quinn beating the drum for a Nov. 5 voter question to raise taxes 3% on millionaires to create a $1.5 billion pool for property tax relief. Considering total property taxes in Illinois were nearly $20 billion in 2022, that amount doesn’t go very far to get Illinoisans anywhere close to the national average. Plus, who trusts Illinois politicians to pass on the money rather than spend it, and who says the richest Illinoisans won’t just join the exodus?

The more sustainable and fiscally responsible answer is to control the growing share of property taxes have gone to government pensions, which continue eating more school and local government resources. With some of the nation’s highest property taxes and an ever-growing share being taken for pensions, still Illinois ended the 2023 fiscal year with an estimated $211 billion in unfunded state and local pension liabilities.

That is about half of what we need on-hand today, leaving Illinois with the nation’s worst funding ratio and biggest pension debt. It is at a level between what experts warn is “deeply troubled” and “past the point of no return.”

A “hold harmless” pension reform plan, such as one developed by the Illinois Policy Institute and based loosely on bipartisan 2013 reforms, could help eliminate the state’s unfunded pension liability. It could reduce homeowners’ property tax payments over time while providing retirement security for pensioners.

Illinois doesn’t need to tax more. It needs to amend its constitution so government pension growth can be controlled and stops eating resources that should educate our kids and protect our communities.

A pension amendment can do all that without threatening our ability to afford our homes.