A new report from Cook County leaders comes with a warning about expanding property tax breaks for homeowners: What seems good for one taxpayer can backfire on a whole town.
Countywide, those exemptions remove $1.6 billion in annual tax revenue by lowering taxes for specific categories of homeowners. But the report found that in some municipalities, they don’t provide as much relief as people think.
And in some cases, they contribute to soaring property tax rates across the board. The higher rates can scare away prospective homebuyers or businesses that could help lower the overall tax burden.
Palatable solutions are in short supply. Doing away with a popular and straightforward way to knock down homeowners’ bills is a political third rail, especially with older residents who qualify for them, who are more likely to take out their aggravation during elections. And city, county and state officials have often been at odds about the causes of rising property tax bills and the best ways to grant relief.
Those unintended consequences also aren’t the case everywhere. The effects of homestead exemptions are negligible in cities and villages with a bigger industrial property base, like McCook and Bedford Park, with a concentration of more valuable properties like Winnetka or Kenilworth, or with a lower share of homeowners who qualify, like Chicago.
But in places where property values are low and where there aren’t other property types or high-value buildings to make up the difference — including the Southland and parts of the western suburbs — each tax break chips away at the total taxable value of an area, forcing governments to boost their levies to help cover their costs, the report found.
In communities like Park Forest and Phoenix that are already burdened by high tax rates, homestead exemptions pushed up that rate on everyone by double digits, according to the analysis.
The findings come from the county’s Property Tax Reform Group — which includes the offices of Cook County Board President Toni Preckwinkle, Cook County Assessor Fritz Kaegi, Treasurer Maria Pappas and others — with help from the Chicago Metropolitan Agency for Planning and the University of Illinois Chicago’s Government Finance Research Center.
Preckwinkle’s team said they have no plans to try to eliminate so-called homestead exemptions, but do want to use the findings to provide more effective relief in places where such breaks have an outsize adverse impact. And in a rare show of unity, Cook County officials are generally aligned about the problems that tax breaks for homeowners can present and a desire to come up with a fix.
UIC professors David Merriman and Rachel Weber, experienced researchers on property taxes and government finances who led the report, said this is one of the first attempts to measure the impacts of exemptions on the county as a whole. In total, $15.8 billion worth of property value in Cook County was unavailable for governments to tax in 2021 because of those breaks, their research found.
That translates into about $1.6 billion in tax revenue, which governments simply shift onto other property owners.
Property taxes are a zero-sum game. Savings for homeowners who claim the breaks come at the expense of those who don’t or can’t, like renters or owners of certain offices or businesses.
“That something that we take for granted could have as large of an effect on property tax rates in particular municipalities, to me, is the most concerning aspect of exemptions,” Weber told the Tribune.
“Exemptions may make sense for an individual homeowner. … But what’s the expression? What’s good for the goose isn’t always good for the gander,” Weber said. “From the perspective of the taxing jurisdictions, municipalities, school districts, that’s just going to make them have to increase their tax rates more.”
Using data from the 2021 tax year, researchers developed a model that eliminated homestead exemptions…
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