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Fundamental Misunderstandings of the Compound Nature of the Cook County Property Tax System May Cause Fundamental Property Tax Reform Miscalculations

By Gary Smith
02/15/2021
Fundamental Misunderstandings of the Compound Nature of the Cook County Property Tax System May Cause Fundamental Property Tax Reform Miscalculations

Originally published in Tax Trends (September 2020, Vol. 64 No. 3)

Summary Conclusion

The impact upon the individual residential property owner’s tax bill of a non-Chicago property after a 100 percent increase to the taxes of all downtown Chicago commercial and industrial properties is virtually inconsequential. Even if the taxes of all downtown Chicago commercial and industrial properties were doubled, that tax increase would have a less than a 1 percent tax impact on the property with the highest tax rate in the county and would have less than a ¼ of 1 percent tax impact on the lowest.

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There exists a fundamental misunderstanding in Cook County that a large increase to the local commercial property taxes in any taxing district will have a meaningful and significant impact on lowering the property taxes to all properties in a different taxing district. It is presumed that major increases to downtown commercial property assessments will have a material impact in reducing the tax bills to residential properties as far away as the far southern communities and townships of Cook County. This misconception is based on the confusion that arises when one does not fully understand the impacts of the melding of two taxing systems into one property’s tax bill. In Cook County, every property’s tax bill is generated from an amalgamation of two distinct systems—the local district property tax system, which is a closed system, and the broader tax system in all of Cook County, which is an open system.

The local taxing district is a closed system. When considering the local tax district, imagine all the local taxes as the air enveloped inside a balloon. Squeezing the balloon at one spot merely redistributes all the remaining air to the other locations. Within the balloon, the volume never changes; merely the density at any particular location is adjusted by the contained squeeze.

Property taxes levied in one local taxing district have minimal to virtually no impact on the individual bills of a property located in a different or distant taxing district. In Cook County, over 60 percent of each district’s tax bill is added into its individual balloon by the local school system alone. Local taxes are exactly as the name implies—local.

Cook County, on the other hand, is an open system, more akin to a large holed colander than a balloon. Only county wide expenses are thrown into the colander together, to be mixed and then distributed into each individual local balloon based on that contained balloon’s total assessed valuation in relation to the whole county. Only an extremely small portion of the individual property tax bill is added to the local balloon by the county wide costs distributed from the colander that is the entire county.


The impact on the individual residential tax bill to a non-Chicago property after a 100 percent increase to the entirety of the downtown Chicago commercial and industrial properties is as follows: (Note 1)

  1. Property taxes in Cook County (on average) are 80 percent local spending and only 20 percent county wide spending. (Note 2)
  2. The tax rate impact on an individual property tax bill is more than 35 percent on the properties with the highest tax rates in the county and 6 percent on the lowest. (Note 3)
  3. If the assessments on all commercial/industrial properties in downtown Chicago were doubled (increased 100 percent), and all other assessments in the county remained unchanged, there would be a less than 15 percent effect on increasing all assessments in Cook County. (Note 4)
  4. Doubling all commercial/industrial taxes in downtown Chicago (Note 5) would have a less than 1 percent impact (30 percent x 20 percent x 15 percent= 0.9 percent) on the tax bill of the property with the highest tax rate in the county, and would have less than a ¼ of 1 percent impact on the lowest. (Note 6)
  5. To give numerical reference to the percentages in D above, a doubling of all of the downtown Chicago commercial/industrial assessments would cause a potential $7.62 difference to a $1,000 property tax bill on a non-Chicago property taxed at the highest tax rate. The difference would be less than $1.25 to the property at the lowest tax rate. (Note 7)

Notes:

1. The state multiplier as applied to Cook County properties is not included in the calculations that follow because it is the same number applied to all Cook County properties.

2. Local spending percentages vary by local district. For ease of reference in this paper, all local spending is calculated based on a high-end percentage of 80 percent.

3. In 2018, the highest tax rate in Cook County was 36.432 percent (in Rich Township); the lowest is 5.952 percent (in Lyons Township). For ease of mathematical reference in this paper, the figures of 35 percent and 6 percent are utilized in all calculations herein when referencing the impacts of these two rates.

4. Total AV in Cook County in 2018 = $59.70 Billion (rounded); total Commercial/Industrial properties in downtown Chicago (North and South Townships, non-TIF) was $8.248 Billion (rounded). Commercial/Industrial properties in downtown Chicago were 13.8 percent (rounded to 15 percent) of the Total AV in Cook County in 2018.

5. The doubling would increase the downtown Chicago commercial/industrial assessment share of the whole of the county from 13.8 percent to 23.8 percent.

6. In 2018, the downtown Chicago commercial/industrial assessments had a .95 percent impact on the tax bill of the non-Chicago properties with the highest tax rate in the county (20 percent x35 percent x 13.8 percent). Doubling the downtown Chicago commercial/industrial assessments would have a 1.66 percent impact on the tax bill (20 percentx35 percentx23.8 percent). The impact of a doubling of the assessments upon the properties with the lowest tax rates in Cook County would be negligible; from a .162 percent to a .285 percent impact.

7. $4,000 x .95 percent = $37.60, $4,000 x 1.66 percent = $66.40, the difference is $28.80; $4,000 x .162 percent = $6.48, $4,000 x .285 percent = $9.52, the difference is $4.92. This article is specifically focused on the impact to non-Chicago, Cook County properties only. Although it is outside the scope of this article, we note the following in relation to Chicago impacts: Doubling the assessments of the downtown Chicago commercial/industrial properties would increase their share of all Chicago assessments from 22 percent (rounded) to 36 percent (rounded). Spending, per A above, would be calculated as 1 (all local and county wide spending included).