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The Tax Burden Is Shifting: Accuracy Is More Important than Ever

By Gary Smith
10/18/2018
The Tax Burden Is Shifting: Accuracy Is More Important than Ever

The unintended consequences of the trio of property tax breaks pushed through by state lawmakers in 2017 are now getting felt by South suburban Chicago. These tax breaks were supposed to ease the burden, especially on senior citizens, of Chicago Mayor Rahm Emanuel’s property tax hikes.

However, those tax breaks, coupled with new requirements for businesses that receive tax-abatement incentives from Cook County, are creating what the South Suburban Mayors and Managers Association (SSMMA) is referring to as a “Perfect Tax Storm.” That’s why it’s more important than ever that tax assessments be correct.

2017 Property Tax Incentives

First, the tax breaks passed in 2017 included an increase to the homestead exemption, from $7,000 to $10,000, and the senior homestead exemption, which is an additional reduction for homeowners 65 and older, was increased from $5,000 to $8,000.

The state also increased the amount of household income a senior household could make—from $55,000 to $65,000—to qualify for a break that freezes the value of their homes for tax purposes.

The unintentional side effect of these exemption increases is that thousands of homes are no longer paying any property taxes. If a home’s market value, as calculated for tax purposes, is $60,755 or less, and the homeowners are receiving both the homeowners and senior exemptions, they have been taken off the tax rolls.

When that many homes are not paying property taxes, the burden then shifts to the homeowners and businesses that do. The government services that need to be funded still need the same level of dollars to continue to run.

Business Requirements for Tax-Abatement Incentives

The second part of the perfect tax storm that SSMMA is referring to is additional requirements to Class 8 incentives, which lowers assessment levels to 10 percent of market value for 10 years or more, for businesses.

Class 8 incentives now require companies that build, expand or repair structures to pay prevailing wage rates to construction contractors. In addition, business owners must certify payrolls and hire contractors that participate in apprenticeship programs. According to SSMMA, this will increase overall project costs by an average of 23 percent.

This additional requirement to obtain Class 8 incentives could send those businesses over the border to Indiana. Coupled with the number of people who have fallen off the tax roll, this double hit will increase the dollars required from residential property taxpayers.

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