By: Ted Dabrowski*
We recently covered why the property tax freeze proposed by Rep. Michelle Mussman (D-Schaumburg) isn’t a freeze by any measure. The “freeze” is only for two years and it has several loopholes – it excludes taxes for pension and debt costs – that make the freeze worthless. The freeze also ignores the real drivers of why property taxes are so high in the first place.
But now the bill is even more problematic. A new amendment to the bill, quickly filed and then passed by the House, has added additional homeowner exemptions.
The bill originally included higher exemptions for homeowners and seniors, but now it adds an exemption for longevity in a home. The total amount of exemptions in the bill could have a detrimental effect on homeowners who can’t benefit fully from the exemptions, as well as on commercial and industrial properties. More of the tax burden will be shifted onto them.
The new longevity exemption is available to homeowners with household incomes of $100,000 or less. The exemption ranges from:
…if the taxpayer has occupied the property as his or her principal residence for not fewer than 8 but not more than 11 years as of January 1 of the taxable year, then the amount of the reduction shall be 25% of the amount of the general homestead exemption…
all the way up to…
…if the taxpayer has occupied the property as his or her principal residence for 21 years or more as of January 1 of the taxable year, then the amount of the reduction shall be 60% of the amount of the general homestead exemption under Section 15-175 for the taxable year.
The new exemption will range from $2,500 to $6,000, depending on how long someone has lived in their home.
The summed exemptions from the bill are: $10,000 from the general homestead exemption, an additional $8,000 for seniors, and up to another $6,000 for the longevity exemption.
The end result is that long-time, senior homeowners in homes worth about $75,000 (of which only ⅓ is assessed) could be nearly or totally exempt from property taxes. On a standalone basis, that’s good news for many long-struggling seniors across the state.
However, by benefiting seniors and longtime homeowners so greatly, the bill could very well impose excessive hardships on other property owners.
Since local governments aren’t reducing the total taxes they take in under the Mussman bill, the new exemptions mean somebody else has to pick up the tab. It simply shifts more of the property tax burden onto homeowners who are entitled to fewer exemptions, as well as onto commercial and industrial property owners.
Such a shift from residential to commercial could make it more punishing for businesses and job providers, creating a negative spiral in many communities.
In particular, mature cities with low overall residential property values and significant commercial/industrial property could end up damaging their economic base.
There’s lots for reasons why Mussman’s bill is a failure, but these latest additions have made it even more of a mess.
*Ted Dabrowski is President of Wirepoints.