Face it: Property taxes are forcing Illinoisans out of their homes

grab whatever tax method you want, cite the specific percent you want to apply and to whom, lets pull up the data for that specific group, and run the numbers, and then lets compare them to the lost revenue from the property taxes, and see if you're even within a ten-fold of coming close... so far everyone has been off by almost 90% in the case of the one guy who cited a 3% sale taxes... he never looked up the retail sales numbers for his county, I did, they were dismal, his county would collapse unless they had an almost 90% sales tax, because he never ran the numbers to prove his rhetoric works... so please, don't be that guy, lets run YOUR local cities numbers...

 

I like some of your posts, you have some important things to say. However, I think you get a bit caught up in your own ideas to the point where you refuse to listen to anyone else. My first sentence mentioned a wealth tax as a possible solution. This was proposed by one of the world's experts on wealth, Thomas Pinketty. A wealth tax will tax property along with all other forms of wealth. A property tax is a form of wealth tax but it is not the only form of wealth tax. As I said in my post, any tax policy proposed has to meet various policy and socially beneficial goals. It is a very complex issue. As for the progressive nature of your property tax, fine. The average cost of a home in my area is around 800 grand for a track home built in the 60s for 25 grand. That is a starter home for kids today. In California we pay around 1% of sale price making that bill 8 grand a year. Not many kids out there that can afford the down on an 800 grand house, make the monthly nut and pay 8 grand a year in taxes on top of it. Yet many of these homes are owned by very wealthy people and rented out. The young couple now has to rent that home until they can save 160 grand for the down payment. The rent includes the property tax. Average rents for that home are over 3 grand a month, many of them are over 4 grand if they have 4 bedrooms. How does your solution fix this?

You say I did not propose a solution and am only a critic. Correctomundo. Unlike you, I understand how complex any tax system is and have respect for the competing interests and claims.

 

my solution addresses this by expecting humans to behave like humans... in your example of young people, (and lets be honest, its all ages since its dictated by income not age) who are "priced out", they will behave exactly as the poor people do, because they are poor for that area and its above their means of income... you will see them living in higher density conditions, just like the poor naturally do already to share and split costs... in my scenario we wouldn't have such extremes as we do today to where now some entire cities contain only the wealthy because the poor have been priced out, you would instead have seen more moderated growth and different forms of housing that would have appealed to those folks as others look to capitalize on the income they do, rather than this quick trend we have where prices shot up and now folks have to leave because now none of them can afford to even start there...

so what would happen... you would see a lot more apartment style and efficiency style of living, which works perfect in urban centers where space is expensive, you would see so many people forced out, the wealthy would have little choice but to pay more for everyday goods and services in areas where people do get priced out of market, because employers in those areas who serve the wealthy who can afford it, would be forced to pay employees more in order to get them to make the commutes into the cities for the wages higher than the areas they live within... this is also why I support a minimum wage based on median incomes of an area, its a great indicator what that area can afford based on the wealthy in that area, versus an arbitrary national number that doesn't reflect actual economic ability of an area, tieing it to median incomes would greatly reflect the true relationship that could be sustained, it would also drive and encourage business in those poorer areas since wages could be lower and would do exactly what property taxes would do, force folks to reevaluate moving to greener pastures and keep that wealth behind in the poorer communities longer circulating it among the very people who need it the most...

so would the days of the american dream being a suburban yard and home end? it would in my scenario take a downtown for sure, I acknowledge and expect it, I expect much like the younger generations are already doing, to move into the cities and not out to the suburbs... we're already seeing increases in rental rates, because this current system we have today, with YOUR example being the prime example, young folks will NEVER be able to break into those markets to afford those high home values... so in your example you attempt to protect the "old" ways where homes are investments to capitalize upon, that market is slowly fading away and the returns are decreasing on the middle scale, which means the young kid today will never be able to realize that wealth the previous generations did because they are already priced out from even starting that unless they move beyond the suburbs and beyond the towns today and start all new towns, but they aren't moving that far out into the boonies, they are sticking around the major urban centers, and looking to mitigate expenses in life by not having cars and walking where they go...

there is a major shift in economics and living with this next generation, because unlike mine they will not reap what most of us could have gained by throwing a dart blindfolded at a board and hitting the bullseye because society had not developed in a way it did prior, so opportunity was ripe... its like stock picks... you want to invest in something BEFORE it becomes a big smash hit, so you can ride it all the way up, rather than much slower and moderate gains after everyone notices it, so if you're there early you capitalize greatly, thats what our housing market USED to be... today however its basically a saturated stock, and the gains are far less than before, unless people want to move way out into the boonies and start whole new towns into mega towns, but we're not seeing that by the rental market and housing markets, the younger kids who are priced out of the suburbs, and don't want to live that far away from the cities, are choosing to find cheaper ways to live in the cities...

so you'll see density rise, not just in rentals but homes as well, as older generations return home instead of going to nursing homes, especially with healthcare costs still out of control, the younger crowds who aren't able to create wealth like previous generations did, aren't going to be able to afford their parents home after their parents die, especially since the rises in price post-death won't be anywhere near what they were pre-death when that home was first purchased... so we're already creating the separation of wealth and poor and we need a new method of fairly estimating that which won't require a "wealth tax" where people are able to hide assets and work the system with exemptions or deductions... you know like the massive problem we have now...

the one thing we can depend on is human nature... the poor will continue to live among the poor, the wealthy will still live among the wealthy, which is why property taxes are the simple and least expensive way to calculate taxes based on known and expected living conditions... there will be far fewer exceptions to the rule than the current system and far less corruption and costs in maintaining that collection... so we save money on the front and back ends that gets lost in its inner workings...

do people want to change? no... but people will have to change, because in your example they are already priced out of those homes you wanted to use as an example, they won't get that money to make a down payment down, so why are you fighting the property taxes on those properties from the people who can afford to pay it... its the most fair and economically sound method... it offers the most mobility for the low and middle class to choose density or space, and they now have the same powers the wealthy always have, before it was only the wealthy who could control their taxes and work the system, now I restore the balance by giving that to the poor as well so they can generate wealth and have upward mobility to eventually afford a home since they can choose to live a lesser quality of life to save the money... or not... their choice...

P.S. at least you acknowledge you're only a critic and offer no solution... but then you spin into a justification and rationalization, which tells me you're only being half honest... I get that its complex, thats why this simple method is amazing, it sucks that complexity out, when we run the ACTUAL numbers of assessed property nationwide, we can see it works out... when we then take examples and look at them individually, we see they actually work out and benefit the poor and middle class... so despite you calling it a complex system that we magically can't work through, I have, I've run the numbers, I've had people people my numbers, and I've supported them every single time... property taxes ding the wealthy, and offer the rest of the people a greater upward mobility... think of it as a progressive income tax, but based on property, but its also a flat tax since its the same tax percent... and its insanely easy to calculate with no way to escape or cheat the system or not report income, its all right there, fair, easy, cheap to administer... I mean we haven't even dove into the hundreds of billions saved in tax code compliance which means more money circulating in the economy, which means either more expensive property for some upper and wealthy which means more tax revenue, or could lead to higher margins by companies which might lead to more competition to capitalize on growing market share driving down costs which means lower cost of living for the poor and middle class...

basically everything in my plan builds upon itself in numerous ways, from many angles, so I get the complexity, I've run the numbers, I've done the angles, its not difficult...

 

Actually, this problem has already been solved in Europe but they have the wonderful advantage of inheriting gorgeous cities and towns with mixed use urban ecosystems much like some of our Eastern Cities. We do not design cities, we allow them to happen championing private property over any other goal. Urban planning is a very complex issue and relies upon the force of the state or local government to force property owners to fit into an overall plan that does not put their interests paramount. If you care to go to little towns where the European model of forced compliance to an urban plan, you will see that it creates a wonderful town but even those towns are subject to the same forces that drive out the poor and reward the rich. The town I am referring to is my home town of Santa Barbara. It once was a middle class town, that town is gone forever. Part of it is population, part is gentrification, part is due to interest rates and part is due to geography. I have one question for you since you are so convinced you have the magic elixir.

1. How does tax policy in a town with the average price of a home being 800 grand change the cost of that average?

We passed Prop 13 in 78 to address this problem. It ended up giving seniors and baby boomers a giant advantage over their kids. It also gave the state massive issues in regards to taxing us to pay for necessary services such as education. If the answer was as easy as you suggest, we would have done it by now.

 

I absolutely agree city planning is a critical factor in every city, and its why the suburbs are now pricing the youth out of that ever being their future, and why they are sticking to the cities and don't want to essentially restart utopia far far away from the cities with so much to do... and you hit on a point I'm trying to drive home, that we've priced folks out but because the opportunity to start from the emerging market is over, its saturated, its done, there is little to gain from buying those $800,000 homes now, they won't turn into $6,400,000 homes in their lifetime like they possibly went from $100,000 to $800,000 in your lifetime... that investment market has reached maturity and its done as an investment tool, only the wealthy will be able to afford moving in there now... and when folks start to die off and retire as the baby boomers are doing, you're actually going to see home prices fall from todays values, which means I expect a lot of children of theirs, to lose out because nobody is left to absorb all that market, at those prices, which is why we needed moderation prior to it reaching this point, which is what property taxes do, moderates growth...

so now all we're left with for a solution, are these extreme measures of cutting property taxes, and raises fee's and other sources of revenue dramatically... in order to try and retain the population in those areas, but the market able to purchase those homes like I said above, is drying up and you don't see home prices rising as much as they used to as quickly as they used to... we're saturated and we're never going to have that much wealth growth again... its simply not possible if you run the numbers... you will however still have "hot spots" that pop up and folks run to and it drives prices up and forces some folks out, that will always happen no matter what, but the days of it happening everywhere since population exploded and wealth did as a result, are over, we're a stalled country at a saturation point...

so what does your town of $800,000 median home price I assume you're saying, do? time and loss... the only way to make housing more affordable is to build more housing in that area that is far cheaper, which means it will likely drive down the assessed values for those folks, which means we'll end up erasing some of the assumed gains... its not going to be popular with those who are on the hook for those mortgages, its also one of the number one reasons why my solution will never be made into law, politicians will continue to cave and not offer a solution, instead we'll get more band-aids... and more band-aids... and more...

if we keep an income tax system, its going to have to be a progressive scale like it is now, but we're going to have to get rid of all the exemptions and deductions politicians throw in to get elected to office... I hate calling them loopholes, since they aren't loopholes, they are lawful actions, but its become the biggest sham in history... OR... we erase all the other taxes and go to a property tax method, which is the most efficient and will moderate things the best, WITHOUT government constantly screwing with the system and tugging it this way or that way based on political whims to win elections and maintain power and control for their party...

much like in your example, politician caved to the senior market who is the most likely to vote of all... why... not to solve the problem, but to retain power as their goal...

property taxes will slow a rising market, and it will lift a down market, assuming you eliminate income taxes, because people will flock to those poorer areas to save on taxes rather than "mooooooving on up, to the east siiiiiide".... sorry little fun there... you will reward good choices, and ding bad choices, which will cause people to make the more economically sound choice, when they clearly understand the consequences and costs, rather than waiting to figure out taxes at the end of the year with all the manipulation or misunderstanding... creative accounting... if you switch to a "wealth tax" that taxes all assessed value, you're going to run into the same nightmare we have today, the same massive overhead in collecting those taxes, and the same issues where thousands of exemptions and deductions are carved out for this that and the other...

property taxes... efficient, moderating, and straight forward...

its how income taxes should be, if we didn't let politicians screw with them so much and create what we have now... but at least with property taxes, there would be FAR less choices for "creating accounting" and exemptions and deductions... I'm sure they would come up with a few, a farmers credit, or a senior credit, or something like that... but it wouldn't be the literally MILLIONS of examples we have today that people have to spend money in order to do... my method lowers cost of living, not increases it...

 

You want services, it comes with a price tag associated with it. No one works for free these days.

 

I want services, but I don't want overpaid public sector union thugs with bloated pensions.

Services can still be available at a fraction of the current cost.

 

Good luck getting them at a fraction of the current cost. You get a raise every year, they want a raise every year; you have medical benefits through your employer, they want medical benefits through their employer, you have a pension through your employer, they want a pension through their employer; sounds reasonable enough to me.

 

I see what is, and identify it.

I suppose that must be why millions of CA homeowners were ruined in the sub-prime crisis, while Illinois homeowners went largely unscathed....?

The property tax is only increasing because the welfare subsidy given to the landowner is increasing. If people can't afford to repay even a small fraction of what the community gives them, then yes, I want them to realize they are living beyond their means, and seek accommodation better suited to their needs.

Let's see now: you are defending the interests of idlers who have been given enormous unearned wealth in return for nothing, at the expense of the poor and homeless, and somehow I'm the one who has no compassion....?

It most certainly did. It gave them the entire increase in the land's value, which is the reason their "house" is now worth so much. In fact, of course, the house has depreciated in value, meaning that the land value given to your parents was actually even more than the difference between the property's purchase price and its current value.

By being willing to know the fact that land value comes from the community, not the landowner. You are not willing to know that fact. Simple.

Of course they don't. They want to continue living beyond their means at the expense of the community and those who actually pay the taxes that fund their welfare subsidy.

I am the one explaining the concept to you: they can only afford to live there because they are living there at the expense of others.

 

Actually all those things are possible, but not that last. Wealthy parents are an accident of birth. We either get 'em, or we don't.

Meantime, you're right. Possibility isn't the problem. There are endless possibilities (short of wealthy parents) in the west. The problem is ... as previously noted ... WILL.

 

Why even bother with such silly, disingenuous nonsense? The only reason they can't afford the property tax is because the community has given them so much unearned wealth, they can't afford to repay even a small fraction of what they have been given.

It is government that is rescuing people from freezing or starving because they can't afford to pay landowners for their existence.

There. Fixed it for you.

Right. Just as in the antebellum South, it depended on whether they owned slaves. The fact that people have been made dependent on injustice and evil for security in their old age does not make that injustice any less unjust, or the evil any less evil.

Such silly, disingenuous scaremongering is merely an attempt to distract attention from the facts. These people -- landowners who can't afford to repay even a small fraction of what they are being given -- have been given immense wealth in return for nothing. Why can they not live in a location better suited to their needs and means?

<yawn> I admit to taking a certain guilty pleasure from such irrational and disingenuous opposition: it proves I must be right.

 

you're confusing the socioeconomics of high levels of property ownership with the emotional value of 'home'. they don't belong in the same conversation.

 

No one IS forcing them, or driving them out of their homes. If they're determined to stay in a specific building, which they can no longer afford, they will find the resources to fund it. The key point here being that they can no longer afford it. Because that is what's happening. Property, by its very nature, has many costs associated with it, and these MUST be factored into the overall affordability. You can't pretend that costs are not part of the picture, which is what you're attempting to do.

Meantime, in your preferred scenario, who is going to determine what level of emotional attachment to a property warrants exemptions? How will it be determined? And how will you manage this isolated case of allowing people to have what they can't afford, when it doesn't apply in any other field of human fiscal endeavour?

 

Excellent post.

 

There was a plan making the rounds about 10 years ago that had the sales tax at 22%, but that was just for replacing income taxes. Why don't I have specifics? Mostly because I don't think it's ever going to happen, so it's not worth the considerable investment in time to flesh the idea out.

 

In my preferred scenario, that wouldn't matter because I'd completely eliminate property taxes altogether, at least on owner occupied properties, and offset the revenue by raising the sales tax. That way you actually own what you own. With property taxes, you're just a renter.

 

Of course they do. Anyone who separates money from other values, is screwing up. Money and financial security are to be balanced and weighed alongside emotional and pyscho-social security. Every purchase you make, every investment is a sacrifice of one value for another. No financial counselor worth a dime will not stress a need to understand and accept a clients emotional values as priorities. Money is a tool to help provide for emotional needs. Thats what you do when you buy a puppy and invest capital in it for years. That is no different than 'investing' in a home that may lead to a net loss financially, but supplies other values.

 

Everything we own has costs associated with it. Take another example, the car. If the cost of car registration goes higher than we can afford, then we can no longer afford the car itself. And cars are depreciating assets. You can buy a car for $50k cash today, but in ten years time it's worth less than half that, and you may not be able to afford the associated increased costs. Does that $50k you spent initially, somehow entitle you to a lifetime of exemption from depreciation and ongoing costs? Just because you 'like' your car?

Property is an appreciating asset, and is either way, not exempt from ongoing costs. If car owners can't be practically exempt ... and given cars depreciate, it could be argue that car owners are more entitled, why on earth should property owners? They're MAKING money on their initial investment, after all.

 

Actually it's the other way around. Anyone who doesn't judiciously separate finances from emotions is screwing up.

And inanimate assets are not puppies.

 

And if that high sales tax adversely affects trade?

Taxes should be spread around. We don't have property taxes here, we only have a capital gains tax (which only applies to investment properties, not primary residences), but I wouldn't be concerned if such a tax were introduced. We may not be able to remain in our home, but there are plenty of other (many self-inflicted) reasons why we might one day no longer be able to afford to live here. At least in the case of high property taxes, we'd know that it was for a good cause. The funding of our excellent public health care and education, etc.

 

yet they may serve the same purpose and that purpose has concrete value. Life is actually not about accruing assets unless the asset serves a specific purpose. Its real worth cannot be measured outside of the purpose it serves, including its emotional and psychological or social value. That is true of a wedding ring, a puppy, a family home and a beautiful piece of art.

 

Largely unscathed? Wrong!

California was 8th from the top and Illinois was 11th from the top in delinquencies and foreclosures in 2009. They were statistically the same...



http://www.calculatedriskblog.com/2009/08/mba-forecasts-foreclosures-to-peak-at.html

There is no subsidy. No money is going from the government to my parents checking account, but there is money going from my parents checking account to the government via property tax. You failed.

My parents haven't cashed in on any unearned wealth. And why is it my parents responsibility to take care of the fat lazy people who are drunks and druggies?

Property values go up and down. Whose fault is it when they go down???? Is it the same community that you speak so highly of???

The community that my parents live in has eroded in the last 30 years. There are tons of Mexicans and crime.

They aren't living beyond their means. Their house is paid off and all their children are out of the house. They live very conservatively.

 

wow, hop into google and pull up retail sales for any given year, than pull up income taxes collected in the same year... then run the math, and notice how 22% doesn't even come close... but you have to dive further down into that as well, were they proposing 22% sales tax to only eliminate the income tax portion, were they leaving the payroll taxes in place to help subsidize the lost income taxes? because either way I run the numbers, they are immensely short with even a 22% sales tax assuming it ONLY replaced lost income tax revenue as a source and did not touch any of the other revenue streams...

see my point, this is why I make people cite specifics... the numbers NEVER add up for the ideas they propose... imagine the poor bastard who told me a 3% sales tax would be enough to cover the federal budget, that guy wasn't even in the ballpark... if people wanted to replace income taxes with a sales tax, according to 2015 retail sales numbers, we would need closer to a 50% sales tax JUST to cover the income tax portion, assuming we left all the other payroll taxes and such in place still...

2015 retail sales... roughly $5 trillion...
2015 income taxes... roughly $2.5 trillion... (excludes payroll taxes)

you see the problem? a 50% sales tax just to replace income taxes as a source of revenue... meanwhile, my property tax doesn't allow anyone to escape, doesn't increase overall cost of living greatly, in fact in the lower housing prices, it lowers their tax costs while it dings the wealthy on the higher ends)... now imagine if they wanted all taxes replaced like I do with property taxes, it would require an almost 100% sales tax... imagine paying twice the listed price next time you go shopping...

 

I live in FL. The annual registration cost for a car, regardless of its hypothetical value is around $30. And even that is purely revenue generation for the State, there is no practical reason to require a car to be registered on an annual basis, if at all. I was raised here, but in my late 20's moved to Washington State. Imagine my shock and surprise to learn that to register my car there, which had at BEST a $3,000 fair market value was $850 per year. That got repealed while I lived there, and it went to more like a Florida $30/year model. Because the State was simply abusing their residents.

Actual costs? Like fuel, maintenance, replacing tires when required, replacing lights when required? No. But the State requiring a vig based on their bull(*)(*)(*)(*) analysis of it's "value" is not an actual cost. It's outright theft.

They only "make" money if they sell their property. If the annual mob "protection money" (otherwise known as value based property taxes) grows beyond their ability to pay, even if otherwise they can afford to continue to own and occupy the house, that is, to me, a crime against humanity.

Property taxes are just a mafia-like protection scheme, and prove that you don't actually own your own property.

 

That's total bull.

Manufacturing workers today are struggling, because their sector got overrun by automation, their unions got smashed, and their training and education wasn't sufficient to keep up with the rate of change.

Now YOU come along and suggest they don't have the "will"??

Sorry - that's just plain insulting.