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Indiana drops corporate tax rate as Illinois considers increasing it

JULY 17, 2020

Illinois Gov. J.B. Pritzker’s ‘fair tax’ would raise Illinois business taxes to the highest in the nation as neighboring Indiana cuts taxes to draw businesses across the border.

Other Midwest states are working to be more business friendly, but Illinois is trying to tax businesses more.

On July 1, Indiana reduced the corporate tax rate from 5.5% to 5.25%. It has been dropping every July since 2012, when it was at 8.5%. Next year, the corporate tax rate will decrease again to 4.9%.

Illinois’ corporate tax rate currently is 9.5%, but will increase to 10.49% if state voters are persuaded by the $56.5 millionworth of “fair tax” messages for which Gov. J.B. Pritzker is paying. Voting to remove Illinois’ flat tax protections will give Illinois a corporate tax rate that is the highest in the nation and more than twice as high as neighboring Indiana.

Pritzker's progressive tax could give Illinois highest corporate income tax rate in U.S.

Small businesses would fare even worse. Tax rates on more than 100,000 Illinois small businesses could jump as much as 47%, from 6.45% to 9.49% – also nearly twice as high as Indiana’s corporate income tax. That is bad for Illinois jobs, because small businesses are responsible for about 60% of the state’s job creation and have already taken the brunt of the COVID-19 economic harm.

Imposing progressive taxes would drop Illinois from 36th to 48th in the nation for its business tax climate, a Tax Foundation analysis found in 2019.

Thousands of Illinois small businesses are not expected to recover from the COVID-19 restrictions and economic downturn. Even big business is suffering, with Chicago-based United Airlines expected to lay off nearly half of its employees. By adding on a massive tax increase, more businesses will close or cut workers.

Many will simply pack up for a state that encourages their growth rather than punishes it.

“My personal opinion is that the governor is making the wrong judgment because you’re going to do a progressive tax and start pushing people out of Illinois,” said Antonio Cavazos, who owns a sangria manufacturing business with his wife in Oak Lawn. “We’ve considered [moving]. And looking at excise tax, Indiana and Wisconsin are a heck of a lot cheaper than Illinois.”

Illinoisans will vote on Pritzker’s progressive income tax measure Nov. 3.

Chicago Tribune Editorial: Property tax failure another reason to vote against the tax referendum

July is sweat-and-fret month for many taxpayers in Illinois: How will households slammed by job disruptions and a public health contagion now pay their property tax bills? Those local taxes gouge virtually everyone: Employers and homeowners — or whoever services their mortgages — make most of these payments to the county treasurer; renters indirectly pay property taxes in rent to the landlord.

And after the pending property tax deadline, another threat looms. Voters this fall will decide whether to let their politicians raise state income taxes or instead force them to clamp down on state spending that just grows and grows.

What we call the proposed “Pritzker Tax” — named for Gov. J.B. Pritzker, who calls it a “fair tax” — would replace Illinois’ constitutionally protected flat-rate income tax with graduated rates. The change would make it easier for politicians in Springfield to raise income taxes. Currently, a tax hike requires more heft from politicians because it affects every taxpayer. Tinkering with a graduated structure is a softer lift.

Oh! We’re just raising this itty-bitty rate on this itty-bitty group of people. Those itty-bitties add up.

As a voter, you’re supposed to trust Illinois politicians. Trust that they’ll give you property tax relief. Trust that they’ll start passing smarter budgets. Trust that they’ll undo some of their past mistakes. Oh, and trust that they’ll only slap this top itty-bitty 3% of taxpayers with higher tax rates — as if higher earners are to blame for this state’s fiscal mess. You’ll see ads urging you to trust the pols, including the most influential pol, House Speaker Michael Madigan, and vote yes on the Pritzker Tax amendment. Pritzker dumped more than $50 million of his own money into the campaign to get it passed.

Which brings us right back to this latest round of property tax bills. The refusal of Democratic lawmakers to confront Illinois’ runaway property taxes speaks volumes about whether you should trust Springfield’s promises about the Pritzker Tax.

‘Trust us, we’ll fix property taxes.

Recall how, in the spring of 2019, the governor placated some Democratic legislators nervous about putting his Pritzker Tax amendment on the November 2020 ballot. How could they justify voting to enable even higher taxation?

Pritzker tossed them a bone: He’d offset a risky income tax grab with property tax reform. Here’s what the governor said on Aug. 2, 2019, when he announced formation of a legislative task force to help Illinois “reduce local reliance on property taxes”:

“Together, we’ll ensure our children receive the quality education they deserve even while we provide more property tax relief for our homeowners and make our system more fair for everyone.”

We wrote that because of that pledge, Pritzker would have to extract some action on property taxes from his task force and the legislature — even if the General Assembly merely sprayed eyewash that didn’t actually lower property tax bills. We expected, say, a nobly titled Illinois Property Taxpayers Relief Act. Maybe an appearance of reform would persuade voters that Democrats were working feverishly to lower local tax bills.

But nothing happened. The task force flopped. Democratic legislators paid lip service. Worse, falling home values throughout the Chicago area due in part to eye-popping property taxes have created a money-losing cycle that is pushing residents out of Illinois.

Democrats could blame the pandemic for the failure to reform, but that would be dishonest. They had no property tax plan before the contagion hit, and they developed no fix during their five session months.

Besides, Illinois property taxes have been studied interminably. Reform is a question of willingness, not of finding time. Madigan’s command staff could have fixed the property tax system decades ago — if that’s what Madigan wanted.

‘Trust us, we need more income tax’

The promise of property tax reform has always smacked of a shell game. Trim one tax while increasing another. The truth is that if state government, local governments and school districts don’t rein in their spending, taxpayers will get no net relief. Taxpayers will pay the same total amount of their income in taxes — less here but more there.

Yet cutting the cost of government isn’t part of the Pritzker Tax agenda. The Democrats offer no pension reform, no big cuts to other cost drivers, not even state furlough days or other economizing on personnel costs during the pandemic.

Instead opportunistic Democrats have adopted the pandemic as, yes, one more excuse for raising more income tax revenue. Look at all the money we have to spend on the coronavirus!

This stubborn refusal to aggressively enlist Illinois’ public sector in a statewide sacrifice attests to the clout of the public employee unions whose money and muscle keep Democrats in control here.

Pritzker, Madigan & Co. protect spending on union workers in state but also local governments. Given the pension crisis Illinois politicians have nurtured, that protection racket has exorbitant costs to taxpayers. The need to meet enormous and rising personnel costs is the real if unspoken rationale for the Pritzker Tax.

‘Trust us, we’ll fix Illinois’

That’s also why the promise of property tax reform relied on taxpayers’ gullibility. Maybe Pritzker himself was gullible in thinking he could make it happen.

But Madigan routinely passes the annual budget he wants. The governors are short-timers. The come and go. By contrast, 2020 is Madigan’s 50th year in Springfield.

So even if Joe Taxpayer wants to believe and trust in Pritzker, not even halfway through his first term, that taxpayer must contend with the levers that actually decide on spending in Springfield. That’s Madigan.

We’ll have more to say about these and many other broken promises to taxpayers — Illinois politicians’ fractured fairy tales — as the tax vote approaches.

So, do you trust Michael Madigan?

Whether because of his inexperience at government or just his generally affable manner, the governor may have already undercut his own push for the Pritzker Tax. He won support for graduated tax rates by voicing a promise of property tax reform. Didn’t happen.

In his first year, he signed a budget that increased spending both on the general revenue side and through a massive $45 billion infrastructure bill. There were no spending cuts, no efficiencies, no “shared sacrifice” from unionized employees. Only higher taxes and fees.

When the COVID pandemic hit, Illinois was, of course, ill-equipped to handle any sort of emergency. That led to Senate President Don Harmon’s infamous “ask” of Congress for a bailout that included pension help.

Is this the fiscally prudent, trustworthy state government deserving of more money through an income tax hike? Rhetorical question.

Voters should focus on this: The Democrats who run Illinois haven’t done the hard work of restructuring how this state collects, and spends, all the money it already gets from taxpayers.

And they won’t do that hard work unless voters reject the Pritzker Tax. It is one chance for voters to hold the upper hand. Remember that as you pay your property taxes. Another promise, broken.

Editorials reflect the opinion of the Chicago Tribune Editorial Board.

Late Property Tax Payments

Late tax bill payment status for the the following Illinois counties:

Cook: The County Board is going to consider a proposal to permit certain tax bill payments  to be delayed up to 60 days.

DuPage: The county will allow certain tax bills to be paid late if a “hardship waiver” is obtained.

Lake: The county will allow certain tax bills to be paid late according to rules to be developed by the Treasuer.

Cook County Circuit Court Closure Extended

Cook County Circuit Court is extending its suspension of most criminal and civil cases through May and expanding the use of videoconferencing amid the growing COVID-19 outbreak.

Originally postponed until April 15, most court cases are now suspended until May 18, the office of Chief Judge Timothy Evans said in a statement Monday.

Illinois PTAB Changes

The Property Tax Appeal Board (PTAB) has received inquiries regarding the continuing operations of the PTAB during the COVID-19 pandemic. The PTAB is also aware that many offices are working remotely and are unable to perform normal operations. In light of the COVID-19 pandemic, the PTAB will be operating as follows until further notice.

Other than hearing postponements, the PTAB will not be generating or sending out mail or electronic correspondence during this time, thereby not creating any new filing deadlines. If you have cases that have current deadlines, you may send extension requests electronically to the PTA.Clerk@Illinois.gov email address. Please do not send evidence to this email address; we do not have the staff to process everything electronically.

To help alleviate any approaching deadlines, the PTAB will be granting a 60-day extension to any deadlines that occur from March 23, 2020 through April 30, 2020, system wide. The extensions will run from the original due date for 60 additional days. The PTAB will not be sending letters for these extensions, however, the parties will be able to see the extensions granted on the Appeal Status Inquiry (ASI) system once the original deadline expires.

Please note that the 30-day period to file an appeal to the PTAB from a BOR decision or PTAB decision has not been extended. You must, at minimum, send in the completed first page of the appeal form with the BOR or PTAB decision and have it postmarked within 30 days of the written decision of the BOR or the PTAB. In Cook County you may also file the appeal within 30 days after the date that the BOR transmits to the county assessor pursuant to Section 16-125 its final action on the township in which the property is located. You may ask for an extension at that time.

The PTAB is also requiring any Request to Intervene that is currently pending be filed within the 60-day time frame of the notice from the BOR to the taxing district of the appeal. Please note that pursuant to Section 1910.60(e)(1) of the PTAB’s rules (86 Ill.Admin.Code 1910.60(e)(1)) if the Request to Intervene is filed without the resolution of the taxing body authorizing intervention, provide a written explanation of the reason and a request for an extension to file the resolution, which will be liberally construed by the PTAB until further notice. You may also ask for an extension of time to file evidence at that time.

Currently the PTAB is scheduled to have a meeting on April 14, 2020, at which time it may issue decisions. Furthermore, the PTAB intends to cancel hearings scheduled through April 17, 2020.

The PTAB continues to work remotely but can answer any questions you may have by calling us at 217/782-6076 or by sending an email to the Clerk of the PTAB at the PTA.Clerk@Illinois.gov email address.

Thank you for your patience and cooperation.

Clerk of the Board
Illinois Property Tax Appeal Board
402 Stratton Building
Springfield, IL 62706
(217) 782-6076 (Office)
(217) 785-4425 (Fax)
www.ptab.illinois.gov

Indiana has around half the population of Illinois. But its building new homes at a rate more than 60% higher.

For nearly five decades, Illinois issued more permits for single-family homes than Indiana – with a blip in 1980 when Indiana built more homes. That was to be expected because Illinois has nearly double the population.

But the situation flipped in 2009, and during the past decade Indiana issued 30,508 more home permits than Illinois.

Illinois averaged around 40,000 permits a year prior to the Great Recession. In 2018 Illinois saw that plunge to only 10,000 permits issued for new single-family homes, according to the U.S. Census Bureau. That 75% plunge is the worst decline of any state in the nation. Indiana, Michigan, Wisconsin and Missouri have all seen more single-family home construction than Illinois for three years running.

Even when including permits for new multi-unit housing, Illinois’ drop is still the worst in the nation, declining to 21,500 units in 2018 from a yearly average of 58,100 prior to the recession. In 2018, Indiana saw nearly 21,500 new units with a population half as large. Colorado saw 42,600.

What’s to blame for so few new homes in Illinois? One of the biggest factors is sky-high property tax bills, two major income tax hikes during the past decade and working-age population loss that has caused demand for Illinois homes – and therefore housing prices – to remain weak.

Property taxes are a significant pain point in Illinois, where homeowners suffer the second-highest tax bills in the country. Unfortunately, Illinois politicians have for years failed to confront the root cause of tax increases: Pension costs.

Until Gov. J.B. Pritzker and other state leaders build support for constitutional pension reform, Indiana and other neighbors will continue sawing away at Illinois’ demand for homes.

Township Government

Considerations To Dissolve Local Townships Underway

Effingham, IL / Effingham Radio
WCRA

 

Illinois -(Effingham Radio)- Illinois’ property tax task force will share its recommendations to reduce Illinois’ sky-high property taxes in less than a month. Cutting Illinois’ nation-leading number of government units should be in its crosshairs.

Consider: If Illinois did away with townships, a homeowner paying $6,000 in property taxes could save as much as $210 on his or her property tax bill.

Illinois is home to nearly 7,000 units of local government, more than any other state in the nation and twice as much government per person as the nation’s average. Townships are one example of government units that have largely outlived their purpose. Illinois has more than 1,400 townships, which cost taxpayers outside of Cook County $574 million – or 3.5% of all downstate property tax collections – per year to deliver simple public services that cities or counties could just as easily deliver.

Illinoisans pay for each layer of local government – cities, school districts, park districts, mosquito abatement districts and others – through their property taxes. With such a large number of government bodies to fund, it’s no wonder the average Illinois homeowner pays the highest effective property tax rate among large states and second-highest property taxes in the nation.

Many local government units in Illinois wastefully perform overlapping functions, and others provide services that could be more efficiently delivered by a larger government unit. Texas, a state with more than twice as many residents and five times the amount of land as Illinois, has almost 2,000 fewer layers of local bureaucracy than the Prairie State.

Consolidation is already happening and is cutting back on waste. For example, the city of Evanston and the now defunct Evanston Township shared the exact same borders. In 2014, voters agreed to dissolve the township, and the city assumed the township’s responsibilities that year. Evanston saved nearly $800,000 in the first year following the dissolution, in addition to seeing improvement in services.

In the spirit of other recent consolidation reforms, state lawmakers should make it easier for local taxpayers to trim layers of local government at the ballot box.

Adam Schuster
Director of Budget & Tax Research

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