Ongoing spike in inflation is likely to drive an increase in Chicago property taxes next year.
Under a budget rule passed under Mayor Lori Lightfoot in 2020, property taxes are tied to inflation. The federal cost of living numbers for December show a 7% increase in the national consumer price index from the previous year, according to federal Bureau of Labor Statistics figures released Wednesday.
That means property taxes are set to go up 5% next year — the ceiling Lightfoot set for a single-year jump.
The 2022 inflation-linked tax hike of 1.4% is set to bring in $22.9 million to help the city meet its woefully underfunded public pensions. That increase will cost the owner of a $250,000 home $18 a year.
It’s too early to say how much the increase linked to the 5% bump will cost homeowners, landlords and commercial property owners. Much depends on property assessments and the total size of the tax levy.
But if the mayor sticks with the formula, property taxes will certainly go up as she and aldermen are preparing to run for reelection in the spring 2023 city elections.
Lightfoot and council members are betting voters won’t punish them politically for the tax increase because it’s not likely to be spectacularly large, and it’s already built into the 2023 budget.
Back in 2020, Lightfoot pitched aldermen on the budget measure tying an annual tax increase to the consumer price index for decades by saying it would give the city and its taxpayers a degree of financial certainty, while sparing the City Council from having periodically to enact huge, unpopular hikes.
Lightfoot could opt to ask the council to deviate from the formula. A city spokeswoman did not respond to questions about whether Lightfoot might do so in the face of the 5% increase.
The Lightfoot administration chose to tie the change each year to the nationwide urban consumer price index rather than one the Bureau of Labor Statistics maintains for the Chicago area. The administration argued it makes sense to use the same inflation rate data employed in tax calculations by the Park District and Chicago Public Schools, even though the city can use whatever standard it wants as a home-rule entity.
Going back to 2012, the year-over-year December change to the Chicago-Naperville-Elgin CPI has just once exceeded the average for all U.S. cities, which includes inflation in pricier locales on the East and West coasts.
While the property tax hike based on the national figure was 1.4% in 2022, raising $22.9 million, the more local inflation rate increased by just 0.9% between December 2019 and December 2020, which would have raised taxes by $14.7 million this year.
The Chicago area’s inflation rate this year of 6.6% also lags behind the national figure, although that won’t make any difference to property tax payers for 2023 because of Lightfoot’s 5% ceiling on the tax increase in any single year.
The inflation number doesn’t tell the whole property tax story. For this year, property taxes will go up a total $76.5 million. In addition to the inflation-linked hike, there was an increase that raised $25 million to pay for Lightfoot’s capital spending plan, while another $28.6 million was raised through assessments on new properties.