Tax relief still on the table - Lawmakers will try again to extend assessment cap
Tax relief still on the table - Lawmakers will try again to extend assessment cap
By Mickey Ciokajlo
Copyright © 2006, Chicago Tribune
Published January 2, 2007
Chicago homeowners bracing for big tax increases this fall could still get some help when the Illinois General Assembly reconvenes in early January.
Supporters of a bill to extend the so-called 7 percent assessment cap for another three years are expected to make another push for its passage, after the legislation narrowly failed in the November veto session.
"If all of our votes hold, we'll have a chance to pass the bill," said state Rep. Lou Lang (D-Skokie), the legislation's chief sponsor in the House.
But while proponents have been gearing up for another shot at passing the bill--an unexpectedly tough sell considering its A-list of political supporters--their opponents aren't letting up either.
Business groups oppose the legislation because it would shift the financial burden from homeowners to other taxpayers, notably those who own commercial and industrial properties and large apartment buildings.
Those opponents are pointing to alternative forms of tax relief they say could target assistance to homeowners most in need without increasing the burden too much for everyone else.
Opponents of the 7 percent cap also say the measure is too broad and helps even homeowners who can afford to pay a higher tax bill that typically comes with an increase in property value. Supporters say the 7 percent law's broad reach is part of its appeal and targeted relief programs are often so narrow that they don't help the middle-income residents Chicago is struggling to retain.
The law works by expanding a homeowner's exemption up to a maximum of $20,000 in an effort to keep a house's assessed value from increasing more than 7 percent a year. The law was implemented over three years in Cook County and is scheduled to expire in 2007 for Chicago homeowners.
Earlier in 2006, the Institute of Government & Public Affairs at the University of Illinois published a report listing alternatives to the 7 percent assessment cap. Opponents of the law say the ideas presented in the paper deserve more attention and complain that most of the focus so far has been on the politics of the fight over the cap.
"There are some opportunities to implement some of these options," said Jerry Roper, president of the Chicagoland Chamber of Commerce, which has a lawsuit pending over the cap. "We're not saying one in particular is better than another."
Tax-loan proposal
One idea supported by the authors of the institute's report is a tax-loan program, in which homeowners could borrow money to pay higher taxes by using the increased value in their property as collateral.
David Merriman, an economics professor at Loyola University and one of the paper's co-authors, said the problem for these homeowners is cash flow, not wealth. They have the asset in their home's increased value, but it's not available to them because they haven't sold the property. "These people suddenly have a lot more wealth than they used to," Merriman said. "They could pay the increased taxes out of this wealth."
Chicago has run a loan program for nearly 10 years, but participation has been low, with about 1,200 loans processed since its inception, said Myer Blank, executive director of the Chicago Tax Assistance Center.
"The loan program helps those most in need, but it doesn't have a broad enough reach," Blank said.
But there's a public-policy question about whether homeowners should borrow money to pay their taxes, Blank and others said. And many people who face a financial challenge are apprehensive about more debt.
"The policy that creates a tax bill that could double isn't fixed by saying we'll let you go and borrow the money," Lang said.
Deferring taxes
An alternative would be a deferral program in which the taxes for qualifying homeowners would not be paid until the house was sold. State or local governments, however, would have to provide a funding source to replace that revenue for schools and other agencies.
Merriman and his co-authors also suggested that Cook County could switch to annual assessments of property to avoid the assessment shock that hits under the current system that assesses every three years.
"Large jumps in assessments are a problem, and smoothing of year-to-year assessment increases has advantages," they wrote.
Cook County Assessor James Houlihan previously proposed legislation in Springfield letting his office adjust assessments annually, but those bills have not succeeded, Chief Deputy Assessor Kevin Burden said.
Merriman said he and his co-authors are not advocating any particular alternative. But there is a problem, he said, with the 7 percent law, because it is not targeted to those most in need and it allows the wealthy to benefit too.
"As a policy concern, I think you really have to ask, why do you want to give a tax break to high-income people and shift that tax break on to others?" Merriman said.
But Lang said that unlike the income tax, the property tax system should not be based on a homeowner's wealth.
The Civic Federation, a Chicago government research group, has endorsed extending the assessment cap with the $20,000 exemption limit for another three years.
Houlihan, Mayor Richard Daley and others want the exemption limit raised to $60,000, but some say that would shift the burden too much in favor of high-income homeowners.
Federation President Laurence Msall called the alternatives proposed by the institute "really just financing techniques" that don't address the underlying problem. Msall said the 7 percent cap is an interim solution, with the ultimate goal being an overhaul of the tax system to make school funding less reliant on the property tax.
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mciokajlo@tribune.com
By Mickey Ciokajlo
Copyright © 2006, Chicago Tribune
Published January 2, 2007
Chicago homeowners bracing for big tax increases this fall could still get some help when the Illinois General Assembly reconvenes in early January.
Supporters of a bill to extend the so-called 7 percent assessment cap for another three years are expected to make another push for its passage, after the legislation narrowly failed in the November veto session.
"If all of our votes hold, we'll have a chance to pass the bill," said state Rep. Lou Lang (D-Skokie), the legislation's chief sponsor in the House.
But while proponents have been gearing up for another shot at passing the bill--an unexpectedly tough sell considering its A-list of political supporters--their opponents aren't letting up either.
Business groups oppose the legislation because it would shift the financial burden from homeowners to other taxpayers, notably those who own commercial and industrial properties and large apartment buildings.
Those opponents are pointing to alternative forms of tax relief they say could target assistance to homeowners most in need without increasing the burden too much for everyone else.
Opponents of the 7 percent cap also say the measure is too broad and helps even homeowners who can afford to pay a higher tax bill that typically comes with an increase in property value. Supporters say the 7 percent law's broad reach is part of its appeal and targeted relief programs are often so narrow that they don't help the middle-income residents Chicago is struggling to retain.
The law works by expanding a homeowner's exemption up to a maximum of $20,000 in an effort to keep a house's assessed value from increasing more than 7 percent a year. The law was implemented over three years in Cook County and is scheduled to expire in 2007 for Chicago homeowners.
Earlier in 2006, the Institute of Government & Public Affairs at the University of Illinois published a report listing alternatives to the 7 percent assessment cap. Opponents of the law say the ideas presented in the paper deserve more attention and complain that most of the focus so far has been on the politics of the fight over the cap.
"There are some opportunities to implement some of these options," said Jerry Roper, president of the Chicagoland Chamber of Commerce, which has a lawsuit pending over the cap. "We're not saying one in particular is better than another."
Tax-loan proposal
One idea supported by the authors of the institute's report is a tax-loan program, in which homeowners could borrow money to pay higher taxes by using the increased value in their property as collateral.
David Merriman, an economics professor at Loyola University and one of the paper's co-authors, said the problem for these homeowners is cash flow, not wealth. They have the asset in their home's increased value, but it's not available to them because they haven't sold the property. "These people suddenly have a lot more wealth than they used to," Merriman said. "They could pay the increased taxes out of this wealth."
Chicago has run a loan program for nearly 10 years, but participation has been low, with about 1,200 loans processed since its inception, said Myer Blank, executive director of the Chicago Tax Assistance Center.
"The loan program helps those most in need, but it doesn't have a broad enough reach," Blank said.
But there's a public-policy question about whether homeowners should borrow money to pay their taxes, Blank and others said. And many people who face a financial challenge are apprehensive about more debt.
"The policy that creates a tax bill that could double isn't fixed by saying we'll let you go and borrow the money," Lang said.
Deferring taxes
An alternative would be a deferral program in which the taxes for qualifying homeowners would not be paid until the house was sold. State or local governments, however, would have to provide a funding source to replace that revenue for schools and other agencies.
Merriman and his co-authors also suggested that Cook County could switch to annual assessments of property to avoid the assessment shock that hits under the current system that assesses every three years.
"Large jumps in assessments are a problem, and smoothing of year-to-year assessment increases has advantages," they wrote.
Cook County Assessor James Houlihan previously proposed legislation in Springfield letting his office adjust assessments annually, but those bills have not succeeded, Chief Deputy Assessor Kevin Burden said.
Merriman said he and his co-authors are not advocating any particular alternative. But there is a problem, he said, with the 7 percent law, because it is not targeted to those most in need and it allows the wealthy to benefit too.
"As a policy concern, I think you really have to ask, why do you want to give a tax break to high-income people and shift that tax break on to others?" Merriman said.
But Lang said that unlike the income tax, the property tax system should not be based on a homeowner's wealth.
The Civic Federation, a Chicago government research group, has endorsed extending the assessment cap with the $20,000 exemption limit for another three years.
Houlihan, Mayor Richard Daley and others want the exemption limit raised to $60,000, but some say that would shift the burden too much in favor of high-income homeowners.
Federation President Laurence Msall called the alternatives proposed by the institute "really just financing techniques" that don't address the underlying problem. Msall said the 7 percent cap is an interim solution, with the ultimate goal being an overhaul of the tax system to make school funding less reliant on the property tax.
----------
mciokajlo@tribune.com
posted by Carlos T Mock @ 9:05 AM
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