Property Taxes to Increase by 13 Percent in Coming Year

property taxIn Chicago, escalating property taxes are headline news. With the average property tax bill due to go up by 13 percent – and more increases in subsequent years virtually guaranteed – home ownership in the Windy City is in deep peril. No one seems happy except the moving companies.

This drastic tax increase is the result of bad decisions by corrupt officials who have caved to city employee pension demands that are unsustainable without massive borrowing. And that borrowing will be paid for by massive property tax hikes. But if homeowners are considering fleeing exorbitant taxation, they may have to travel a good distance. Illinois residents, even without the Chicago pension tax, are already paying the highest effective property tax rate in the nation at 2.67 percent, according to a recent study by CoreLogic, an Irvine, California-based provider of data to the financial and real estate industries.

Nationally, the study shows the median property tax rate is 1.31 percent of value.

In addition to Illinois, states with median property tax rates of greater than 2 percent include New York, New Hampshire, New Jersey, Texas (which some may find surprising considering its reputation as a low tax state), Connecticut and Pennsylvania. On the low end is Hawaii at 0.31 percent.

California, at 1.12 percent, ranks 30th compared to other states. Tax seeking politicians and their special interest allies will likely consider this a failure. After all, thanks to them, California has the highest state sales tax, highest marginal income tax rates and, due to carbon charges, the highest gas levies in the nation. “Why shouldn’t we be number one in every tax category?” they are, no doubt, asking themselves.

California property tax rates are reasonable for one reason and one reason only – Proposition 13. Arguably the most famous of all initiatives in the history of the United States, Prop. 13 was the brainchild of the late Howard Jarvis. He led the effort to put the tax limiting measure on the ballot where it was approved by nearly two-thirds of California voters in 1978. By limiting annual property tax hikes to two percent per year, it made tax bills moderate and predictable.

Still, California property taxes are not low. Because of high property values, the median priced home now costs nearly $519,000 according to the California Association of Realtors. Thus, while our effective tax rate ranks 30th of the 50 states, when measuring property tax revenues per capita, we rank 14th. This belies government complaints that California is starved for property tax revenues.

Proposition 13 protections should not be taken for granted. Consider the cities of Stockton, Vallejo and San Bernardino which were driven into bankruptcy by officials who, like Chicago’s aldermen and mayor, agreed to inflated and unsustainable pension benefits for government workers. The difference is that Proposition 13’s tax limiting provisions prevent California cities and counties from arbitrarily increasing property taxes. At least for now.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Union Greed

UnionChicago, long known as the Second City, may still be second in some things, but it seems to be #1 in teacher union greed. As it’s time for a new contract with the Chicago public school system (CPS), the inevitable blather has begun to befoul the air. Here are a few things Chicago Teachers Union (CTU) will not use as talking points:

  • Teachers in CPS are the second highest paid in the country, making barely less than New York City’s teachers.
  • On the 2015 National Assessment of Educational Progress (NAEP), only 30 percent of 4th graders and 25 percent of 8th graders tested as “proficient” in mathematics, and only 27 and 24 percent, respectively, were found to be proficient in reading.
  • Teachers only contribute 2 percent of their salary to their own retirement; CPS kicks in the the other 7 percent, the so-called pension pick-up.
  • Chicagoans are the most taxed people in Illinois and their already crisis-level pension shortfall is in freefall.

The economic situation is so bad in Chicago that Illinois governor Bruce Rauner has been making noises about CPS declaring bankruptcy. If successful, the state would take over the district, void the contact with CTU and possibly reduce pension payments. Needless to say the union and its enablers in the Illinois statehouse are not happy at the prospect and claim it is not legal under existing statutes.

In the meantime, to placate CTU, Chicago mayor Rahm Emanuel proposed a contract so generous that Rauner called it “unaffordable.” It was one-sided enough, however, that CTU boss Karen Lewis liked it. It offered:

  • A guarantee of no economic layoffs through the end of the contract in 2019; the only way to reduce the workforce would be through retirements and attrition.
  • Cost-of-living pay increases.
  • “Step and lane” pay increases based on experience and seniority.
  • No more new charter schools beyond the 130 presently operating; the only new ones allowed would be replacements for any that closed.

Amazingly, the union’s bargaining team rejected the deal, infuriating CPS CEO Forrest Claypool. In response, he fired off a terse letter to Karen Lewis emphasizing three unilateral moves CPS would now make:

  • The district will discontinue the pension pick-up, saving CPS $130 billion annually.
  • A reduction-in-force plan will go into effect that will necessitate layoffs and save another $50 million.
  • Repurposed federal funds will result in a “reduction in general funding to the schools while having no significant overall impact on school budgets.”

Well, as Larry Elder would say, “Then the fit hit the shan.” The union called the letter an “attack” and an “act of war.” The unionistas were especially exercised about the withdrawal of the pension pick-up, but their stance is indefensible. In the Windy City, teachers are obligated by law to contribute 9 percent to their retirement. But in fact, for 35 years CPS (i.e. the taxpayers) has been picking up 7 of the 9 percent. So teachers have been getting away with legal theft, paying only 2 percent of their own retirement contribution, which has helped to position Illinois as the state with the worst credit rating in the U.S.

Moreover, please keep in mind that Chicago has the second highest paid teachers in the country, with a median salary of $71,017, not counting comprehensive healthcare benefits for the teacher, their spouse or domestic partner and children. Also, the average teacher salary is 51 percent higher than Chicago’s median household income, which is estimated at $46,877. And teachers work just 178 instructional days (plus a few non-instructional ones), whereas other full-time workers toil for 240-250 days a year.

But some teachers were outraged at Claypool’s letter and about a thousand of them tore through the Loop aiming their venomous arrows at Bank of America. Sixteen were arrested for sitting in and chanting inside the bank. As Karen Lewis said, “(We’re) here, because we have to make a choice in the city: banks or schools.” (Don’t we need both?) The teachers also disrupted rush hour traffic, inconveniencing thousands of commuters. Ms. Lewis didn’t explain what the demonstrators had against people driving home at rush hour, many of whom pay a lot more than their “fair share” to the teachers’ pension fund.

At the end of the day, probably the best thing would be for CPS to declare bankruptcy, as Rauner proposed. It’s a novel approach, but one that, at first glance, would seem to have little chance of implementation. However, the Republican governor claims that Democrats outside of Chicago are in favor of it because hitting the reset button would void union contracts, thus saving taxpayers all over the state mountains of unnecessary debt. Declaring bankruptcy could also set a precedent. (Take note Los Angeles: LAUSD is due to go belly-up in 2019.)

Final note to union leaders, protesting teachers and fellow travelers: You are obviously looking out for yourselves. Fine. But please stop using “corporate greed” as a rallying cry. When you scream that “corporations must pay their fair share,” please be assured that they already do and then some. Federal tax rates on corporate income vary from 15 percent to 39 percent. Teachers unions – and in fact all unions – don’t pay a penny in income tax. They not only don’t pay their fair share; they pay no share at all. Now that’s what I call greed, with maybe a little gluttony added for taste.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.