Shifting the tax burden...some win...most lose!
Last month we mentioned that the expanded homestead exemption amount (EHEA) was phasing out in Cook County. This exemption was initiated when market prices for homes were rapidly increasing (circa 2003). It was supposed to temper the anticipated increases in real estate tax paid by residential homeowners. The mechanics of this extended exemption was hard to understand, but suffice it to say assessments were lowered resulting in less real estate tax paid by "eligible" property owners. But government still got its money from "ineligible" property owners!
The University of Illinois conducted a study of the extended homeowner's exemption and the results were interesting enough to pass it along. It demonstrates that government will still get its levy (the money necessary to conduct business) from the taxpayers when a tax saving devices is utilized. Lowering one group's assessment simply causes a higher assessment to be paid by someone else. The full text is provided as a link on our website. (http://www.amariandlocallo.com/media/publications/)
Here are some of the more interesting discoveries by the University:
- Owners of parcels that were eligible for the EHEA often paid hundreds of dollars less because of the EHEA, saving 14.2 percent, on average, in the first year for Chicago homeowners.
- Tax rates increased over what they would have been to compensate for the fall in the tax base.
- All properties that were not eligible for the EHEA paid more because of it; roughly one-third of eligible properties actually paid more because of the EHEA in 2005.
- Because the EHEA reduces tax burdens only by shifting those to other properties ...Ineligible properties in areas where eligible properties grow rapidly and constitute a large portion of the tax base suffer the largest tax increase.
- The benefits of the EHEA varied widely, with eligible properties in some areas getting very large benefits while other eligible properties-in the same and other areas-received virtually no benefit.
- Similarly, the effect on ineligible properties varied widely across the county.
Our commercial and industrial sectors, as well as ineligible homeowners, suffered the brunt of this tax burden shift. If you happen to be one affected by a tax shift, your best position is to be the one with the lowest possible assessment. Let us help you.
Don Quixote did get some satisfaction jousting at his windmills!