Over 50 years ago, Cook County government officials decided that commercial and industrial taxpayers should subsidize property taxes paid by residential property owners. To make that happen, Cook County now assesses commercial and industrial taxpayers 2 ½ times as much as residential and gives residential property owners over $10 billion in exemptions that commercial and industrial taxpayers pay for.
Because of this, commercial and industrial taxpayers pay nearly three times as much in property taxes as everybody else (residential included), and their taxes are reportedly the second-highest in the country.
In recent years, a popular but misleading narrative has emerged, repeated often in the press, op-eds and political campaigns. It paints commercial taxpayers as the villains in the property tax story because they hire lawyers to file tax appeals seeking relief from crushing real estate taxes.
Commercial and industrial taxpayers are not the only ones that file tax appeals. Over 200,000 appeals are filed by residential taxpayers each year as they seek fair assessments and fair tax bills.
Businesses have a simple mission: to survive, thrive and provide a return to their investors and jobs for their employees. If they fail in that mission, they wither and die. In the aftermath, the economy suffers a rash of business departures, foreclosures and property vacancies, and workers suffer. Business failures and departures are universally bad for Cook County.
You need only to pick up the newspapers to see this happening today. More than 25% of retail space on Michigan Avenue is vacant. Water Tower Place has been returned to its lender — someone will need to figure out how to reinvent it. The commercial property market in the south suburbs has cratered. And Boeing is leaving Chicago for greener pastures.
So, who is the villain in the Cook County property tax meltdown? High government spending and high property tax levies. Their growth has far outpaced inflation over the last 20 years and made Cook County property taxes a permanent second mortgage that no one can avoid.
According to Cook County Treasurer Maria Pappas, property tax levies doubled over the last 20 years. In comparison, inflation increased only by 36%. That means property tax growth outpaced inflation by a staggering 3-to-1 margin.
Excessive government spending — and unaffordable property taxes — are the problem, not commercial taxpayers who try to reduce their tax burden so they can survive.
Constant attacks on the business community only threaten to make matters worse. For commercial taxpayers and investors, scuttlebutt tells them that Cook County is a hostile place for them to be. And, when they pick up the newspapers and watch TV, they observe a continual stream of hostile attacks that paint them as villains. This negative environment reaffirms their perception that they may be better off elsewhere.
So, what happens when businesses and investors avoid or leave Cook County? Basic economics: Demand for commercial real estate falls, which causes property values to fall. To make matters worse, the values of bricks-and-mortar retail properties are already suffering as people work from home, shop from home and entertain themselves from home. The combination of these factors is significantly affecting the value of commercial properties.
What happens when commercial real estate values drop? The property taxes paid by commercial property owners fall and the subsidy they provide to homeowners also falls. Once this happens, residential property taxes automatically rise to compensate.
So, like it or not, residential property owners need a strong commercial tax base to keep a lid on their property taxes. The two aren’t opposed to each other. Their fates are inexorably joined.
It’s time we solve the underlying problem of high spending and taxation by local governments.
In the meantime, we need to stop attacking commercial and industrial taxpayers. They are not villains. They pay nearly triple their share of taxes. We need to encourage them to come to Cook County, not chase them out.
Remember: We’re all in this together.
Michael Elliott is an attorney who helps property owners with their property taxes.