Chicago Aldermen Approve Tax Hike for Public Safety Pensions; Economist says Residents will be Financially Burdened
Dominique Spears, a retail clerk, is worried about how she will make ends meet after the Chicago City Council approved a $588 million property tax increase – the biggest tax hike in the municipality’s history.
Spears is concerned her landlord will kick back his costs for taxes and new fees by increasing her rent.
“I understand this will be helpful to the city but it really isn’t to citizens, like me,” said Spears, 32, who recently moved from Mississippi to the city’s Chatham neighborhood to help care for an ill parent. “This is a very big concern.”
At least one top local economist agrees.
The middle class and poor will probably be the ones to bear the brunt of the overall $7.8 billion spending plan, according to Ernst Coupet, economics professor at Chicago State University.
“This is definitely going to impact the poor communities,” said Coupet, who has written extensively about cities and their economic growth.
Last week, the council approved the 13 percent tax levy increase, along with various new fees, including a garbage collection one, to pay for police and fire pensions and school construction.
By a 36-14 vote, aldermen approved the overall spending plan for 2016. In a separate vote, 35-15, the property tax and other funding sources were approved.
Among the new fees: a monthly garbage collection charge of $9.50 per household.
Meanwhile, the property tax hike would eventually cost the owner of a $250,000 home about $588 yearly.
The increase would be phased in over the next four years.
“Is this a piece of art?” asked Chicago Mayor Rahm Emanuel at last week’s City Council meeting about his tax and fee hike plans. “I don’t think that anyone would ever say that.”
Emanuel said, in regards to the tax hikes, that the city had “no other choice. No one ever presented, anywhere, another choice.”
“One thing we know for sure: we cannot cut our way out of this crisis,” said Emanuel in the past. “To fund our pension obligations through cuts, we would need to cut 2,500 police officers – 20 percent -- from our ranks. We would need to close 48 fire stations – that represents half of our fire stations – and lay off 2,000 firefighters, about 40 percent of the force.”
At the same time, Emanuel wants to provide his own form of tax relief.
The mayor hopes to get support for an expansion of state exemptions so owners of homes worth $250,000 or less would not see a property tax hike and owners of more expensive would receive some assistance. But all the exemptions might prove difficult because Ill. Gov. Bruce Rauner would have to green light the plan.
In the meantime, the tax hike will put pressure on middle income and poor communities, Coupet said.
The average Cook County family makes a minimum of $950 a week, Coupet said.
So, the average tax increase for a family living in a $250,000 home would be $12 a week or 1 percent of their income with the tax hike, cutting into a family’s discretionary income, Coupet said.
The garbage fee would add more of a burden, he said.
In the end, some residents might even feel pressured to leave the city, Coupet said.
He added that landlords also would pass the new taxes and fees on to their renters.
“Anytime you have tax increases is never good,” Coupet said. “I think this is terrible. I do agree that the budget problems have to be fixed… But this is unfair that average folks have to pay for it.”
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