STUMP » Articles » Taxing Tuesday: Election Day! Let's Just Tweet It All! » 6 November 2018, 06:00

Where Stu & MP spout off about everything.

Taxing Tuesday: Election Day! Let's Just Tweet It All!  


6 November 2018, 06:00

Okay, just kidding. A few weeks back I covered tax-related referenda, so next week I will look at the outcomes on some key ballot measures.

But today, people are going to the polls (and I’m giving a talk in NYC on insurance regulations, yes really), so I’m putting this together well ahead of time.

So I will link with minimal commentary.


State Tax Breaks Are Hurting Chicago’s Suburbs

Some of the suburbs south of Chicago have been struggling for years. Their populations are growing older and poorer, and many of their businesses are seeking greener pastures across the Indiana state line. A property tax giveaway enacted last year by the Illinois General Assembly has made their revenue problems much worse.

The suburbs have been victims of a series of unfortunate events. Chicago Mayor Rahm Emanuel has repeatedly raised the city’s property taxes to fund schools and buttress problematic pension funds. That led state legislators to come up with the idea of giving senior residents in the city a tax break. The way things worked out, however, they extended tax breaks to everyone in Cook County. That meant much less tax money going into suburban treasuries.

Given low property values in the southern suburbs, some people are now paying nothing in property taxes. The suburb of Harvey saw 700 homes come off its tax rolls, costing it 5.6 percent of its assessed value. “Some seniors are not paying taxes at all,” says Hazel Crest Village President Vernard Alsberry Jr. “It’s created a burden for our other taxpayers.”

The losers in this process include local commerce. In response to the state action, Cook County decided to do away with a 10 percent tax break for small businesses. As a result, some commercial property owners are seeing their rates go up for two different reasons: the decline in residential tax bills and the cancellation of the business tax incentive program. This “double whammy,” Alsberry says, has already brought some development programs in the south suburbs to a halt.

For legislators, it was fun to pass a tax cut bill when the downside mattered only to a tiny share of constituents. But this “dissipation of responsibility,” as Msall calls it, makes it hard for the localities to remedy the situation. “The legislature is legally able to change the exemption levels and is not, at the end of the day, responsible for making up that reduction in local finances,” Msall says. “The full impact is on our local governments.”

Remember Harvey has a severe debt problem itself, and this really doesn’t help matters.


They’re going with the fake charity idea:

New York City could join other municipalities across the state that have set up charities as a way to circumvent a new federal tax law that caps state and local tax deductions.

City Councilman Ritchie Torres, a Bronx Democrat, plans to introduce bills this week that would establish a city-operated charity that taxpayers could donate to in lieu of paying local taxes. Taxpayers could in turn deduct those donations from their federal income tax, according to Mr. Torres.

Mr. Torres will introduce the pair of bills to the City Council on Wednesday. One measure would order the city to come up with solutions to mitigate the new federal tax law’s effect on taxpayers. A second bill would create a charitable-gifts reserve fund to which taxpayers could donate in exchange for paying some local taxes. Money in the reserve fund would be used for city operations.

If the measures pass, New York City would join 14 other cities or municipalities in the state that have established this type of fund. The workaround, however, faces a challenge from the Internal Revenue Service.

In August, the IRS issued proposed amendments to its tax code that would make donations to these reserve funds essentially ineligible to use as a federal tax deduction. The IRS has scheduled a public hearing on the amendments on Nov. 5 in Washington, D.C.

A spokesman for the IRS had no comment on the New York City measures.

You cannot sue NYC for them ignoring the IRS saying nuh-uh.

City Councilman Daniel Dromm, the Democratic chair of the council’s finance committee, said he was interested in a bill that could benefit taxpayers but isn’t certain Mr. Torres’s measures would pass given the IRS’s proposed regulations.



Would a ‘mansion tax’ to fight homelessness turn off high-end buyers?

High-end buyers would pay tens of thousands of dollars to help fight homelessness under a proposal being introduced at a Chicago City Council meeting this week. Brokers worry about the effect on the luxury market.

A proposed special tax on people who buy high-end homes in Chicago, designed to fund the city’s efforts against homelessness, could deter upper-income buyers who have already been nicked by property tax increases and lost homeownership deductions, according to agents and lenders who work with the city’s luxury real estate market.

The Bring Chicago Home tax is proposed by a coalition of civic groups and Ald. Walter Burnett (27th), who on Wednesday will introduce at the Chicago City Council meeting legislation calling for a citywide vote on the idea. It would require buyers who pay more than $1 million for a home to pay a onetime tax of 1.2 percent of the value at the time of their purchase, with all of that additional amount going to fund homelessness programs.

New York City has had a “mansion tax” since 1989, instituted by New York Gov. Mario Cuomo to help dig the way out of a financial crisis; it’s recently come under scrutiny by Mayor Bill De Blasio, in part because at this point $1 million is a middle-class price there. In San Francisco, the rampant problem of homelessness has spawned the Proposition C, a proposed tax on businesses to generate funds for combating homelessness.

In Chicago, the existing 1.05-percent transfer tax is paid by both parties in a transaction, about seven-tenths of it paid by the buyer and three-tenths by the seller. The additional 1.2 percent would be paid entirely by the buyer, as the proposal is written.

Regardless of who actually writes the check, “it’s coming out of the price,” said Charles Grode, a principal in the high-end homebuilding firm BGD&C. Buyers will figure the additional transfer tax into their total cost to acquire the house, he suggested, and subtract it from what they’re willing to pay the seller. “It’s a zero-sum game,” Grode said.

That could exacerbate the losses sellers are taking on vintage mansions. In recent years, many properties have sold for a loss, such as the Astor Street mansion that in August went for less than both its 2006 and 2000 purchase prices, and another on the same street that in May sold for about one-quarter less than the sellers paid for it in 2008.

Grode and Struthers both said they would expect to see some people who had planned to buy in the city go to the suburbs instead, not merely to escape the tax but to “get the most house they can afford, and if the suburbs don’t have that tax, they can afford more there,” Struthers said.


Separately: Thorny Property Politics: Cook County’s 2018 Democratic Primary for Assessor

Assessors play an important role in the property tax process in the United States. A homeowner’s taxes are based on the estimated value of their home, and that estimate is made by the assessor. If an assessor over- or under-values a property, then the homeowner will be over- or under-taxed. Over-taxation can produce a cascade of negative consequences, including foreclosure for failure to pay property taxes, while cities want to maintain high collection rates.

Assessors can be elected positions, but rarely do voters know much about the candidates or the position. This is largely true in Cook County, Illinois, which includes Chicago and many inner suburbs. In 2018, however, the office became the focal point of a heated primary race after a Chicago Tribune/ProPublica Illinois series (aided by Dr. Christopher Berry’s research) exposed how current assessor Joe Berrios’ assessment system for residential properties was flawed and regressive (subsequent reporting highlighted flaws in commercial assessments too).

The Chicago Tribune/ProPublica Illinois series highlighted how Assessor Berrios’ office was already undervaluing more expensive properties in its initial assessments, and those properties’ assessments were then systematically lowered once more (and thus undertaxed) because owners of higher-value homes appealed their property values at far greater rates than homeowners of lower priced homes. Cook County is highly segregated, and the wealthiest neighborhoods are typically majority-white while the lowest-income neighborhoods are often majority black or Latinx. The assessment system thus had racially disparate impacts, resulting in black and Latinx homeowners being especially over-assessed.
Has Cook County’s assessment system always been regressive and it is the politics around flawed assessments that ebbs and flows, or has the accuracy of the Cook County assessment system changed over time? Related, it is unclear to what extent the regressivity in Cook County’s assessment system is tied to the housing bubble and bust of the 2000s. In other words, are unfair property assessments a lingering effect of the Great Recession? There is also evidence to suggest that Cook County is not alone in having a flawed assessment system and examination of property assessment systems in other places in the United States could shed light onto how widespread the problem of regressivity is, as well as links between structural racism and unequal property assessments.



Here we go…

This next one isn’t really about taxes…

…it’s because I want to mention that I babysat Bree when she was a wee toddler. She probably doesn’t remember me (her older sister, Gina, probably remembers.)

This is very selfish, but I kind of hope the Dems win the House so that they do go after Trump’s tax returns. That should keep them out of more nefarious trouble.

I mean, we’ll get this:

….which is probably not going to help Dems in 2020, but hey. Ya never know.

This is a bit more staid:

But not much more. I think it would be hilarious for the Dems to dig through Trump’s taxes. Mainly because I wonder if the stuff Trump has done is similar to what one could see in, say, Nancy Pelosi’s own returns. Hmmm, I don’t know that she runs any businesses, but I hear tell her husband has made a pretty penny.

I’m keeping an eye on that one.

Not sure if that includes FICA.

Okay, it’s 6am and the polls are open… time for me to feed the vote scanner!

(I kind of miss the old lever machines, where it felt like you were flushing when you pulled that lever)