In 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.
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.
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.
"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.
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.
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.
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.
Chicago, Carl Sandburg's "City of the big shoulders," is about to find out just how heavy a tax burden homeowners are able to bear. Mayor Rahm Emanuel has revealed his plan for a massive property tax increase to pay for unfunded pension obligations. And for taxpayers, it isn't pretty. The mayor wants a $543 million increase in property taxes to cover police and fire pensions, as well as additional taxes and fees to close a projected $745 million budget shortfall.
How much this will cost the average homeowner is not yet clear. Emanuel is seeking approval from the Legislature to exempt those homes worth less than $250,000 from the increase, meaning more valuable properties would absorb the entire burden.
The uncertainty may also be contributing to a decline in home values in recent months, as shown by the Case-Shiller Home Price Index. Buyers may not be so ready to cut a deal that will see them inheriting a massive property tax hike.
In order to illustrate the seriousness of the city's fiscal crisis, and perhaps to make it easier to extort more from property owners, Emanuel is claiming that without the additional revenue, public safety will be decimated. Twenty percent of the police force and 40 percent of firefighters will lose their jobs, he threatens.
Still, two years ago, the mayor foreshadowed the coming tax increase when he warned that in order to pay the mounting bill for government employee pensions — a bill that would triple in 2015 when a balloon payment comes due — property taxes could be forced to go up 150 percent.
This is a frightening scenario for homeowners, but not so much for homeowners in California. For us, notwithstanding equally daunting pension problems, the good news is Proposition 13. Although city mismanagement is also common to California – a number of cities have been forced to file for bankruptcy in recent years, largely due to exploding government employee pension debt – officials are prohibited by Proposition 13 from soaking property owners to cover up their dereliction. While Chicago homeowners are sitting ducks for higher property taxes, in California, increases are limited to two percent annually.
Add to the property tax limitations that Proposition 13 gives voters the final say on new local taxes and requires a two-thirds vote of each house of the Legislature to increase state taxes, and it becomes easier to understand why it is a target of so many Sacramento politicians, most of whom owe their election to their government employee union allies. If they can eliminate the impediments to tax increases established by Proposition 13, the politicians will be in a much better position to repay and reward their political benefactors.
Without Proposition 13 Californians could soon experience what it is like to live in Chicago without ever having to leave their homes. And it could be even worse. Chicago's budget director has already gone on record as saying Mayor Emanuel's property tax increase is not enough.
Unions love raising the minimum wage, so long as they are exempt.
A new report, "Labor's Minimum Wage Exemption," by the U.S. Chamber of Commerce found many labor unions are exempt from the various local minimum wage laws they support for everyone else.
The report explains that these sort of "escape clauses" are often designed to encourage unionization because they make membership a low cost alternative for employers. This, explains the report, raises questions about who these minimum wage laws are actually meant to help.
The report cites the experience of one union after the city of Los Angeles included an exemption for unions when they raised the minimum wage for the hotel industry.
"Local 11's membership increased from 13,626 in 2007 to 20,896 in 2013,10 while its revenue increased from approximately $7.5 million per year to nearly $12.7 million," the report details.
The same thing happened for UNITE-HERE Local 2 when San Francisco passed a minimum wage ordinance with a union exemption in late 2003.
Another notable example is when the city of SeaTac, Washington passed a living wage ballot initiative in 2013, known as Proposition 1. At the time the initiative established the highest minimum wage rate in the country of $15 per hour with an annual adjustment for inflation.
San Francisco's move to raise its minimum wage to $10.55 per hour, which gained national attention, also included an exemption for unions.
According to the report, minimum wage laws passed in Oakland, San Jose, Long Beach, Milwaukee County and Chicago all included an exemption for unions.
Nanny of the week: More gun control in Chicago?
Chicago is home to some of the toughest gun control rules in the country.
It's also home to some of the most frequent gun violence in the country.
But officials in the Windy City are not giving up hope just yet — surely, one more go at tougher gun laws is all the city needs to tip the scales in the other direction and turn Chicago into a modern day Miranda, free from any and all violent thoughts or actions.
That's why there will be not one, but two gun control issues on voters' ballots in Cook County on Nov. 4. The first would impose stricter background checks for legal gun purchases — "legal" being the key word there, as we'll get to in a moment — and the second would ban assault weapons.
Gov. Pat Quinn, who is also facing re-election this November, is pushing for similar laws at the state level in Illinois, though he hasn't had much success getting the Legislature to embrace those ideas.
Quinn has tried to turn gun control into a campaign issue against Republican opponent Bruce Rauner.
That makes complete sense, because even though I'm no expert on gun violence in Chicago, I'm guessing legal gun owners practicing on their own property are probably responsible for a sizable portion — maybe 85 percent, I'm sure — of the 415 murders reported last year.
Politicians in Chicago, Cook County, Illinois and everywhere else can add as many layers of regulations for legal gun owners as they can dream up, but criminals who are going to use guns to commit crimes are probably not too concerned with staying inside the boundary of gun control laws.
But the nannies just keep on pushing. Democrats on the Cook County Board of Commissioners voted unanimously to put the gun control measures on the ballot.
Luckily, this is one time where voters can have the final say over the nannies. Polls indicate the measures are headed for defeat in November, perhaps because voters have realized additional rules don't make anyone safer from those who have no regard for the rules.