It's Not Scientology, It's Property Taxes!

Everyone’s affected by our incomprehensibly convoluted system, so even apartment dwellers should read this—if only for laughs.

By Ben Joravsky
July 28, 2006

On July 20, Cook County clerk David Orr brought reporters to his office for the annual unveiling of the county’s tax rates. According to Bill Vaselopulos, Orr’s chief financial aide, this year’s tax rate is (drumroll, please) 5.98 percent, down from last year’s rate of 6.28 percent. As Vaselopulos patiently plowed his way through a glossary of mind-numbing tax law definitions, reporters pored through a thick press release, searching for the elusive answer to the question on everyone’s mind: How much were taxpayers going to be stuck for come July 31, when the second installment of the annual tax bill comes out?

Alas, as with every aspect of our property taxes, that’s not so easy to figure. “It is,” Vaselopulos noted with a wry smile, “a complicated system.” The tax rate is just the final piece in an enormous jigsaw puzzle that takes months to assemble. Months before it’s determined, each of the county’s taxing bodies—the city, the county, the schools, the parks, the libraries, the Water Reclamation District, etc—figures out what it needs to spend (or levy, to use the tax man’s term) in the coming year (they can’t ask for the sky because most of them are bound by state law not to raise their spending by more than the rate of inflation, currently 3.3 percent). The county assessor’s office tells the county clerk how much in assessable property value is available for taxation, and Orr’s office divides the levy into the total property value to determine the tax rate. If the assessable property value rises, Orr’s office can lower the tax rate and still increase the amount of money taxpayers have to pay. This is nirvana for politicians such as Mayor Daley, the aldermen, and the commissioners of the Cook County Board, who get to brag about holding the line on taxes even as taxes rise.

The assessor reassesses property every three years. You’d think that since Chicago’s property owners are still covered by the last assessment (the updated assessments won’t take effect until next year) and the tax rate fell, that means that Chicago property taxpayers will pay less come July 31. Right?

Well, no—that assumes that calculating a tax bill is as straightforward as multiplying your home’s value by the tax rate. Let’s use Illinois house speaker Michael Madigan’s southwest-side property as an example. According to the county assessor, his property has a market value of $180,975. Multiply that by the current tax rate of 5.98 percent and he pays $10,822.

Except that in 1970 local reps at the state’s constitutional convention insisted that it was unfair to make ordinary Cook County home owners pay at the full value of their property. So they fought for home rule authority that would allow them to set the assessable value of residential property in Cook County at no more than 16 percent of fair market value. Applying this formula to Madigan’s property, you multiply $180,975 by 16 percent, getting an assessable value of $28,956, which is then multiplied by the current tax rate of 5.98 percent. So the speaker’s on the hook for $1,732 in property taxes, right?

Wrong again. At that same constitutional convention delegates passed another law that essentially overrode the Cook County reps’ efforts. Under the constitution that emerged, all property had to be taxed at least at 33 1⁄3 percent of its fair market value. If a county didn’t tax property at 33 1⁄3 percent, then the state would raise the assessment for them. Thus was born the socalled “state equalizer,” a figure devised by the Illinois Department of Revenue to even out assessments statewide.

Why would Cook County bother with the pretense of taxing residents at 16 percent of a property’s fair market value? Good question. Publicly most state and county officials will tell you they don’t know the answer: the 1970 constitutional convention was long before their time. Privately, they’ll concede that the 16 percent figure is intended to give taxpayers the illusion that they’re getting some sort of break. “The whole way of calculating taxes is intentionally deceptive—it’s misleading,” says Cook County commissioner Tony Peraica, the Republican candidate for board president who’s running on an antitax platform. “The first number you see on your tax bill is an assessment value that’s much lower than you know your house is worth. You look at your tax bill and it says your house is valued at $132,000 or whatever, and you know that you can sell it for much more and you think, ‘I’m getting a break.’ It’s a false illusion.”

On the very next line of your property tax statement, the county shatters that illusion by applying the state equalization factor. You’d think that it would be relatively easy to determine the equalizer: divide the mandated 33 1⁄3 percent by the actual 16 percent to get an equalizer of 2.083. But no, Cook County assessments are also out of whack because of the Cook County Board of Review.

Let’s back up for a moment. Your property is assessed by Cook County assessor James Houlihan’s office, which makes a determination of a property’s fair market value by reviewing sales figures for comparable properties. If you think your property has been overassessed, you can appeal to the Cook County Board of Review, which generally gives applicants some sort of break.

One reason for this is that the three-man board is elected: appreciative taxpayers are likely to remember the board members come election time. Another is that applicants tend to hire savvy lawyers who know how to play the game. As one seasoned commercial and residential landlord explained to me, “You hire a lawyer who either knows someone or goes to the assessor’s golf outings or contributes to the board of review’s campaigns, and you pay him half of what he manages to save on your appeal.”

In July the state’s Department of Revenue raised the equalizer from 2.5754 to 2.7320, in part, the department announced, because the board of review doled out so many decreased assessments. “Only a mope doesn’t appeal,” the commercial property owner adds. “You gotta figure that the goddamn equalizer’s eventually gonna make you pay for the tax breaks everyone else gets from the review board.”

So, going back to the calculation of Madigan’s property taxes, you multiply $28,956 (his assessed value) by 2.7320 (the state equalizer) to reach $79,108 (the taxable value of his property), subtract $20,000 (the current home owner’s exemption, set to revert to $4,500 next year after the speaker did little to help a proposed increase pass the house), and multiply that figure ($59,108) by the 5.98 percent tax rate. Voila, you’ve arrived at his tax bill: $3,535. Since tax bills are paid in two installments and Madigan paid $1,846 in the spring, that means that come July 31 Cook County treasurer Maria Pappas will send Madigan a $1,689 bill for his second installment. And that, my friends, is how your tax bill goes up even as the tax rate falls and your home’s assessment remains the same.

Actually, Madigan’s hit isn’t too bad: up $108, or 3.1 percent more than the $3,427 he paid in 2005. Calculating some other sample property tax bills from across the city, I found that almost all this year’s tax hikes will be relatively mild. Retired county board president John Stroger’s looking to pay $3,047 on his south-side home, up $102, or 3.5 percent from the $2,945 he paid last year. Twenty-Ninth Ward alderman Isaac Carothers will pay $1,225 this year, up $84, or 7.36 percent from the $1,141 he paid on his westside home last year. On the north side Congressman Rahm Emanuel will pay $9,539, up $167, or 1.8 percent from the $9,372 he paid last year.

Of course, as county tax experts discreetly point out, it’s next year that Chicagoans will get whacked—that’s when soaring reassessments will get fit into the formula. This cycle’s modest increases fit the political calendar perfectly. The tax issue will be muffled come November’s gubernatorial and February’s mayoral campaigns. But the big bill’s on its way.

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