Wednesday, July 14, 2021

The real scandal is not in the bribes allegedly taken by a Board of Revew employee....

So yesterday, Rich Miller, linking to a Sun-Times story, put up a post entitled, "Feds allege evidence of bribery ring at Cook County Board of Review." Apparently, $1,000 was the going rate for a residential property tax reduction; commercial property tax reductions required a $2,000 payment. Jon Siedel's Sun-Times article, quoting an FBI affidavit, reported that the person taking the payments called himself a middleman; he said he would be sharing the money with his fellow workers in the vineyard.

One of those commenting on the CapitolFax post noted that this has all happened before. Among the links the commenter provided was one to an article by Ed McManus in December 1980 issue of the old Illinois Issues, now archived by NIU, "Property tax assessment fraud in Cook County."

The Board of Review was called the Board of Appeals back then. See? Who says there are no reforms in Cook County government?

I know what my role is here. Just by maintaining this site lo these many years I am considered to be one of those "goo-goos." That's an old and dismissive abbreviation for someone who supports good government. And, as a goo-goo in good standing, I am expected to rage and maybe even fulminate about the rampant corruption of our body politic illustrated in this latest sordid scandal. Later, after some greedy people who were caught on camera have gone to jail and some meaningless reforms have been enacted (maybe another name change?), I, as a good little goo-goo, will be expected to cheer wildly. But, whatever happens, I am not supposed to -- and you are not supposed to -- think for even a nanosecond as to why these scandals recur.

Alas. I have once again failed to meet expectations.

Because I have thought about it -- and it occurs to me that the scandals allegedly ongoing in the Board of Review will inevitably recur, whatever "reforms" we enact, whoever we send to prison, and whatever new name we invent for the Board of Review, because the system of basing real estate property taxes on property assessments is fundamentally flawed and must be scrapped.

In Illinois, real estate property taxes are based on a property's assessed value. The assessed value is supposed to be what a willing buyer would pay a willing seller for the property to be taxed in the year the property was last assessed. (The link is to the Cook County Assessor's explanation of residential assessments; but the same basic explanation is provided for commercial properties. Becuase this is what state law commands that assessors do.)

Since property values have almost always increased over time, this system is a boon to greedy governments -- and a millstone around the necks of individual property owners.

Progressives often rail against the evils of gentrification. But as property values climb in a given area, so too do property tax bills. And property owners who can't pay those increased bills are forced to leave. It is fashionable to blame landlords in gentrifying areas: Rents go up and long-time tenants are forced out. But rents go up because property taxes go up... and even the nicest, most woke landlords have to raise rents to render unto Caesar. (And, yes, I understand that at least some greedy landlords would jack up rents in order to attract a new, wealthier class of tenant. Hope and greed both spring eternal.)

For a highly mobile population, one that packs up and moves on every few years or so, the assessment system is no real problem. But most people don't move every three years.

So here's the solution: Base real property taxes on actual purchase prices. Your neighbor who just bought her house for $500,000 will pay more in taxes than you, though your houses are similar, because you bought your house 30 years ago for half that amount. But when you sell and move to Florida, the new owner's taxes will be based on the actual sales price, not someone's guess about what the house might fetch on the market. And your neighbor, if she's still there, may wind up with a lower tax bill than the person who buys your house.

The system would be objective -- purchase prices are usually matters of public record -- and an immediate savings for the taxpayer would be realized from scrapping the assessment system and the review system.

Of course there would be a firmly entrenched lobby against any such proposal. In addition to all the public sector jobs that would vanish, the many lawyers who make money challenging assessments would also have to find other work. Many of the public employees would find other sinecures. But it would be harder on the lawyers, certainly. Especially those not in politics.

There would be a lot of details to work out: What about transfers between relatives? Or when title remains in a land trust but beneficial interests change?

And there'd be another big problem, too: Without increased assessments to hide behind, the public body that wants to get more tax money from you will have to openly raise its rate. You might notice. Other taxpayers might also notice -- and they might withhold their votes from the offending politicians. But this would be infinitely better than our system now where one's taxes can go up by an enormous amount, thanks to a new assessment, and every taxing body can claim that it had nothing to do with it because their rate did not change.

Wealth taxes are much in the news these days. The theory is that the big billionaires should pay, as a wealth tax, some small fraction of their total net wealth (net after all other taxes) each year. Sounds good when applied to Jeff Bezos and Elon Musk, right? But what about Elon Bezos who owns a bungalow in Jefferson Park? If he bought his house for $200,000, but now pays property taxes based on an assumed $400,000 valuation, isn't that a wealth tax, too?

We hear much talk these days about building generational wealth in minority communities. We even hear lip service about the private home being the only asset that most people can use to build any sort of wealth that might be handed down to one's children. But thanks to assessments, imagining what the fair market value of someone's home might be, increased taxes squeeze out more than is ever left to the next generation.

Yes, it's a terrible scandal that some mope took money to reduce assessments. But as long as there are assessments based on what someone's property value might be, there will be those who will find ways to 'adjust' these. It won't matter what 'legal' channels are in place for this purpose or what safeguards are enacted to prevent future shenanigans. Human nature, and human ingenuity, will always find ways around protective barriers. The real scandal is that we have assessments at all.


Bonnie McGrath said...

Back in the olden days, Royko in one of his many columns about the Jane Byrne administration, began calling Paul (McGrath, her first deputy mayor) Mr. Magoo-goo. The name stuck, at least in certain circles--and we always thought it was an inuslt. Now, I see it's a compliment!! Wish he'd known that when he was alive--as I think being called Mr. Magoo-goo for years always sort of hurt his feelings! GREAT post here, btw.

Anonymous said...

They have this in California. It's called Prop 13. It's completely distorted the real estate market since it provides a HUGE incentive against moving or any ownership change. It freezes municipalities in place, preventing any dynamicism that might be expected in an urban environment. Land value taxes are probably the best way to go, but politically unpopular.