The Menace of Privilege – While privilege exists, justice can't be achieved.

Tax favors for owners of “farmland”

Continuing our exploration of land values and real estate taxes in Cook County …

parcel #06364020270000, at 1830 Lake St in Hanover Park — Parcel #06364020270000, at 1830 Lake St in Hanover Park. 7.36 acres, adjacent to a residential area and virtually across the street from a Metra station. Due to favors done for class 239 farmland owners, it pays less than $200/year in property tax.

The County contains 813 parcels coded as class 239 “non-equalized land under agricultural use, valued at farm pricing.” An explanation of how farms are supposedly assessed is included in this document, page 12 of which states:

The assessor notes each of the farm’s land use categories and uses the equalized assessed value for each soil productivity index to determine the assessed value. The assessor may make some subtractions for things like slope, drainage, ponding, flooding, and field shape and size before calculating the final value.
• The portion on which crops are planted is assessed at the state-certified equalized assessed value certified by the Department for the corresponding soil productivity index.
• Permanent pasture is assessed at one-third of what would be assigned if it was planted in crops.
• Other farmland (e.g., forestland, grass waterways) is assessed at one-sixth of what would be assigned if it was planted in crops.
• Wasteland has no assessed value unless it contributes to the productivity of the farm.

For Cook County, the Assessor provides specifics here.

The total assessed value of these 813 parcels is $2.25 million. To calculate their acreage it seems I would have to retrieve the records manually and individually, but the 2022 Census of Agriculture says the County contains 154 farms totaling 10,281 acres. (A farm might comprise several parcels). This implies an assessed value of $218/acre. Reviewing a small sample of parcels, it appears that the Assessor values most class 239 parcels at $2250/acre, and assesses them at 10% of that, or $225/acre.

One might compare this to the Illinois Society of Farm Managers and Rural Appraisers’ report, which includes but doesn’t break out Cook County, and indicates sales prices in Northeastern Illinois range from $5500 to $40,000 per acre.

There’s no minimum parcel size for a “farm” under class 239. Thus, we have a series of 18 small vacant lots in Matteson: 31-20-218-001-0000 thru 31-20-218-018-0000. All of these appear to be empty lots, awaiting the construction of houses. Eight of them are classified as vacant land, with assessed values ranging from $5392 to $7953 (differences apparently due to differing sizes). Taxes due on these in 2024 range from $2351 to $3467 (excluding overdue taxes from the prior year, but including interest charged). But ten of these similar lots are class 239, farmland, assessed at $50 to $84. The County issues tax bills of zero for these parcels. This is claimed to be due to 35 ILCS 200/18-40, which states

If the equalized assessed value of any property is less than $150 for an assessment year, the county clerk may declare the imposition and collection of all tax for that year to be extended on the parcel to be unfeasible and cancelled. No tax shall be extended or collected on the parcel for that year and the parcel shall not be sold for delinquent taxes.

However, these parcels are assessed at $50 to $84. Applying the equalization factor of 3.0163 results in EAV greater than $150. In response to my inquiry, the Cook County Treasurer explained that, even tho equalized assessed valuation is printed on the tax bill, it isn’t used for taxation of farm properties. Here are the 18 parcels:

table of data — 18 vacant lots in Matteson

I don’t know why 10 of these properties are assessed as farmland while 8 are not.

Countywide, the 813 class 239 parcels have a total assessed value of $2,251,552. While the Assessor’s records are imperfect (there being, for example, no “Dundee” municipality in Cook County), it appears that only 37 of the County’s municipalities (plus a few unincorporated areas) contain class 239 parcels. The tally is shown in the following table. Keep in mind that these are assessed value, 1/10th or less of the actual market value.

table showing class 239 parcels in Cook County — Summary of Class 239 parcels by place

While class 239 is a great bargain for owners of “farmland,” the inequity doesn’t seem, by itself, to have a major effect on the financial condition of the taxing bodies. For example, Ford Heights has the largest number of class 239 parcels, 114. Total class 239 assessed value in Ford Heights is $35,496. If this land was subject to equalization like other parcels, the equalized assessed value would be $107,067. As noted above, the Assessor seems to undervalue class 239 parcels, but even if we assume undervaluation of 75%, the total EAV of these parcels would be $428,268, for a net increase of at least $392,772. (I say “at least” because some or all of the class 239 parcels may be assessed at less than $150 and therefore completely untaxed.) The latest report I can find for Ford Heights total EAV, from 2022, is $14,201,062. Thus, if my assumptions are correct, and tax levies don’t change, then the typical property owner would save just 2.76%, Longer-term, landowners might be encouraged to develop their parcels, with housing or other improvements, so the benefit over time might be greater and might not only be financial. There would be no expense to the Village or other taxing bodies.

And of course the captioned illustration at the top of this post, 7+ acres in desirable Hanover Park, easy walk to Metra, adjacent to residential areas (or suitable for retail/commercial use), takes advantage of class 239 to pay taxes of less than $200/year.

[Still more to come.]

Cook County contains 59,886 vacant taxable land parcels

A vacant lot (source: Cook County Assessor)

The current locally assessed value of these 59,886 parcels totals $490.23 million. By ordinance, these assessments are 10% of what the Assessor estimates to be the market value of these parcels, implying that they’re worth $4.902 billion. Of course there’s also a “multiplier” of 3.0163, meaning the taxable value is $490 million X 3.0163 =$1.478 billion. Tax rates vary around the County, but in Chicago currently (before expected increases) is 7.02%. Meaning that owners of vacant land need to pay $1.54 billion X 7.02% = $103 million.

The County Board decided that vacant land, like residential real estate, should be assessed at 10% of estimated value. Commercial and industrial land is assessed at 25% of value (with exceptions for special favors). The Board could, by ordinance, apply this 25% factor to vacant land also. Which would raise something like $490 million X 1.5 X 3.0163 X.0702 = $155 million/year. Without taxing any housing; without taxing any business. Without taxing anybody who can’t afford to own land. Now $155 million may not seem like a lot, given that the City of Chicago is running something approaching a $1 billion annual deficit, Chicago Public Schools hundreds of millions more, and of course many suburban Cook County taxing bodies are in deficit. But $155 million is just the start.

If you are owner of a vacant lot, and you receive notice that your taxes have more than doubled, what will you do? You could sell the lot, but who would buy it? Probably somebody who wants to build housing, or a commercial business, or something else that serves the community. Or you might decide to build something yourself. Either way, this contributes to better housing supply or increased job opportunities.

Also, that $155 million/year is just for actual vacant lots, coded by the Assessor as class 100. There are also 25,180 parcels labeled as “vacant land under common ownership with adjacent residence” (class 241), also assessed at 10%. These are assessed at $123 million. By the same calculation as we used for vacant lots, assessing these like other nonresidential property could yield an additional $39 million, and some of the parcels would be used for new housing (including accessory dwelling units) or other useful projects.

This amount of revenue is not going to solve all the financial problems of Cook County local governments, but it would be a start, would cost practically nothing to implement, and would have the side benefit of increasing jobs and housing.

Many vacant lots are not taxable, because they belong to the City of Chicago or other government agencies. The above calculations omit such lots. DePaul’s Institute for Housing Studies has examined vacant land in Chicago, including City-owned parcels, and provides some analysis here.

This is not a complete remedy for Chicago’s and Cook County’s financial (and other) difficulties. But it should be an element in any plan to achieve prosperity and justice.

[More to come.]

Tribune and “Illinois Answers” explain why value of improvements should be excluded from assessments

“Cook County assessor misclassifies hundreds of properties, missing $444M in one year alone,” says the Chicago Tribune. The report is joint with Illinois Answers. $444 million is a lot of money, about 1/2 of 1% of all the assessed value Countywide. And assessment data is public, so the journalists could easily find examples of inconsistencies.

Evidently, Fritz didn’t do as good a job as we wish. The journalists didn’t report any comparable error rates for other jurisdictions; perhaps they couldn’t find any. Some Cook County taxpayers were unpleasantly surprised when, the Assessor having suddenly discovered their improvements, they received big bills for back taxes.

The report includes a chart showing annual number of improved properties discovered and amount of back-taxes billed for each year going back to 2006:

From the Chicago Tribune / Illinois Answers report.

From this it appears Fritz’s record is pretty much in line with the results of prior Assessors. He says there are 1,864,161 taxable parcels in the County, so in his worst year he discovered missed improvements on 0.1% of them.

Note that the Tribune/IAP folks mislabeled the chart; the assessments probably weren’t “omitted,” but the properties were underassessed because improvements weren’t recognized.

The report includes a number of complaints by former County employees and some local officials, essentially agreeing that Fritz did an imperfect job. There’s even a time-series of aerial images of a subdivision in Lynwood, showing very clearly that houses have been built, but didn’t yet show up on the tax rolls. For a village of 9116 people, and their school districts, this subdivision of a few dozen houses might be a significant fiscal consideration. And for the new homeowners, the back taxes will be a burden.

(The report implies that in this case the ball was dropped by the Bloom Township Assessor, an intermediary between Fritz and the municipality. )

The journalists also start, and conclude, their report with the case of one property owner who has experienced serious tax increases and is considering moving out state. Yes, excessive and wasteful government spending, and high taxes, is a big problem here. But fixing assessment errors affecting 0.1% of the parcels will do little to address it.

We could make a couple of observations here.

What if Cook County could drop improvements from the tax base, assessing and levying only on the value of land, what the each parcel would be worth if vacant? Probably none of the problems described in this report could have occurred. And instead of increasing “the number of budgeted field staff from 34 in 2023 to 38 in 2024,” Fritz could have laid off most of the field staff, putting a few to the task of correctly valuing land. He’ll also need (probably already has) somebody to monitor the County Clerk’s Tax Map Department, to be sure parcel boundaries and numbers are up to date.

How does the government’s ability to accurately administer the property tax system compare to the income tax system, or the sales tax system? Nobody knows. While nobody really understands how income taxes work, the revenue agencies release only aggregate data, so we know nothing of any invidual’s situation unless the person chooses to publish her income tax returns, as some politicians do, or somebody violates the rules and liberates confidential information. Even sales tax information for individual taxpayers is largely confidential. To guess how well these taxes are administered, one could search for /IRS agent indicted/ on luxxle or freespoke .

And here’s a report asserting that over a recent 18-month period, more than 1% of Internal Revenue Service employees had “confirmed tax noncompliance issues.” (Apparently most of them kept their jobs.) If 1% of IRS employees are “cheating,” I doubt that the percentage for average taxpayers is less. So it seems that overall, Fritz is doing a better job than the Feds.

Maybe he should ask the State to make his job easier by removing improvements from the real estate tax base.

Georgist looks at “Escaping the Housing Trap.”

This new book by Strong Towns head Chuck Marohn (and Daniel Herriges) is worthwhile for anyone who wants to understand where America’s “housing crisis” came from. The history is important: How did we get here? He goes thru how housing was financed a hundred years ago, federal programs enacted in response to the 1929++ economic depression and subsequent disruptions, subsequent federal programs, and the dilemma we have today.

About 2/3 of American households are homeowners, they have (or hope to obtain) “equity” in their property, and they really don’t want to see the economic value of their holdings decline. Many of them are already stressed by the cost of paying their mortgages, taxes, maintenance expenses, and other costs of living. Not to mention the cost of owning and operating automobiles, as in most communities life without one is quite inconvenient.

The remaining third are renters (plus the unhoused). Many of them are also under economic pressure, as rents in recent decades have outpaced incomes. They might like to see housing prices decline, or more precisely to see the housing they want become easier for them to afford.

So there are big interests who want housing costs to decline, and who don’t want the price of housing to decline.

Part of the problem, as Marohn sees it, is that nowadays housing is built, financed, and often managed at a national scale. These folks are professionals who can deal with complex zoning and building code requirements. So part of the remedy is for local governments to make it easier for small-scale, local builders to make housing. This would include allowing an increase in density by right, such as backyard cottages, accessory apartments, or a two or three unit building in areas which have been restricted to single family.

This isn’t wrong, and I have enough personal experience dealing with building and zoning officials in a “progressive” community to know that improvements would be helpful. Even Brandon Johnson claims to be aware of the problem.

Working thru the book, I kept wondering what happened to the land value tax, which I know Marohn has supported. When I got to the example on “Financing Backyard Cottages” where he notes that one advantage would be additional property tax revenue, it sure looked like LVT has been tossed aside. Finally, toward the end of the penultimate chapter, he says “the land value tax… is perhaps the best mechanism to overcome neighborhood stagnation and decline.” Well it was nice he was able to fit this in.

I do recommend this book to anyone interested in realistic ways to get more housing built, or just in finding out how we got where we are. However, if you want to know how the whole problem could have been avoided by getting public revenue primarily from the value of land and other privileges, you’ll want to look elsewhere.

Three “finalist” proposals for fixing Chicago’s pension mess

We have an article from Crains reporting on the winning proposal for solving the disaster that is the City of Chicago’s pension plans. Of course a new fee is involved, being a toll on DLSD. Article doesn’t disclose how much this toll would be, nor its likely impact on traffic. I suspect that parallel arterials would see increased congestion, while DLSD itself might flow a lot better with reduced traffic volumes.

The two runners-up proposed income tax increases. One would be a 1% income tax on the remaining Chicagoans, to be termed a “public safety tax” and used to fund police and fire departments, freeing up municipal funds to go to pensions. The other proposed raising the State income tax to 6%.

There were originally eight proposals, and perhaps one of the losing five made the logical proposal– a tax on whoever controls on-street parking. Like any real estate tax, this would be based on the value of the control, and should be set such that LAZ Parking can retain just enough profit to operate the system. .The Sun-Times’ Fran Spielman said LAZ grossed $136.2 million in 2021).

A tax collecting most of that annually could make a significant dent in $35.4 billion shortfall recently estimated for the City’s pension funds, tho it couldn’t cover the entire need. And that doesn’t include Chicago Public Schools, Cook County, State of Illinois, and other government pension funds which are in difficulty.

All these proposals come from students at UChicago’s Harris School of Public Policy. Which somehow reminds me of the remark decades ago from Mike Royko, observing that Hyde Park isn’t really part of Chicago, but rather a sixth boro of New York.

Are Cook County property taxes actually paid? Some data from Maria Pappas

Georgists like to say that one of the many advantages of a real estate tax over other taxes is that, if the owner does not pay it, eventually s/he’ll lose the property, which can be sold to pay the arrears. But “eventually” is an important word here.

Now Cook County Treasurer Maria Pappas has compiled data showing the extent to which taxes don’t get paid. For this purpose, “not paid” means “not paid within a month of the due date.” I suspect that in most cases, these taxes are eventually paid, with a penalty (9% interest, recently reduced from 18%) included. But years might elapse, and various games can be payed by “investors” regarding these properties. (Some detail is on pages 23-26 of this pdf.)

The reports are broken out by property class, by ward, by municipal area, and by taxing agency, showing amount billed and amount paid, and can be downloaded to spreadsheets.

Countywide, 96% of all taxes billed were collected within a month of the deadline. In the impoverished Village of Ford Heights, only 28.55% of taxes got paid, but no other community had less than 50%. The six lowest percentages are all in the south suburbs, followed by the Chicago community areas of Englewood and West Garfield Park.

For parcels coded as “vacant,” only 71% of taxes were collected; all the other categories were above 95%. Total taxes billed to vacant parcels was $121,810,594, of which $86,873,652 was paid, implying that, were vacant parcels taxed at the same rate as commercial and industrial land, government revenue would increase by something like $130 million to $183 million — not counting the development which such a tax increase would encourage.

How your government increases meth fatalities

That’s the conclusion from this Sun-Times article. They attribute rising methamphetamine use to shortage of Adderall (apparently including its generic version and “another popular [apparently lawful] stimulant”), which can’t be lawfully imported.

The U.S. Food and Drug Administration issued an advisory in October announcing that Adderall had fallen into short supply months after pharmacies reported issues filling prescriptions. Teva, a major producer, was “experiencing ongoing intermittent manufacturing delays,” the agency said.

Teva’s name-brand Adderall formulations are now “available,” according to the FDA, but there’s a “limited supply” of some generic versions.

There’s also a shortage of nearly 40 versions of methylphenidate, another popular stimulant used to treat attention deficit hyperactivity disorder, according to the American Society of Health-System Pharmacists.

The easiest way to eliminate the shortage of prescription stimulants is for the government to lift importation restrictions temporarily and work with companies to ramp up U.S. production, Beletsky says.

But the government has said it won’t increase production quotas for Adderall because most manufacturers say they have sufficient inventory “to meet their contracted production quantities for legitimate patient medical needs.”

To make black seem white and wrong seem right

Of course Henry George, writing in the 1890s, explained how sinister forces are able to manipulate the opinions of the public against our own interests.

Credit: Chris Piascik
(CC BY-NC-ND 2.0)
The power of a special interest, though inimical to the general interest, so to influence common thought as to make fallacies pass as truths, is a great fact without which neither the political history of our own time and people nor that of other times and peoples can be understood. A comparatively small number of individuals brought into virtual though not necessarily formal agreement of thought and action by something that makes them individually wealthy without adding to the general wealth, may exert an influence out of all proportion to their numbers. A special interest of this kind is, to the general interests of society, as a standing army is to an unorganized mob. It gains intensity and energy in its specialization, and in the wealth it takes from the general stock finds power to mold opinion. Leisure and culture and the circumstances and conditions that command respect accompany wealth, and intellectual ability is attracted by it. On the other hand, those who suffer from the injustice that takes from the many to enrich the few, are in that very thing deprived of the leisure to think, and the opportunities, education and graces necessary to give their thought acceptable expression. They are necessarily the “unlettered,” the “ignorant,” the “vulgar,” prone in their consciousness of weakness to look up for leadership and guidance to those who have the advantages that the possession of wealth can give … This is of human nature. The world is so new to us when we first come into it; we are so compelled at every turn to rely upon what we are told rather than on what we ourselves can discover; what we find to be the common and respected opinion of others has with us such almost irresistible weight, that it becomes possible for a special interest by usurping the teaching province to make to us black seem white and wrong seem right. … [W]e have but to look around us to discover in operation today the great agency that has made falsehood seem truth.

Henry George
Science of Political Economy
Book II Chapter 2
source

Any questions?

How can gov’t officials be permitted to invest personally?

Ugandan Anti-Corruption Sign (credit: futureatlas.com, CC BY 2.0)

There’s been some concern about government insiders demonstrating great skill at choosing investments, at the presumed expense of other investors (not just individuals, but pension funds and other entities on which we depend). At least they’re required to, ex post, report their trades, including those of their spouses. But there must be a better solution.

A lot could be accomplished by reducing the role of government, and government-backed monopolies such as the “Federal” Reserve, in our economy. This would reduce the leverage of gov’t insiders. But every government operation has a lobby behind it, so this will be a challenge to accomplish. And even a legitimate limited government is going to have an impact on the economy.

So I propose that government insiders be required to post all their trades in advance, let’s say at least an hour before executing them. Put them on an easily-accessible public website (insiders.gov might be a good URL) so folks can front-run them. It would create a whole new subindustry of forecasting market moves based on what the insiders are doing.

Of course all kinds of new hustles might develop to get around this.

Posting a trade and then not executing it
Having offshore trusts which they can claim not to control
Telling their friends a day ahead of time what they plan to do

But it would at least be progress. And it might discourage some of the wealthy from getting so directly involved in government.

Concerns about rising death rates

Mural Detail, St. Joseph Church, Hammond IN CC BY-NC-ND 2.0 by Noah Vaughn

According to this report from Indianapolis, an insurance company CEO has observed deaths of working-age people (covered by his company’s policies) running 40% above pre-‘demic levels, and says most of the claims aren’t covid deaths.

The CDC do publish some data on deaths by age, and for the age group 18-64 we see

year weeks “covid” deaths total deaths

2021-22 40-48 24,792 145,529

2020-21 40-48 12,493 143,491

2019-20 40-48 0 120,317

2018-19 40-48 0 119,029

So we have about a 20% increase, most of which is listed as “covid.” The remainder might reasonably be due to knock-on effects of the lockdowns and lockouts. The difference between 20% and 40% is curious, but his insured aren’t a random sample of the total population. He also notes an increase in disability claims.

Since the vaxxed population would have been higher in 2021 than 2020, this data would be consistent with some deaths being caused by the vax, as well as few deaths prevented by it.