The wildfires aren’t completely controlled at this writing (January 15), but they will be. Estimates of dollar loss are all over the place, the highest I’ve seen is $275 billion. Maybe it’ll be more; let us suppose $400 billion is the cost to replace the buildings and other wealth that has been lost. Let us further suppose that half of that will be covered by insurance from solvent companies. Finally, let us suppose that it is public policy to compensate private individuals and corporations for their losses, even tho no such compensation is provided to victims of common thieves.
So who should pay this $200 billion? Well, the US Federal government has lots of money and can issue bonds as needed to obtain more. But it’s already over $36 trillion in debt, ignoring some big obligations. Ultimately the money will come from federal taxpayers, of whom we may assume there are about 200 million (The total number of personal returns filed appears to be less, but some are joint.) That would work out to $1,000 per taxpayer, tho of course more for those who lack effective lobbyists and less for those who don’t.
But why should this be a Federal matter at all? Why can’t the people of California, or even of Los Angeles County, cover the cost? They’re certainly closer to the situation. The County Assessor tells us that the total assessed value of taxable property in the County is $2.1 trillion. But like other jurisdictions, this involves many fictions, and the actual value of any given property is typically several times the assessed value. In California this seems to be largely due to Proposition 13.
It seems that in LA County, at least for residential parcels, the land value is typically much greater than the improvement value. [edit 1/18/25: This article and link therefrom supports the assertion that “[l]and values in Los Angeles account for an extremely high share of home value.”] What this means is that, if you bought a house and lot for $1,000,000, and the house was destroyed, you actually lost less than $500,000. Combining the Countywide underassessment with the relatively high proportion of value in land, the $2.1 trillion in total assessed value probably includes actual land value greater than $2.1 trillion. And if this value were taxed at, say 1%, it would yield more than $21 billion/year that could fund recovery and rebuilding. (This 1% would be in addition to the much lower effective rate already applied.) There is no need for Federal taxpayers to bear this burden, which benefits primarily owners of very expensive real estate.
This is essentially how San Francisco recovered from its 1906 earthquake, as documented by Mason Gaffney in this article.
Continuing our exploration of land values and real estate taxes in Cook County …
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:
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.
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.
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.
“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.
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.
Disused Chicago bread factory to become data center. Image credit: Emily CC BY-NC 2.0
In a new article (archived copy, also included in this pdf) for the Chicago Council on Global Affairs, Cook County Assessor Fritz Kaegi asks “In a digital economy, how can cities create a more equitable property tax system?” Of course he does not try to define “equitable,” but one infers from the article that it means “funded more by those benefiting from the digitalization of the economy, and less by those who actually perform useful work.” A desirable result, to be sure, but how does he propose to accomplish it? He also seems to assume that government-funded schools are a good thing, or at least that parents shouldn’t be held individually responsible for arranging their own children’s education.
He proposes to get more revenue from the big infotech companies, specifying Apple, Microsoft, Alphabet/Google, Amazon, and Facebook, but by implication the numerous other organizations who have prospered by taking advantage of the internet (as well as their lobbying capabilities to stifle competitors). He doesn’t think that local or state government is equipped to collect much of this revenue. Further, he assumes that a real estate tax to fund “education” can only be implemented at the school district level, and couldn’t be countywide, regionwide, statewide, or in any respect subnational. He concludes that the U S government needs to send large quantities of money to America’s cities, particularly including Chicago and the rest of Cook County.
“The federal government … is best situated to tax incomes generated by activity like digital commerce, virtual meetings, and footloose service providers [and]…will need to build fiscal mechanisms for a digital world that separates economic activity from physical space. ” (Presumably these wealthy and influential companies won’t use their influence to deflect the tax burden to others. )
OK, so Cook County local governments don’t get revenue from this digital economy? What about the 11 (soon to be 12) data centers in Elk Grove Village (archived copy), paying real estate taxes and utility taxes, as well as taxes imposed on persons working to construct and operate them. This report (archived copy) counts 52 data centers regionwide as of February 2021. Both reports note that several kinds of tax favors are provided, without indicating that they’re necessary since the digital economy requires facilities in appropriate locations.
And Amazon and other on-line retailers don’t generate taxes? Those of us who’ve bought something on line in the past couple years have noticed that the e-commerce giants collect and remit state and local sales taxes, typically in excess of 10% here. Last year the BGA counted (archived copy) 36 warehouses in the Chicago area built for Amazon since 2015 (and noted “at least $741 million in taxpayer-funded incentives”). This of course doesn’t count warehouses used by non-Amazon sellers such as Walmart and Target. Again, it’s likely that most or all of these facilities would have been built without subsidies, since warehouses have to be located appropriately with respect to markets, labor supply, transportation, etc.
Kaegi is legitimately concerned about the fragmentation of Cook County’s tax base, noting that “The lower the value of real estate in a community, the higher the effective rate to provide a comparable level of school services. This results in
great disparities.” But that problem isn’t inherent in the real estate tax; it’s inherent in the fragmentary structure of finance, funded largely by local real estate tax. A statewide real estate tax, such as Illinois had until it was replaced by a sales tax in 1933, could reduce or eliminate the disparities. A number of states retain statewide real estate taxes, but the problem of disparities can also be addressed by a tax-base sharing arrangement, as has operated for half a century in Minnesota.
“[W]e must continue to push for local-school funding that is not rooted in local land values,” writes Kaegi. Actually, if an effective disparity-reduction arrangement is in place, the opposite might be true. I have previously posted a table and map illustrating that, if taxes were based on land value rather than land+improvement value, the burden on homeowners in communities of low income and color would be lessened. And of course if the burden of sales taxes could be replaced by a tax on land value, the benefit to moderate-income households would be enhanced.
So we have an Assessor, running for re-election, who doesn’t believe the taxes he helps calculate are a good way to fund local services. I had hoped for better (but didn’t really expect it), as the quality of assessment seems to have improved during his tenure. He does have one announced primary opponent.
UPDATE Aug 29 2021: If anyone familiar with Chicago doubts that removing improvements from the tax base will ease the burden on low-income homeowners, this map will be instructive. The original, mapless post from Aug 25 follows.
We sometimes are told that a land value tax (LVT) would punish the poor person who has a small rundown house on a high-value lot, while benefiting the person next door who has a large fancy house on an identical lot. And that’s not wrong, it’s just atypical. In practice, we believe, poor people mostly live in neighborhoods where housing is cheap and land is cheaper, thus they would tend to benefit from a shift to LVT.
As the quality of Cook County assessments has been improving, we expect to be able to show this by analysis of that data. In the meantime, we have some estimates of land and improvement value from William Larson and colleagues at the Federal Housing Finance Agency. Using appraisals produced for mortgage underwriting, they estimate land and improvement values for homes in most zip codes (and census tracts) nationwide. Their source data includes only single family properties which were appraised for mortgage purposes. They consider only parcels where the improvement is less than 15 years old, and exclude vacant land as well as land where the appraised value is very close to the assessed value (in case appraisers might have relied on low-quality or obsolete assessments). Also excluded are zip codes with an insufficient number of single family home transactions.
The chart below shows, for Chicago zip codes, the ratio of land value to total value (vertical axis) and total value of the property (horizontal axis. What stands out is that the ratio tends to be lower where the properties are cheaper. That is, a revenue-neutral shift of property taxation to land values only, ignoring value of improvements, would tend to reduce the taxes on low-value zip codes, while increasing it in higher-value areas.
The table below shows the data for each zip code, sorted from high proportion of value in land to low. Clearly the more affluent areas have lower proportion of improvement value, and the areas with low income population have a higher proportion of improvement value.
Estimated land value proportion and related data for single family properties in Chicago zip codes
Also of interest, even tho the low-value areas have a high ratio of improvement to land value, this isn’t because of large houses on small lots. The floor area ratio is generally lower in the areas with lower land value proportion.
Overall, the above data is consistent with Georgists’ assertion that low-income residents usually benefit from a switch to LVT. I might be taking a further look at this dataset.
According to a Sun-Times report, Cook County Assessor Fritz Kaegi acknowledges that his “Senior Freeze” program, under which old property owners claiming household income under $65,000 can get a big break on property taxes, is “riddled with errors.” Highlighted is a multi-million dollar condo in Water Tower Place, whose owners pay only $2502/year. While it’s certainly possible that these folks might have income under $65,000/year, that seems unlikely, as they also own a Florida condo valued at over $1 million. Their Chicago property apparently also benefits from the temporary removal of toilets during a 2017 remodeling. It seems that the Assessor never noted that the toilets were replaced (or perhaps they were not?)
While the WTP property is clearly an extreme case, the senior freeze program transferred $250 million from owners of 144,904 properties who participate in it to the remainder of the 1.77 million taxable properties (of which 1.6 million are residential) in the County. With the total property tax revenue at $15.6 billion, this amounts to about 1.6 % of total taxes collected. The Sun-Times article provides several other examples of affluent old people who benefit from the program.
Clearly this is a problem of bad policies ((discriminating against renters, the nonelderly, and people who find it difficult to complete simple bureaucratic forms), and taxing improvements), combined with governmental malfunction (Kaegi hasn’t been able to get the program under control, partly because there is no mechanism for the County to verify incomes).
It should not be necessary to mention, but I will mention anyway, that the Sun-Times report relied on property tax data being, for the most part, publicly available. While far worse scandals likely could be found regarding income tax, many of these can’t be documented unless taxpayers “voluntarily” release their information, or it is (probably unlawfully) liberated.
I’ve long considered Dominic Frisby, perhaps the only working comic who’s also a financial writer, to be a Georgist. Several years ago he posted a nice video explaining the land value tax. Now he’s gone deep into a history of taxation and its effects, in Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future Readable and succinct, but somehow by the end Frisby has forgot about his video.
The title is appropriate, so good that over a dozen older books already carry it, but the subtitle may be unique. Frisby asserts quite a few facts new to me, and for the most part provides references (altho some are a bit summary, showing only the domain name such as cbs.com, or time.com, where one might need to search around a bit).
The book starts with the story of Hong Kong, a British colony which prospered thru free markets and lower taxes (The point stands, even tho in recent years external demand pushed housing costs to obscene levels, and in recent months political and governmental interference made conditions even more difficult.) Going thru tax history, Frisby of course discusses the effects of the window tax (“daylight robbery”), and explains why it was considered to be fairer and easier to administer than its predecessor. He tells us about tax revolts and England’s first income tax, all records of which were apparently destroyed (source citation is a two-volume history that I can find only in Latin). He explains the cause of the U S War between the States (which Lincoln waged more for revenue purposes than in any opposition to slavery.) He notes that Hitler was tax-exempt, and the Guardian used a Cayman Islands entity to (apparently legally) avoid taxes.
After lots more stories about taxation and its role in history, moving to modern times, Frisby explains (as if any of us need to know) the burden that taxation of productive activity places on people trying to, well, be productive. He talks about the digital nomads and crypto currencies which make collection of production tax more difficult, and about digital transactions which make the collection easier.
Finally he proposes a Utopian tax system. Is it collection of all economic rent as the sole source of public revenue? Not really. He wants VAT (not to exceed 15%, and including narcotics) and income tax (also not to exceed 15%). So the record-keeping burdens and complexities of those will remain, tho perhaps a bit reduced because the impact of error is less. To these he wants to add L U T (Location Usage Tax), which is basically LVT but with perhaps a clearer name, and which would be set at some percentage of the land rental value. He wants voters to choose the percentage, apparently a single rate nationwide. And since he aims to keep governmental expenditures below 15% of GDP, it’s unclear that there would be any L U T at all.
“The location usage tax does not apply just to land, but to any asset granted by nature — the airspace the mineral wealth, and even the broadcast spectrums.” He doesn’t seem to have any problem with private collection of rent for “intellectual property,” even tho I P is a privilege granted and protected by the government, thus straightforward to track and assess– if there’s anyjustification for I P at all.
It seems that much of the land in Britain is “unregistered,” in that the owner isn’t known, and in Utopia this will be remedied by identifying every owner. I’m not sure why that’s necessary. A tax bill could be posted for each parcel, and a copy mailed to the owner should s/he request it. After due and repeated notice, If the bill isn’t paid, the land could be taken over by the Crown (or whatever they call it over there), and auctioned to somebody willing to pay the tax. (If nobody’s willing to pay the tax, it needs to be reduced.)
Would I like to live in Frisby’s Utopia? Well, of course here in the U S we have no VAT, and the retail sales tax is generally less than 15%. But income tax can be higher, and we have various other taxes which Frisby proposes to eliminate. And LVT has other benefits in addition to the revenue it generates. So on the whole, it’s a better deal, a step in the right direction. But Utopia? Go back and watch the video.
(Note: This review is of the 2019 edition of the book. The Publisher’s web site indicates that a new edition will be released later in 2020.)
Reportedly, taxes of 163,036 parcels in Cook County were not paid on time. This comprises 2018 taxes which should have been paid in 2019. and amounts to 8.7% of all parcels in the County. For a dozen south Cook County municipalities, this amounts to 20% or more of total parcels. Counts by municipality are posted separately for south, west, and north Cook. All sources show the percentage of parcels with unpaid taxes within the City of Chicago as 9.9%.
Separately, the reports show that only 7.8% of the delinquent taxes offered for auction in 2018 were bought by investors, which might imply that the remaining parcels are considered worth less than the taxes owed.
Unfortunately the source doesn’t tell us how many of the parcels are vacant, residential, commercial, or other uses, and gives no historical context, so we don’t really know how any of these figures compare to prior years. But regardless, the current numbers are alarming.
Suppose that the real estate tax system was changed, so that improvements would be tax-free while the value of land as vacant would be heavily taxed to make up the difference. For vacant parcels, construction of houses or other structures would not increase the tax. For parcels which contain improvements, taxes likely would be lower than now, and improvements would again be tax free. Just a thought.
Maybe expanding tax-exempt institutions raise land prices?
Crains tells us that a strikingly-designed two flat, less than 30 years old, is worthless. Well, they didn’t say it quite that way, but it was sold for $1.9 million to a buyer who will demolish it. So the $1.9 million was for the land. I don’t know whether any developer of housing or anything else taxable would have paid nearly that much for the site, but the buyer was tax-exempt Illinois Masonic Medical Center. Their exempt status of course made the land more valuable to them. Which raises the interesting question of whether buying land in the path of such an institution’s expansion might be a profitable strategy. Of course, a fair-minded community might decide to tax land used for hospitals at the same rate as land used for housing and other useful things. But we’re not there yet.
“Taxes – De Standaard” by Stijn Felix is licensed under CC BY-NC-ND 4.0
