Chicago Mayor Lori Lightfoot wants to raise fees and establish new taxes to cover a budget shortfall, but she wants the Illinois General Assembly to allow the city to do it instead of asking residents for permission.
When a property is purchased in Chicago, the seller will pay the city $3.00 for every $1,000 in value and the buyer pays $7.50 per $1,000. Cook County receives 50 cents per $1,000 and the state receives $1 per $1,000 from the seller.
On top of the seller’s fee, the buyer of a property in Chicago would pay a combined fee of $4.50 per $1,000, making the total potential tax on the transaction more than nearly any other jurisdiction in the country, said Gail Spreen, chairwoman of public policy for the Chicago Association of Realtors.
Should the city get permission from Illinois lawmakers, it would tax property valued at more than $1 million a city tax of $15.00 per $1,000. On top of the other layers of fees, this would amount for the highest tax on any business property in the nation, and the second-highest residential transaction fee, second only to New Jersey.
City officials estimate that the higher fee structure would raise $120 million in new revenue. The money would go to the city’ budget deficit, estimated to be $1 billion. The city's deficit is largely the result of rising pension costs.
Spreen said the city may not meet that expectation because a tax on the property transaction will ultimately depress prices and lower assessments.
“This will create a negative impact on property values because our assessed values will be less and then the city and county will collect less,” she said.
Illinois lawmakers, Spreen said, should reject any pleas from Chicago to hike fees because it would ultimately push investors of commercial or residential property elsewhere, meaning the state could miss out on that potential revenue as well.
Spreen's concerns about driving away investors surfaced earlier this year. Famed investor Warren Buffett said states with high legacy debt, like Illinois, are not ideal to invest in because the cost of that liability is likely to fall on his business.
“In the public sector, you know, it's a disaster,” he said. “...if I were relocating into some state that had a huge unfunded pension plan, I'm walking into liabilities.”
Lightfoot also plans to request permission from lawmakers to tax high-end professional services, according to a Chicago Sun-Times report.