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Mr Downtown Nov 17, 2009 5:42 PM

Quote:

Originally Posted by pip (Post 4562818)
Boston, 500,000 people, gives the MBTA $75 million a year vs. Chicago, 3 million people, the above bolded.

So? Different places set up their tax support of local transit differently. In some places, the city (or state) collects sales and income taxes and then gives it to the transit agency. In other places, such as Illinois, the transit agency is authorized to collect the tax itself.

Attrill Nov 17, 2009 5:53 PM

Quote:

Originally Posted by pip (Post 4562818)
Boston, 500,000 people, gives the MBTA $75 million a year vs. Chicago, 3 million people, the above bolded.

Downtown has it exactly right.

Bostonians don't pay a 1% sales tax specifically earmarked for transit - Chicagoans do. I'm not sure how much Chicago's contribution (via RTA tax) is this year, but it is certainly in the hundreds of millions.

Having the City of Chicago pay more is pointless. The entire RTA system for funding transit needs to be scrapped.

Chicago Shawn Nov 17, 2009 7:30 PM

The big problem with RTA's operational subsidy is that it is based on sales taxes, which are too volatile to solely rely on for balancing a budget.

I would like to see the RTA scrap the sales tax subsidy in exchange for property taxing district overlay on the whole metro area receiving service. It could operate like any of the other taxing agencies and just be a separate line item on your annual property tax bill. It would be a much more stable source of revenue, and it can be graduated by county, i.e. a smaller percentage to pay in McHenry and Kane Counties versus Cook and Dupage.

ChicagoChicago Nov 17, 2009 7:53 PM

Quote:

Originally Posted by Chicago Shawn (Post 4563086)
The big problem with RTA's operational subsidy is that it is based on sales taxes, which are too volatile to solely rely on for balancing a budget.

I would like to see the RTA scrap the sales tax subsidy in exchange for property taxing district overlay on the whole metro area receiving service. It could operate like any of the other taxing agencies and just be a separate line item on your annual property tax bill. It would be a much more stable source of revenue, and it can be graduated by county, i.e. a smaller percentage to pay in McHenry and Kane Counties versus Cook and Dupage.

Property taxes might be stable to the municipality, but they are anything but stable to the landowner. I'd rather see an uptick in income taxes. At least then, you know upfront what your taxes will be for every dollar you make. In Chicago, you have no idea what your property taxes will be until a month before they are due.

VivaLFuego Nov 17, 2009 8:55 PM

Quote:

Originally Posted by ChicagoChicago (Post 4563136)
In Chicago, you have no idea what your property taxes will be until a month before they are due.

I don't mean to sound harsh, but if so, that's your own fault. The tax bills that recently arrived are for the second installment of the 2008 property tax - whose levies were set 2 years ago. Changes to assessed valuations (and thus potential increases/decreases outside of those implied by the changes in the levy) for the 2009 property tax bill, which will be paid in 2010, were published a couple months ago, giving time for people to either appeal their valuation or ballpark calculate their 2009 property tax (remember, the 2009 property tax levies are already set).

Maybe it would help (serious suggestion) if everyone were required to pay the property tax in escrow or other form of installment plan so that payments are perceived as more normalized and smoothed like an income tax, rather than receive very large bills every 6 months (of unexpected size, due to ignorance or incompetence) and then complain to elected officials about how evil the most economically rational and stable method of funding essential government services is.

mwadswor Nov 17, 2009 9:16 PM

Quote:

Originally Posted by VivaLFuego (Post 4563258)
Maybe it would help (serious suggestion) if everyone were required to pay the property tax in escrow or other form of installment plan so that payments are perceived as more normalized and smoothed like an income tax, rather than receive very large bills every 6 months (of unexpected size, due to ignorance or incompetence) and then complain to elected officials about how evil the most economically rational and stable method of funding essential government services is.

That's a great idea. Other types of taxes may sum to large annual amounts, but every other form of tax is broken up into lots of small payments, lessening the perceived amount (and making refund time a joyous time of year :D ). Why is property tax only collected semi-annually?

By the way, I also agree that it makes more sense to fund transit out of property taxes. It's more stable, and you're directly taxing the places where transit runs.

Mr Downtown Nov 17, 2009 9:38 PM

Quote:

Why is property tax only collected semi-annually?
Well, that's when you take your crop to market. Seriously, property taxes are a holdover from the 18th century.

For one thing, property taxes are inherently regressive. I would argue that a large portion of transit needs should be paid from a progressive income tax, which is a) based directly on ability to pay (in the year it's collected) and b) indirectly based on the economic prosperity caused by having efficient metropolitan transportation.

mwadswor Nov 17, 2009 10:00 PM

Quote:

Originally Posted by Mr Downtown (Post 4563327)
Well, that's when you take your crop to market. Seriously, property taxes are a holdover from the 18th century.

For one thing, property taxes are inherently regressive. I would argue that a large portion of transit needs should be paid from a progressive income tax, which is a) based directly on ability to pay (in the year it's collected) and b) indirectly based on the economic prosperity caused by having efficient metropolitan transportation.

How is it regressive? You own property, pay for the services (including transit) that the city provides for that property. Your property's worth more? You pay more.

VivaLFuego Nov 17, 2009 10:35 PM

Quote:

Originally Posted by Mr Downtown (Post 4563327)
For one thing, property taxes are inherently regressive.

I disagree strongly. A property tax almost perfectly captures all economic activity (assuming fair/objective relative assessed valuations of course) in contrast to a sales tax (taxing consumption) or an income tax (taxing production). The increased density of economic activity afforded by transit access makes real property a natural tax source for re-capturing some of the value created by transit.

A high-income person not only pays property tax on his home - he pays it indirectly via his employer, who pays rent to a landlord who pays property taxes that are related to the relative value of his property, which is increased because high-income people work there (for a moment, ignore the existence of TIF districts...). Property tax is not strictly "progressive" - it scales based on a combination of production and consumption activity, rather than purely on personal income - but it certainly isn't "regressive." Again, being impacted by both production and consumption activities, it is less at risk of creating the sorts of potential perverse incentives other taxes induce, e.g. high income/gains taxes disincentivizing growth/investment or high sales tax disincentivizing consumption.

Quote:

Originally Posted by mwadswor (Post 4563363)
Your property's worth more? You pay more.

I would argue it's deeper and better than that, even, since even if one lives in a dump to minimize his residential property tax while banking a high salary, he is nonetheless contributing tax revenue indirectly on the production side via his job. Of course, one also pays property tax indirectly via retail shopping, since the retailer pays rent on a property whose value is determined by the amount of retail spending potential at the location. So even if Joe Six-Figure Slob lives in a dump so he can afford boutique clothes, bottle service nightclubs, and $100/plate dinners every night, he is still paying a sizeable amount of property tax.

Mr Downtown Nov 18, 2009 2:44 AM

Regressivity is so inherent in a property tax that it's usually mentioned in the first sentence of any description of ad valorem taxation. Consider the owners of three identical bungalows on Avers Ave.:

In 4411, a widow with annual income of $20,000, owes $4,000 property tax. That's 20% of her annual income.

In 4415, a young family with annual income of $40,000, owes $4,000 property tax. That's 10% of their annual income.

In 4421, a pair of lawyers-in-love with annual income of $160,000, owes $4,000 property tax. That's 2.5% of their annual income.

I'm sure you can see the problem. It's not as insistently regressive as a sales tax, but there's only the slightest relationship between the size of your house and your ability to pay. Only a tax on gross wealth is more related to ability to pay than a graduated income tax.

And what kind of accounting are you doing where an employer's rent is paid by the employees rather than the shareholders?

ChicagoChicago Nov 18, 2009 2:56 AM

Quote:

Originally Posted by VivaLFuego (Post 4563258)
I don't mean to sound harsh, but if so, that's your own fault. The tax bills that recently arrived are for the second installment of the 2008 property tax - whose levies were set 2 years ago. Changes to assessed valuations (and thus potential increases/decreases outside of those implied by the changes in the levy) for the 2009 property tax bill, which will be paid in 2010, were published a couple months ago, giving time for people to either appeal their valuation or ballpark calculate their 2009 property tax (remember, the 2009 property tax levies are already set).

Maybe it would help (serious suggestion) if everyone were required to pay the property tax in escrow or other form of installment plan so that payments are perceived as more normalized and smoothed like an income tax, rather than receive very large bills every 6 months (of unexpected size, due to ignorance or incompetence) and then complain to elected officials about how evil the most economically rational and stable method of funding essential government services is.

While I agree with you to an extent, there are plenty of people not savvy enough to understand this city's property tax system. They get their assessment every year and shrug their shoulders at it.

Bought my property in 2007, it was a new building. Finally got the assessors office to subdivide the property last year. The first assessment came late, but we had a ballpark idea of where it would be. Then the assessment came in for next year in August. Surprise, it's 38% higher than what it was assessed for last year. I appealed, they declined it. According to the tax assessor's website, my property assessment should be worth $688k. Meanwhile, the penthouse unit in my 4 story condo building is on the market for $569k. Fuck em. I'm selling come spring. I refuse to pay $12k in property taxes on my place.

VivaLFuego Nov 18, 2009 4:56 AM

Quote:

Originally Posted by Mr Downtown (Post 4563908)
Regressivity is so inherent in a property tax that it's usually mentioned in the first sentence of any description of ad valorem taxation. Consider the owners of three identical bungalows on Avers Ave.:

In 4411, a widow with annual income of $20,000, owes $4,000 property tax. That's 20% of her annual income.

In 4415, a young family with annual income of $40,000, owes $4,000 property tax. That's 10% of their annual income.

In 4421, a pair of lawyers-in-love with annual income of $160,000, owes $4,000 property tax. That's 2.5% of their annual income.

I'm sure you can see the problem. It's not as insistently regressive as a sales tax, but there's only the slightest relationship between the size of your house and your ability to pay.

An important distinction is that in stark contrast to a regressive tax like a sales tax, the struggling widow can sell her property. (assuming she isn't at 150% LTV with HELOC's up the wazoo to pay for LCD TVs in every room and a new kitchen...). I never bought the argument the rising property values unjustly forces people out of their (owned) homes; fixed-income granny can cash out and sell if the 5.8% 2008 COLA on her fixed-income isn't cutting it for gas money to get to community meetings to complain about kids these days and taxes.

Quote:

And what kind of accounting are you doing where an employer's rent is paid by the employees rather than the shareholders?
Highly conceptual here, but shareholders or more generically investors are expecting a certain ROI or profit margin. Rent for office space is an operating expense just like wages and benefits, competing for the same slice of the budget within the constraints of investor targets. Yes, in reality the picture is much more complicated and circular, but I'd maintain that in the overall scheme it more or less nets out as evidenced in the very high property values (and ergo property taxes paid) in downtown office skyscrapers. And yes, this also requires one to ignore the presence of TIF districts in high-income employment zones, which are highly distortative.

Quote:

Originally Posted by ChicagoChicago (Post 4563935)
While I agree with you to an extent, there are plenty of people not savvy enough to understand this city's property tax system. They get their assessment every year and shrug their shoulders at it.

Which suggests maybe a mechanism to blend the payments (mandatory low-fee escrow?) would make the tax less of a political nightmare?

Quote:

Bought my property in 2007, it was a new building. Finally got the assessors office to subdivide the property last year. The first assessment came late, but we had a ballpark idea of where it would be. Then the assessment came in for next year in August. Surprise, it's 38% higher than what it was assessed for last year. I appealed, they declined it. According to the tax assessor's website, my property assessment should be worth $688k. Meanwhile, the penthouse unit in my 4 story condo building is on the market for $569k. Fuck em. I'm selling come spring. I refuse to pay $12k in property taxes on my place.
Something's not right. Have you hired an attorney to appeal? When all is said and done with the various multipliers and equalization factors, most Chicago condo owners pay in the *rough ballpark* of 1 - 1.5% of their market value in annual property tax - so $12k sounds punitively and unjustly high.

ChicagoChicago Nov 18, 2009 6:03 AM

Quote:

Originally Posted by VivaLFuego (Post 4564238)

Something's not right. Have you hired an attorney to appeal? When all is said and done with the various multipliers and equalization factors, most Chicago condo owners pay in the *rough ballpark* of 1 - 1.5% of their market value in annual property tax - so $12k sounds punitively and unjustly high.

The attorney filed the appeal on behalf of everyone in the building. The letter I got a few weeks ago said that the assessment was not adjusted due to "your property's uniformity with comparable properties." The 10/25 ordinance says that my assessment should be for approximately 10% of the market value of the property. I called the assessor's office and told them they can buy my house at a 20% discount... Seriously, I'm ready to go down there are strangle someone. Nobody's property taxes should go up 40% in one year.

Nowhereman1280 Nov 18, 2009 7:27 AM

Quote:

Originally Posted by ChicagoChicago (Post 4563136)
In Chicago, you have no idea what your property taxes will be until a month before they are due.

Not true, you never know exactly what the second installment will be, but the first installment is always exactly 1/2 of your total tax bill from the previous year. The second installment is usually about 55-60% of the previous year, making your bill about 105-110% of the year previous. Sometimes the increase is less though.

Nowhereman1280 Nov 18, 2009 8:02 AM

Quote:

Originally Posted by VivaLFuego (Post 4564238)

Highly conceptual here, but shareholders or more generically investors are expecting a certain ROI or profit margin. Rent for office space is an operating expense just like wages and benefits, competing for the same slice of the budget within the constraints of investor targets. Yes, in reality the picture is much more complicated and circular, but I'd maintain that in the overall scheme it more or less nets out as evidenced in the very high property values (and ergo property taxes paid) in downtown office skyscrapers. And yes, this also requires one to ignore the presence of TIF districts in high-income employment zones, which are highly distortative.

Not even that conceptual, how is a shareholder going to pay property taxes? Hello, shareholders pay nothing after they purchase their share of the company. How are the "paying" for anything. No, it is the customers (in the form of higher prices) and the employees (in the form of lower wages) that end up paying when property taxes increase. Most companies don't pay a dividend so there isn't even any income going to the shareholders to cut into...

Also, property taxes are totally not regressive since they don't affect the poor more unless the poor own proportionately more expensive goods. If a poor man suddenly wins the lottery and his income jumps to $1 million dollars and now he has to pay 50% tax, does that suddenly make our income tax system regressive? No. Same applies if a poor person buys a proportionately more expensive house. They don't have to buy a $500k house when they make $50k, they could buy a $100k one and let the people with $250k a year buy the $500k one. Then they both pay the same tax rate...

ChicagoChicago Nov 18, 2009 4:32 PM

Quote:

Originally Posted by Nowhereman1280 (Post 4564504)
Not true, you never know exactly what the second installment will be, but the first installment is always exactly 1/2 of your total tax bill from the previous year. The second installment is usually about 55-60% of the previous year, making your bill about 105-110% of the year previous. Sometimes the increase is less though.

The key word there is "usually"... But when the assessor's office goes and totally fucks you, as they have for a boatload of people this year, we don't take comfort in that assumption. My example, given above, is classic Chicago bullshit, and they are going to lose a taxpayer in Lakeview because of it. I'd rather move downtown where I can live in River North, pay the same mortgage amount and enjoy a third of the tax that I have in Lakeview.

Nowhereman1280 Nov 18, 2009 5:53 PM

^^^ I dunno, in your case it seems like something is grievously wrong with the system. Did you buy a 4 unit building and subdivide it, or did you buy into a recently subdivided building? We've defended people before because the Assessor is stupid and put a tax lien on their recently subdivided condo because the owner didn't pay the full tax bill for the entire building before it was subdivided. One time the Assessor tried to put our client on the hook for a like $60k tax bill that was for the entire 20 unit building, instead of the 1/20th bill it should have been for their single unit.

Did you have a lawyer dispute the assessment? You might want to at least consult a RE or Tax lawyer and see if they can do anything.

Mr Downtown Nov 18, 2009 5:54 PM

Quote:

Originally Posted by Nowhereman1280 (Post 4564537)
how is a shareholder going to pay property taxes?

Lower dividend; lower share value. Employment markets are competitive and so is product pricing. You guys live in a strange theoretical world where an accountant in the Loop is paid less than one in Downers Grove because the property taxes are higher on the Loop office building.

Quote:

Originally Posted by VivaLFuego
the struggling widow can sell her property.

But why would you think a system that requires that much personal anguish is an admirable one?

The only advantage of property taxes is that, because they're unrelated to actual economic activity, they don't decline during recessions. Well, that makes them stable for local governments, but a punishing burden on taxpayers who no longer have the corresponding ability to pay the taxes.

You know very well how property taxes encourage--even demand--poor land-use decisions as villages compete for rateables. Taxation rates in Dixmoor or Glenwood end up being several multiples of what they are in Northbrook or Libertyville. The relationship to public transportation benefit is casual at best. How can you defend property taxes except in the most macroeconomic and theoretical terms, oblivious to the real world?

Nowhereman1280 Nov 18, 2009 6:13 PM

Quote:

Originally Posted by Mr Downtown (Post 4565089)
Lower dividend; lower share value. Employment markets are competitive and so is product pricing. You guys live in a strange theoretical world where an accountant in the Loop is paid less than one in Downers Grove because the property taxes are higher on the Loop office building.

That's a fallacy, you aren't taking into account the per-capita distribution of those taxes or the dozens of other factors that determine wages. Yes an office building in the Loop pays much more in taxes, but it is also much larger and contains many more accountants than the one in the suburbs. Also, taxes aren't the only thing that determine wages, that is ridiculous. Your example is flawed because, if the CPA on Madison makes more than Mr. Downers Grove, then its likely because hes a "better" CPA and serves clients that are willing to pay him more and cover the higher costs of him being in the loop so he can serve them better.

Also, like I said before, 99% of companies pay no dividend, so no, they won't see a lower dividend at least 99% of the time. Maybe the share price would be slightly lower, but then again 95% of companies are not publicly traded (if they ever trade hands at all), so thats unlikely as well.

Quote:

But why would you think a system that requires that much personal anguish is an admirable one?
Why do you assume the personal anguish is caused by the taxation? Maybe if people didn't become violently attached to material objects like family homes the probably would be eliminated outright? I don't see people assigning sentimental value to material possessions as a reason to create a less efficient society and economy. I thought the "moral" position was to rant against materialism...

VivaLFuego Nov 18, 2009 6:23 PM

Quote:

Originally Posted by Attrill (Post 4562904)
Bostonians don't pay a 1% sales tax specifically earmarked for transit - Chicagoans do.

Minor gripe - but isn't MBTA partially funded by a statewide 1% sales tax, in addition to levies on the municipalities served?


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