Illinois Now Has the Second-Highest Property Taxes in the Nation

In the last decade, the state has been climbing the charts—and could pass New Jersey this year.

Average Property Tax as a Share of Home Price, Five Year Average: 2007–2011
Average Property Tax as a Share of Home Price, Five Year Average: 2007–2011. A county-by-county tax rate chart for the years 2007–11 shows a band of highest-tax counties in Illinois and Wisconsin. (A 2012 map was not available.) SOURCE: “Residential Property Taxes in the United States,” by Benjamin H. Harris and Brian David Moore, Urban Brookings Tax Policy Center, Nov. 18, 2013.

With all the snow this week and the brutal cold forecast for Chicago next week, it’s no wonder so many of us are dreaming of Hawaii right about now. But if you own your home, those daydreams may not only be weather-related: in Hawaii, homeowners are taxed at about one-eighth the rate that Illinois homeowners pay.

On that basis, you could dream about 48 of the states. Illinois now has the second-highest property taxes in the nation, according to a recent report from the Urban Institute. Only New Jersey had higher property tax rates as of the end of 2012, the period covered by the report.

Property taxes in Illinois average 2.28 percent of a home’s value, according to the Urban Institute. In New Jersey, they’re 2.32 percent, and in lowest-taxing Hawaii, they’re 0.27 percent. (The lowest among mainland states is Alabama, at 0.46 percent.)

All the states that ranked ahead of Illinois in the 2007–11 chart saw their tax rates go up in 2012. But the rate in Illinois went up more.

When the data is in for 2013, it’s unlikely to show Illinois stepping down from second place, says Brian Costin, director of government reform for the Illinois Policy Institute. In fact, he predicts that Illinois is on its way to eclipsing New Jersey on property tax rates.

“New Jersey is going up at a slightly slower rate than Illinois,” Costin says, “so in a couple more years like this, we could be number one. But it’s not a number one that you want to be.”

We’ve been moving up. Back in 2005, Illinois property taxes ranked seventh in a report published by the National Association of Home Builders. Then we were sixth during the years 2007–11, for which the Urban Institute’s report gives a multi-year average (see pages 11 and 12 of the pdf).

What’s moving us up the list? Home values are down but taxing bodies’ appetites are up, as Costin sees it. Illinois home values fell farther and are improving more slowly than those in many other states. The latest Case-Shiller index data, which came out on New Year’s Eve, showed that while home values in the nation’s ten major cities have recovered, on average, to June 2004 levels, they’re only back to February 2003 levels in Chicago. At the same time, Costin says, “most local taxing bodies do the maximum increase they can do under the law each year.” Lombard and Lake County are notable exceptions, he says; both have reduced their rates.

When they’re asking for more total dollars in taxation on a smaller pot of aggregate home values, the tax rate is what goes up. It doesn’t necessarily mean that the amount of tax you have to pay goes up, as Cook County pointed out earlier this year.

Nevertheless, to some eyes, it’s the rate spike that that stings most: taxing bodies are asking for more of a share on your asset, even though that asset’s value has dropped. Fast-rising home values during the late, lamented boom economy of the early 2000s “lulled people into a false sense of security,” Costin says. “They accepted increases in property taxes because they thought, ‘I’m making out really well with the value of my home.’ ”

Now, he believes that “our property taxes have gotten so high that it’s having a negative effect on our housing market.” He points to reduced demand, as evidenced by a rising number of people leaving the state. Moving to Indiana—where property tax rates are less than half those in Illinois, and the cost to buy a house is much lower, as well—becomes more appealing, he says. That’s especially true for senior citizens and others who don’t have kids in public schools and so don’t feel compelled to pay high taxes to cover the schools, Costin says; as much as two-thirds of your property tax bill goes to school districts.

There’s another way that Costin sees property taxes hurting the real estate market: corporations that are looking to relocate may consider not only their own potential tax burden but the taxes their employees will pay. Companies that opt to leave Illinois (or if those that were considering coming here choose some lower-tax state), they reduce the demand for homes here, too.

In related news, Allied Van Lines reported Monday that Illinois is the state with the second-highest rate of households moving out. Last January, we were also number two in a similar report from United Van Lines, an annual report that will be updated this week. Number one in that report? New Jersey, the only state that tops us on property taxes.

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7 months ago
Posted by Noah

Could you talk to more than one person when reporting a story?

7 months ago
Posted by thinking1776

The property tax in IL is far worse than demonstrated by this article stating the average is "2.28%". Illinois uses Equalized assessed value- http://tax.illinois.gov/LocalGovernment/PropertyTax/taxbill.htm What this means is they do a % value of you home then do the taxes as a percent of that number. What this yields is a higher tax rate on homes of lower value- so a multi-million dollar home will pay around 1% to 1.5% while a house around 200k will pay 3.5% or more. On top of that clear inequality the system is also rigged by political patronage, where a elected person "estimates" the value of your property- so its not based on actual market value. http://articles.chicagobreakingnews.com/2009-04-01/news/28524142_1_assessor-paul-ruff-frankfort-township-assessor-joe-kral In addition to that the wealthy have the money challenge the taxes in court or in the case of powerful companies, they can just negotiate http://www.morrisdailyherald.com/2009/08/26/chemical-plants-can-negotiate-tax-assessments/ae56t0k/ This system like all others in Illinois favors the rich and punishes the middle income and poor forcing them to effectively rent their property from the government.

6 months ago
Posted by chicagoborn

It might be nice to give some figures on the rate of increase - the article skirts around this, but cumulative 5-10% increases from the various taxing bodies seem to be common, and it really adds up to a steep rate, over 10% total in some situations. Something is seriously out of control.

6 months ago
Posted by MovedFromTorontoToChicago

I've lived here since October 2007, moving in from Toronto, and I have never seen taxes as high as Canada's where I see minimal if not zero benefit. My property taxes on my current house in Mount Prospect have been increasing from about $5,000 to almost $9,000 in the past 9-years (or about 80% increase). I have been fighting to keep my assessment of my house down winning $20,000 here and $25,000 there, but even so I find myself taxed more each year.

Did some number crunching, and I currently have annual taxes of 2.9465% of my home value. In contrast, living in Windsor, Ontario, I was paying about 0.7895%. And I thought I was paying high taxes there, but Chicago decided to bless me with taxes 4-times as much.

If all fails, we are going to leave either Illinois or perhaps move back to Canada.

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