An "Audible Gasp" Was Heard When The Chicago Fed Unveiled Its "Solution" To The Pension Problem

Submitted by Mark Glennon of Wirepoints

An audible gasp went out in the breakout room I was in at last month’s pension event cosponsored by The Civic Federation and the Federal Reserve Bank of Chicago. That was when a speaker from the Chicago Fed proposed levying, across the state and in addition to current property taxes, a special property assessment they estimate would be about 1% of actual property value each year for 30 years.

Evidently, that wasn’t reality-shock enough. This week the Chicago Fed published that proposal formally. It’s linked here.

It surely ranks among the most blatantly inhumane and foolish ideas we’ve seen yet.

Homeowners with houses worth $250,000 would pay an additional $2,500 per year in property taxes, those with homes worth $500,000 would pay an additional $5,000, and those with homes worth $1 million would pay an additional $10,000.

Is the Chicago Fed blind to human consequences? Confiscatory property tax rates have already robbed hundreds of thousands, maybe millions, of Illinois families of their home equity — probably the lion’s share of whatever wealth they had.

Property taxes in many Illinois communities already exceed 3%, 4% and even 5% of home values. Across Illinois, the average is a sky-high 2.67 percent, the highest in the nation.

In south Cook County they already average over 5%. Most of those communities are working class, often African-American. The Fed says maybe you could make the tax progressive by exempting lower values, but that’s very difficult to do and, if you did somehow exempt the poor and working class, the bill pushed to the others would be astronomical.

Those rates have already plunged many communities into death spirals, demanding an immediate solution, but the Chicago Fed apparently wants to pour on more of the accelerant.

Don’t they understand that people won’t build on or improve property when property taxes are that high? When taxes are 3 percent to 6 percent, any value you add to your home is going to be taxed at that high rate forever. Have they never been to our communities with countless disrepaired, abandoned homes and commercial properties, which are the result?

Get this, which is part of the Fed’s reasoning:

“New taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes. In addition, current homeowners would not be able to avoid the new tax by selling their homes and moving because home prices should reflect the new tax burden quickly.”

In other words, just confiscate wealth from current owners because they will pay, whether they stay or not, through an immediate reduction in home value.

This proposed tax would only address the five state pensions. What about the other 650-plus pensions in Illinois, particularly those for overlapping jurisdictions in Chicago which are grossly underfunded? The Fed was asked that at last month’s seminar and they, without explanation, said they didn’t bother to cover that.

I’ve earlier met Rick Mattoon, one of the Chicago Fed authors of the proposal. He’s a smart, likeable guy who I thought had lots of interesting information. For the life of me, however, I can’t understand how he would put his name on this proposal.

Property can’t leave, so seize it. That’s the basic idea.

Comments

JimmyJones Keyser Sat, 05/12/2018 - 22:42 Permalink

Create a State owned bank, all tax dollars are collected and deposited in that bank, that bank makes loans using standard practices and the interest collected finances the pension and other public works, easy. The State of North Dakota already does something similar to this. They have run a budget surplus since the late 1930s, early 1940s. Nothing prevents a municipality, village, County or State from owning and operating a bank.

In reply to by Keyser

Escrava Isaura Al Gophilia Sat, 05/12/2018 - 23:32 Permalink

Tax because they can’t get higher yield from the current system while the population is living longer. Duh.  

These folks ‘us’ are about to find out that getting older sucks and capitalism is a myth because it’s unsustainable even if theirs 'our' pensions were underpinned on savings instead revenues, unfortunately.

But capitalism was fun while it last.

Well, it’s not totally dead yet. Many still partying.

 

In reply to by Al Gophilia

two hoots chiburashka Sun, 05/13/2018 - 07:19 Permalink

Most Important is:   The Federal Reserve acknowledges the problem.  Not just Zero Hedge but the Federal Reserve, meaning concern at the highest level for if it is spoken outwardly it is surely spoken of inwardly.  That is more than a sign.  (added this a.m. after thought)

 

Just know "they" will always do this for the good of society, don't expect anything other.  They will convince (fool) themselves first then pass some legislation selling it as good for society, thinking  "Government is for everyone, it is not personal".

But we all know BS.  

It is government and their agencies that allow conditions to get where they are, usually for their own advantage.  Those that benefitted most are long gone and new officials are trying to fix the unfixable (and profit from it).

Government ueber alles!

In reply to by chiburashka

SACRED-COW BetterRalph Sun, 05/13/2018 - 10:43 Permalink

With a $10K maximum feral tax deduction on my $15K+ Illinois real estate taxes, and now, possibly and extra $5K+ on real estate taxes, also not deductible, and a measly $5 annual SSA COLA, 1% interest rate on savings, and increasing taxes on all utilities, what is the take away message?  Get out of Dodge ASAP? 

How will this affect Illinois renters with $2,500/month rents in 1 bedroom shit-boxes?  The additional tax cost will automatically be passed down to them.  There's no more room in mommies and daddy's basement. How will this affect the value of real estate and the sales market?  Prices down, sales volume down. 

A tax revolt is the only way to put an end to these criminals.  If nobody pays, they will be unable to enforce their bankrupt system.

 

whatswhat1 (suspended)

___read.between___ (suspended)

SACRED-COW (suspension pending?)

CIA is watching.

In reply to by BetterRalph

Radical Marijuana King of Ruperts Land Sun, 05/13/2018 - 12:39 Permalink

Is it "stupid"  to have made "loans" in ways where that "money" did not exist until the "borrower" agreed to take that "loan?"

People who have achieved the political privilege of legally counterfeiting the public "money" supplies have every possible interest to find every possible excuse to do so as much as possible in the short to medium terms, regardless of the collective longer term consequences.

In reply to by King of Ruperts Land

SACRED-COW Buckaroo Banzai Sun, 05/13/2018 - 12:32 Permalink

Although I disagree with many of your posts, I do agree with your current post, even though I'm subject to being shafted by the tax scheme.  The residents of Illinois have been asleep for far too long.  I pity those exposed to the triple whammy: State of Illinois, County of Cook (crook), City of Shitcago.  One of my properties goes to market this Wednesday. 

In reply to by Buckaroo Banzai

William Wics a Smudge by an… Sun, 05/13/2018 - 12:40 Permalink

a Smudge by any other name

I believe  you are looking for "onomatopoeia"

onomatopoeia:

1. the formation of a word, as cuckoo, meow, honk, or boom, by imitation of a sound made by or associated with its referent.

2. a word so formed.

3. the use of imitative and naturally suggestive words for rhetorical, dramatic, or poetic effect.

http://www.dictionary.com/browse/onomatopoeia

 

In reply to by a Smudge by an…

Tarzan 1 Alabama Sun, 05/13/2018 - 06:50 Permalink

Idiots who come up with such folly are living in a vacuum.  Do they think Trump has built the wall already, around Illinois, to keep everyone in? 

Honestly, will they outlaw moving to another State next? 

Here in North Florida, it's popular to own a piece of land just across the border, in Georgia, to retire on when the time comes.  Wonder why?

Many move to Florida because of the low tax burden on the working man, so it only makes sense to retire where the tax burden on a retiree is lowest....

Georgia does not tax Social Security retirement benefits and provides a deduction of $65,000 per person on all types of retirement income for anyone over the age of 64. The state's sales tax rate and property tax rate are both relatively moderate. Georgia has no state inheritance or estate tax.

Maybe they should lower the tax burden to slightly less then their neighbors, before their slaves jump? 

In reply to by 1 Alabama