Eureka! They figured out a way to tax wealthy folks trying to flee Illinois: A progressive real estate transfer tax, and the idea seems to be getting popular.
An Op-Ed yesterday in the Chicago Sun-Times by Daniel Kay Hertz of the Center for Tax Budget Accountability and Marisa Novara of the Metropolitan Planning Council made the case for it in Chicago. Evanston already voted in favor of it Tuesday.
Chicago today has a real estate transfer tax of $5.25 per $500 of property value, but the city should stick pricey homes with a higher rate, say the authors.
They weren’t specific about what rates they favor, but the ballot measure passed in Evanston, as Crain’s reported, calls for a transfer tax increase of 40 percent to establish a new rate of $7 for every $1,000 of value for sales between $1.5 million and $5 million and an increase of 80 percent to establish a new rate of $9 for every $1,000 of value for sales over $5 million. Evanston’s current rate is $5 for every $1,000 of value.
If the concept flies, nobody knows where the rates will eventually end up.
You may remember a recent proposal by three Chicago Federal Reserve bank economists to establish a statewide property tax. Their express reasoning was that property can’t flee, so that’s what Illinois should tax. Proponents of progressive transfer taxes don’t say it, but their true rationale undoubtedly is similar. Think you’re going to sell your expensive home and move to Tennessee? Sorry, that will cost you.
The statewide property tax idea set off a firestorm of objections. Our article on it alone had over a million pageviews, and preemptive ballot measures opposing it passed overwhelmingly in a number of Illinois areas on Tuesday. The general public doesn’t like the idea of the statewide property tax, but a transfer tax only on the wealthy? Why not? Maybe that’s why Evanston Now reported their city may “start a trend.”
Mayor Rahm Emanuel has already opposed the idea, but he will be gone next year. A proposed Chicago ordinance is pending to put the idea on the Feb. 26 election ballot, as a referendum question. And Hertz’s comrade at the CTBA, Ralph Martire, is on the budget committee of Governor-elect Pritzker’s transition team. So, we’ll have to see how far this goes.
This is scary stuff – seizure of property before it can escape.