Daily Debunk: Fund schools, cut property taxes

Cook Assessor Kaegi says adequate education funding will ease pressure on property taxes

Cook County Assessor Fritz Kaegi, seen with Gov. Pritzker at a news conference last January, calls the Fair Tax “an essential structural change we need.” (One Illinois/Ted Cox)

By Ted Cox

We’re going to tackle a pair of the Illinois Policy Institute’s “seven misleading progressive-tax claims” today, because it’s Friday, and because these two issues dovetail nicely into one connected argument to affirm the Fair Tax Amendment.

Let’s get right to it, shall we?

Misleading claim No. 5: Money from the progressive tax will adequately fund schools, health care, and other public services that are currently struggling.

Reality: A progressive tax will not solve Illinois’ fiscal issues.

This one is easy to debunk, and in fact we already have. As Vote Yes for Fairness Executive Director Quentin Fulks and former state Sen. Daniel Biss recently acknowledged in an online debate on the Fair Tax, “this is not going to fix everything.” The state has fiscal problems, to be sure, but a graduated income tax is no magic wand that will adequately fund public education, restore infrastructure, and solve the backlog in pension payments.

But, as Fulks and Biss emphasized, it is a tool that will raise an estimated $3.4 billion in revenue by raising the tax rate slightly on those making more than $250,000 a year, while 97 percent of Illinois taxpayers pay less or the same as they do now, and it will allow the state to move toward its constitutionally mandated role to be the “primary” funder of public schools. Which leads us right into the next “misleading claim” to be debunked.

Misleading claim No. 6: The progressive tax will reduce property taxes.

Reality: Nothing in the progressive-tax amendment provides property-tax relief.

First, the obvious. The state government has little if any control over property taxes, which are assessed by local governments. So it’s hardly fair to blame the Fair Tax for not immediately lowering property taxes.

Second, as Biss pointed out, there is an increase in the property-tax credit granted to homeowners as part of the new tax package, largely benefiting those making up to $250,000, thus enabling Fair Tax proponents to say it actually lowers taxes on everyone up to that figure, even as the tax rate for those making between $100,000 and $250,000 remains the same as the current 4.95 percent flat tax.

The two issues — state income-tax revenue and local property-tax revenue — are intrinsically connected, however. As Cook County Assessor Fritz Kaegi pointed out just Friday in a Chicago Tribune op-ed column in support of the Fair Tax: “The graduated tax can help reduce property-tax levies because it provides an alternate source of education funding. Our state is dead last in the United States in funding education, providing about 25 percent of school-district revenues, versus a more typical 50 percent in other states. Our school taxing districts carry more of the cost of educating children than anywhere else in the country, with about two-thirds of Illinois property taxes going to schools.”

This then is the mythical “grand bargain” that has been discussed by Illinois politicians for decades: that as the state assumes its constitutional role of being the “primary” funder of education, local property taxes lose the primary driver that is causing them to increase, which is the funding of public schools.

Because they’re two different levels of government, however, they can’t be connected so that one leads inevitably to the other. Even so, the connection is obvious: as the state assumes more of education funding, local governments naturally have to raise less through property taxes to fund schools.

This was the driving force behind the move toward “evidence-based” school funding three years ago. Towns and cities like the northwest suburbs of Chicago, where there is an abundance of highly valued housing, have an easier time raising revenue through property taxes than a small town like Bunker Hill outside Springfield, home of state Sen. Andy Manar, who led the way in getting that new funding formula adopted.

That’s because it costs a certain amount of money to adequately fund public schools, so with the state not fulfilling its proper role the burden falls on the local government to raise the revenue. As the pro-business government watchdog the Civic Federation pointed out a year ago, “among the 12 selected Cook County municipalities, Harvey had the highest effective tax rate for residential properties at 7.08 percent in tax year 2017.” Because property values aren’t as high in Harvey as they are in, say, Schaumburg, the tax rate has to be boosted even more to raise the same the same amount of revenue. That places the heaviest tax burden on homeowners who can least afford it.

As Fulks and Biss stated, echoed by Kaegi, the Fair Tax Amendment doesn’t achieve these forms automatically. Rather, it creates a dynamic where property-tax reform is not just possible, but where it should follow logically.

“This is a moderate, modest bite,” Biss said. “Vote yes, and then wake up the next day and fight for those other things too.”

Or, as Kaegi put it, in calling a graduated income tax “an essential, structural change we need”: "It’s up to us to tell our representatives (in the General Assembly) that new revenues should be dedicated to school funding and demand corresponding property-tax relief.”

Again, that’s the assessor for Cook County making that case.

So, no, the Fair Tax Amendment doesn’t automatically lower property taxes; it only allows Illinois to adopt a progressive income tax. But any sane, rational look at the dynamic suggests that, if the state better funds schools, local governments will need to raise less of that required revenue. Lower property taxes can and should follow if taxpayers follow through and demand it.