Lawmakers propose property tax breaks but analysts say there’s always a tradeoff

[January 30, 2015]  By Mark Fitton

 SPRINGFIELD — Legislators from both parties have filed billed to ease property taxes and help keep struggling people in their homes.

But some analysts say however laudable the goal, property tax breaks generally have to be paid for by some other public revenue, and government would be wiser to seek broader tax bases and lower tax rates.

Rep. Jack Franks, D-Marengo, said his House Bill 157 would increase the homestead exemption for the disabled from 5 percent to 10 percent.

A homestead exemption allows a homeowner to exclude a portion of his or her property’s value from tax assessment, which reduces the tax liability.

“Many disabled folks incur much more cost simply to live their normal lives, and that’s really tough for them to bear,” said Franks. “This is intended to provide a measure of relief on that front.”

Another proposal, House Bill 156, would allow Medicare recipients to reduce their gross taxable income by the amount of their premiums.

That will put those people on equal footing with people whose healthcare premiums are withdrawn from the paychecks pretax, Franks said.

Franks said he’s “trying to protect folks and keep them in their homes.”

Rep. David McSweeney, R-Barrington Hills, also introduced property tax relief measures in House Bills 177 and 178. Both involve the property tax extension limitation law, or PTELL, which seeks to limit taxing units’ abilities to increase property taxes year after year.

House Bill 177 would freeze most PTELL multipliers within property tax extensions for three years, limiting the increase in local property tax bills to zero percent.

House Bill 178 would create a one-year tax freeze on the general fund tax levies extended by most townships that have populations of less than 100,000 and are subject to PTELL.

“High property taxes are a major reason people have been moving out of the state,” McSweeney said. “That is why we need an immediate property tax freeze.”

“We cannot keep throwing money at multiple units of government and ignoring the outcome, which is ultimately higher taxes.” McSweeney said.

Carol Portman, president of the Taxpayers’ Federation of Illinois said the general consensus among tax policy professionals is that government should aim for broad bases and low rates.

The mantra generally runs toward a simple, solid tax structures and away from short-term solutions, she said.

The refrain is “broad base, low rates, fewer credits, fewer exceptions, fewer exemptions,” Portman said.

Any number of groups can be worthy of tax breaks she said. And the world is complicated, so the federation shies from “always” or “never” solutions.

Still, tax breaks don’t automatically mean a smaller overall tax bill or less revenue collected; instead the burden often gets shifted to other taxpayers and other taxes.

Lower rates spread over broader bases distribute the burden more fairly and is less taxing upon society as a whole, the federation and similar groups said.

Political scientist Kent Redfield said most property tax exemptions and freezes are easy to support and hard to oppose.

But, he said, the measures represent expenditures in that they are reductions in government revenue.

While school districts and other local governments collect property taxes, state government does share revenue with these entities and a reduction in funding on a local level could increase demands on the state.

“Until the state gets its financial house basically in order, I’d think you’d want to look at making things neutral,” said Redfield, professor emeritus at University of Illinois, Springfield.

[This article courtesy of Watchdog.]