Chicago tax increase appears to fail after Black business owners call it a 'migrant tax'

[March 20, 2024]  By Catrina Petersen | The Center Square

(The Center Square) – Chicago residents were asked during Tuesday's primary election whether the city should change the way it assesses real estate transfer taxes on the sale of higher-valued property for the stated purpose of addressing homelessness. Voters appear to have rejected the tax increase referendum in Tuesday's primary.

Chicago already levies some of the highest commercial real estate property taxes in the nation. Cornel Darden, the Chicago Southland Black Chamber of Commerce chairman, said advocates of the tax hike are pushing a narrative that it's just the "rich, white man" who is going to see an increase in taxes.

"They make it a race thing and say, 'we're just going to tax the rich, white people and we're going to help out everyone else,' but it's not just white people who own property just north of a million. Our chamber members own property north of a million dollars," Darden said.

While Chicago Mayor Brandon Johnson has said the new revenue would be used to help the city address homelessness, critics note that the referendum doesn't restrict how the money can be spent. The Chicago City Council could vote to spend the money in any way it chooses. The Chicago Teachers Union, which is up for a new contract this summer and which has campaigned aggressively in favor of the measure, is seeking housing assistance for its members.

Regardless, Darden said the measure could actually cause more homelessness, and he wishes Mayor Brandon Johnson would have included the chamber during discussions.

"Home insecurity is a huge issue. When the price of doing business as a landowner goes up, then the price of rent goes up. Whether you're a business owner renting a storefront or you're renting an apartment in Chicago," Darden said.

Some individuals in the Black business community also have called the referendum the "migrant tax" as city and state taxpayers have spent hundreds of millions of dollars on services for foreign nationals arriving from the southern border.

Tuesday's results are unofficial. It could take up to two weeks for the election to be certified because of outstanding mail-in ballots.

About 41% of the mail-in ballots sent out by Illinois election authorities have been returned. Data from the Illinois State Board of Elections shows that in Chicago, 181,000 people requested mail-in ballots, and 68,000 were returned before Tuesday. That leaves 113,000 mail-in ballots that could still be outstanding.

Advocates said the hike would have only affected homes and commercial buildings sold for more than $1 million, and there would have been a 20% tax reduction on properties that sell for less than $1 million.

Darden said the question on the ballot itself was improperly written.

"The reason it was so manipulative is because it was 231 words and it included multiple things in one question," Darden said.

Bryce Hill, the director of Fiscal and Economic Research with the Illinois Policy Institute, said officials should be fostering an environment where there is economic opportunity for people. He said officials should claw back regulations in the city.

"You have widespread aldermanic privilege that affects zoning laws throughout the city, keeping housing prices unaffordable and preventing new construction and deterring builders from building more homes," Hill said. "We need to be doing other things to address the homelessness crisis rather than throwing money and tax hikes at the problem."

Hill said government officials have spent more on homeless services. Direct spending from the city is over $60 million annually, yet homelessness hasn't changed. There are 6,000 homeless Chicagoans at any given point in time and that number hasn't changed over the past decade, according to Hill.

Hill said 90% of the property that would have been affected by the tax increase would have been commercial real estate, adding that vacancy rates are at record highs in Chicago because it's unaffordable to do business in the downtown area.

"If the tax passes, then the value of real estate will continue to crater because you'll have fewer people wanting to do business, but also job opportunities are going to continue to decline," said Hill. "This could have some devastating effects."

Hill said the tax increase would have actually resulted in a failure to generate the revenue promised to address homelessness.