Improving Transparency in Property Tax Assessments
High property taxes are one of the biggest concerns of residents in the 49th district. People are being overtaxed and they’ve had enough.
Not only does Illinois need new ideas to reduce property taxes, the entire system needs more transparency and fairness in property tax assessments.
In many counties in Illinois, taxpayers are confused by a complicated property tax assessments that cause inaccurate and unfair assessments. These are a serious burden on taxpayers and property taxes have grown six times faster than Illinoisans’ household incomes from 2008 to 2015.
Illinois Policy recently did an in-depth study on issues with fairness in the Illinois property tax assessment system.
Here is the original story as reported by Illinois Policy:
PUZZLED BY PROPERTY TAXES: IMPROVING TRANSPARENCY AND FAIRNESS IN ILLINOIS’ ASSESSMENT SYSTEM
Illinoisans shoulder one of the highest property tax burdens in the nation.
The assessment process determines how that burden is distributed among property owners. While property values themselves shouldn’t raise or lower the overall level of property taxes in a given locale, Illinois’ property assessment laws and practices do affect individuals’ property tax bills, and inaccurate or unfair assessments can mean that some homeowners shoulder more of the property tax burden than they should.
To get a glimpse at property tax assessments in some of Illinois’ most populous counties, the Illinois Policy Institute examined data for Cook, DuPage, Lake and St. Clair counties. The Institute then studied the extent to which state assessment laws make the system less fair and more complicated than it should be.
Here is what the research shows:
1. Cook County performed worst on measures of assessment accuracy and fairness, but each county studied fell outside accepted standards in some cases.
Properties with comparable features located in similar areas should have roughly the same assessed value. Data from the Illinois Department of Revenue, or IDOR, show Cook County performed worst on uniformity of assessments among similar properties, compared with DuPage, Lake and St. Clair counties. All of the counties studied were outside accepted standards in at least some instances, though.
Cook County also showed considerable regressivity in its assessments, according to IDOR information. This means owners of higher-value residential, commercial and industrial property had lower levels of assessed value than owners of less expensive property. In short, wealthier property owners in Cook County tended to catch a break in their assessed values, while poorer property owners did not. The other counties studied also had some instances of regressivity, though not to the extent that Cook County did.
2. Illinois can improve its assessment process by replacing fractional assessment with assessment at full market value.
Illinois law requires property to be assessed at 33 1/3 percent of its market value outside of Cook County; in Cook County, property is assessed at 10 percent and 25 percent of market value for residential and commercial property, respectively. This system of fractional assessments makes it harder for a homeowner to read his or her property tax bill and immediately tell what the assessor thinks the market value is.
Property taxes should be based on the full value of the property, not a fraction of that value. This would eliminate an unnecessary step in the calculation of assessed value, and would make bills easier for taxpayers to read and less likely to obscure overassessment and the effective tax rate.
3. Illinois can improve its assessment process by requiring more frequent assessments and more recent sales data.
In general assessment years, local assessment officials evaluate each parcel of property within a county to determine its fair market value. This happens every four years in all counties outside of Cook County, and every three years in Cook County.
That’s not a good way to operate, considering the fluctuation that can take place in the housing market. Conducting assessments more frequently, such as every year or every other year, would especially benefit taxpayers in times of declining home values, which can’t happen when homes are evaluated every few years.
Additionally, policymakers should reconsider the use of sales data going back three years in the assessment process. Although this might smooth the ascent of assessed values in rapidly rising markets, using the previous three years’ sales data also means that in declining markets, assessed values can be higher than what a homeowner could actually sell his or her property for. Where enough annual sales occur to constitute a representative sample of market data, policymakers should consider whether using only the previous year’s sales data would better serve assessment accuracy and fairness.
4. Targeted relief programs should be limited to homeowners who need help the most.
To the extent that Illinois maintains exemptions from assessed value or other similar relief programs, they should be targeted at property owners who might not otherwise be able to afford their property tax bills. Tailoring exemptions in this way could help struggling Illinoisans while not unduly complicating the property tax system, making it less clear who pays what, or severely distorting the distribution of the burden.
Improving the assessment process, which determines what portion of the tax burden each property owner must shoulder, would result in more accurate, fair and easily understandable property valuations and tax bills – and a more transparent, less complicated and fairer system than Illinois has today.
Property taxes are among the most unpopular taxes.
In Illinois, this anger has recently been fueled by reports of unfair assessment practices, government incompetence and a lack of transparency.
Taxpayer outrage has spurred a host of campaign promises by Illinois gubernatorial candidates pledging to fix the problem.
Illinoisans are justified in thinking they have high property taxes.