High property taxes on business owners hurt more than pocketbooks
Whenever someone asks me why I do the work I do, I point to Aliki and Frank Marinos.
The Marinos run Bel-Mar Wire Products, a small-scale manufacturing business in Chicago that their father, Tom, started in 1972. The Marinos siblings were forced to lay off about half their staff after their annual Cook County property taxes increased by 141% without explanation. In total, the Marinoses' taxes jumped from more than $45,000 in 2021 to more than $108,000 in 2022.
"We can't just pull money out of thin air," Frank Marinos said. "Where do we get the money from? Do we pull it out of our savings, out of our IRAs? Who knows. But a lot of businesses don't have the money budgeted for that type of a surprise, so they have to shut the doors."
This is why I work in policy - in the end, it's all about people. The fact that people could lose their jobs not because of anything they did, but because of property taxes shows how burdensome Illinois' and Chicago's property taxes are for all their people, including business owners.
Right now, Illinoisans pay the second-highest residential property taxes in the nation. The Tax Foundation found when accounting for both real and personal property taxes, Illinois ranks seventh worst in the nation for business property taxes.
Chicago's property tax levy doubled from $860 million to more than $1.7 billion during the past 10 years. For businesses in central Chicago, which includes the Magnificent Mile and much of Chicago's most popular commercial areas, property tax bills increased by $4,806 on average in 2021, as commercial property tax bills on the North and South sides remained flat.
If state and city leaders want to stop more employees from losing their jobs - or keep employers from crossing state lines, like many business owners did last year - they'll start by reforming the property tax systems that make it too expensive for employers to operate.
One solution: implementing property-tax freezes. That would give both business owners and residents relief right away. Plus, the move would be popular with Chicagoans. In a February 2023 poll of 800 registered Chicago voters conducted by Echelon Insights, 69% of respondents polled were in favor of a property tax freeze. Fifty-two percent also supported lower taxes on businesses.
Another reform that would be popular? Pension reform. Even though Illinoisans paid the third most for government workers' retirements in 2021, the state's pension debt still totaled almost $140 billion at the end of fiscal year 2022. On top of that, Chicago's pension debt totals $48 billion - more than 44 U.S. states.
Illinois' lawmakers could address this by proposing a constitutional amendment to change Illinois' state and local pension systems to a hold-harmless structure. A hold-harmless plan would curb pension costs by allowing for adjustments to future, not-yet-earned benefits for public employees while not detracting from employees' already-earned benefits. Voters deserve the chance to vote on a proposal to reform the state's public pensions. A 2022 poll found bipartisan supermajorities of Illinois voters favor pension reform.
But instead of prioritizing reform to the costs that burden taxpayers, Illinois' leaders have recently proposed to bring back the progressive income tax Illinois residents and business owners already rejected. Lawmakers' obstinance on this issue tells businessowners their concerns about taxes don't matter. That must change, or Illinois employees will continue to suffer as bad policies threaten their jobs and send their employers to other states.
Tax policy, property or otherwise, hurts more than pocketbooks. When people are suffering because of a broken policy, our leaders should make it a priority to fix it. Leaders already have ample public support for property-tax and pension reform. All they need to do is act.
And soon. The people affected by their policies are waiting.
• Matt Paprocki is president and CEO of the Illinois Policy Institute, a free-market think tank based in Chicago.