The simplest way to think about your property tax bill is this: Just assume it's going to go up by the rate of inflation. Even if what you owe declines for a couple of years, assume that larger increases are coming to make up for it. Over a 10-year period, this should be the pattern.
The tax cap ties the revenue of taxing districts to the rate of inflation up to 5 percent. New development does not count against the cap. Most taxing district's will, every year, raise their tax levys to the maximum amount.
Why? A couple of reasons: 1) More money! 2) If they don't, they can LOSE some taxing authority in future years. If a local government decides to not "capture" new development, they end up with a lower capped tax rate. (Editor's Note: Some municpal governments such as Palatine are not subject to the cap).
Occassionally a taxing body will consider not maximizing their levy, but that is rare. And even then, the conversation is not about whether to raise property taxes, but by how much.
Let me stop for a second and point something else out: The tax levy amounts themselves are fictitious. In fact, I actually do not report them in a vain attempt to actually communicate reality to you, the reader.
You see, no matter how much money schools or park districts ask for it's going to be reduced to match inflation. A school district could levy for a 10 percent increase in property tax revenue this year – but that will be lowered to 1.5 percent. If you figure about 0.3 percent increase attributed to new development the best guess you have is a total increase of about 1.8 percent.
This is how the system works. And even when a taxing district is not raising taxes they do. Yeah, it's that confusing. The Palatine Park District raised its levy this year and then used reserve funds to abate it to keep residents' tax bills constant. Why? To keep their taxing authority at the maximum.
I guess my point in writing all of this is to point out that property tax increases are systemic. If I told you the state income tax rate was going to rise every year by a few percentage points, you'd tell me I was insane. This, essentially, is how property taxes in the Chicago suburbs work.
The problem is that these increases are not tied to any sort of economic reality for the taxpayer. If your income is cut by 20 percent it doesn't matter. If you're out of work, it doesn't matter. The fact is, your tax burden is pretty much going to increase every year.
With the income tax the opposite is true, unless the rate rises (I know this happened recently, but generally such increases are pretty rare). If you make more, you're going to pay more in taxes. If you make less, you pay less.
I hear people all the time wondering why their tax bills continue to rise as the value of their homes remains, say, 20 percent less than what it was in 2008.
Here's why: When home values were rising the tax cap pushed tax rates lower because a lower tax rate was needed to generate the inflationary increases in revenue for local government. When home values uniformally fall, the opposite happens – the tax rates rise. The bottomline is that our local governments are going to get that inflationary increase in revenue.
Again, there's a disconnect between economic reality and the system. Your home – possibly your greatest asset – is worth less, but your tax burden continues to rise.
Does this mean you should not appeal your property taxes? No. In fact, everyone should visit the assessor and make sure they are not being overtaxed. Occassionally a house will be really overvalued in relation to comparable homes. If you are an outlier – for example a $250,000 home that is valued at $350,000 – you are being hammered unfairly.
There are other issues, as well. For example, if you happen to lose the expanded homeowner's exemption your taxes will skyrocket. I bought my home in 2008, so I completely lost the exemption last year and my taxes went up about 40 percent.
In the end, the fact is the rising tax burden exists. Everything else is something of a game as people, businesses and institutions attempt to push this burden onto someone else. If a company or a neighbor somehow gets a big break on their tax bill, it simply means someone else is going to pay more.