Illinois Supreme Court Says Chicago Real Estate Tax Hike Can Proceed

A fiscal watchdog also released a report warning that Chicago leaders may not have studied the issue thoroughly before putting it on the March 19 ballot.

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The ballot measure that would raise the tax that buyers pay on real estate purchases over $1 million can appear on voters’ ballots in Chicago next week, and the votes will count, according to a Wednesday ruling by the Illinois Supreme Court.

It was the second straight loss for the collection of landlords and real estate groups that have been fighting to keep the measure off the March 19 ballot, and it likely brings to an end the legal battle to block voters from weighing in on the measure.

Early voting is already underway, and the real estate groups were working to block votes on the measure from being counted, initially winning in a lower court before losing on appeal and with Wednesday’s ruling.

The Supreme Court didn’t elaborate on its decision ruling against the real estate groups.

The proposed tax hike is a key priority for first-term mayor Brandon Johnson, who is seeking to raise upwards of $100 million annually by charging a higher tax on properties over $1 million.

Currently, in Chicago, buyers of residential and commercial real estate pay a flat tax of 0.75 percent on all purchases, regardless of price. The measure would create a three-tiered rate system moving forward.

For properties that cost less than $1 million, buyers would see a slight tax cut, to 0.6 percent. For properties between $1 million and $1.5 million, the rate would increase to 2 percent, and for all properties above that, the tax would be 3 percent of the purchase price.

Supporters say the money raised would be used for programs to help the homeless and create new housing. Opponents, including the Illinois Realtors, say the measure is a hidden property tax hike that will be passed on to renters and homeowners.

While the proposal has often been dubbed a “mansion tax,” research has shown it would hit the commercial real estate industry hardest, as the tax hike would apply to residential and commercial sales.

A watchdog’s warning

Earlier in the day, a fiscal watchdog released a report warning that Chicago leaders may not have studied the issue thoroughly before voting late last year to put it on the March ballot.

The Civic Federation said it evaluated the proposal, known as Bring Chicago Home, and that it had “serious concerns” about the measure.

“The City’s work on this policy proposal is incomplete,” the federation wrote. “Given the stakes, it is critical that City leaders move quickly to meet the moment with additional public-facing details about implementation and analysis of possible consequences, both positive and negative.”

As part of its research, the federation said it reviewed a recent tax hike in Los Angeles. In the first eight months of its implementation, the watchdog found the tax raised just $150 million of the $600 million to $1.1 billion it was expected to generate.

The tax hike also came with other negative consequences, the watchdog wrote, including “the creation of a disincentive to build multi-family housing, and the continued availability of several tax avoidance strategies that could reduce revenue generated by the new tax.”

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