Study Offers Roadmap to Stem Growth of Illinois’ Property Tax Rates

With persistent state funding gap, Illinois property taxes have risen to 7th highest in the nation

La Grange:  An increase in state funding for K-12 public education could enable Illinois municipalities to limit the growth of local property tax rates, boost the economy by up to $1.25 billion, and create as many as 14,000 new jobs according to a new study by the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal (PMCR) at the University of Illinois Urbana-Champaign.

Read the Report: Assessing Potential Options to Provide Property Tax Relief in Illinois 

“Illinois ranks 50th nationally in state support for public schools, and it’s no secret that municipalities are relying on property taxes to fill the gap,” said study co-author and ILEPI Policy Director Frank Manzo IV. “However, property taxes are regressive and reliably consume a larger share of income for working and middle-class families than the state’s highest wage earners.  This leaves lawmakers with the choice between finding ways to equitably boost state funding or dramatic reductions in the delivery of local public services.”

Illinois currently has the 7th-highest property tax collections per capita in the United States, and the average Illinois taxpayer pays more in local property taxes than state income taxes. A state task force is expected to issue a report on the cause of increasing local tax burdens later this month, but four prior efforts since 1982 have called out a lack of state funding for public education and the expansion of local units of government as major contributing factors.

In its analysis, ILEPI and PMCR evaluate three possible solutions to providing property tax relief— increasing the state’s share of funding for public schools, consolidating townships, or drastically cutting municipal services. ILEPI and PMCR researchers concluded that by adding $5 billion in state funds over four years to the coffers of K-12 public schools, property tax levies could be held constant. The additional funds could be fully financed by either Governor Pritzker’s progressive income tax proposal, by subjecting retirement income over $100,000 to state income tax (which 38 of the 41 states that have state income tax systems already do), or by expanding the state’s sales tax to 81 services that are currently taxed in Iowa but not in Illinois.

Researchers concluded that in addition to reducing the need to raise property tax rates, the added investment generated by the tax reform models would boost the state’s economy by between $850 million and $1.25 billion and create between 10,000 and 14,000 new jobs.


PropertyTaxRedTable1Alternatively, researchers examined the possibility of reducing property tax burdens by consolidating the state’s 1,431 townships, which account for 24% of all local government units but receive just 2% of all property tax revenue. In doing so, they found that township consolidation would reduce local administrative costs and yield 1.2% in property tax relief— or about $61 per year for each Illinois homeowner. However, they found that in terms of broader impacts on the economy, such a change would be far more modest than tax reform.

A final approach floated by lawmakers has been for state leaders to mandate a 10% cut in local property taxes, which would force local governments to slash funding for K-12 education, infrastructure, and other public services by about $3 billion. Again, based on industry-standard economic impact modeling, researchers found that any economic stimulus from the cuts would be more than offset by losses tied to investments in public services— ultimately costing the state upwards of 25,000 jobs and shrinking its economy by $2.2 billion.


“The structural dependency our K-12 schools currently have on property taxes drives regressive levies higher,” concluded study co-author, PMCR Director, and University of Illinois Professor Dr. Robert Bruno. “The data shows that only by increasing the state’s share of education funding can we equitably reverse this dynamic, while delivering both economic growth and real relief for the working and middle-class families who are hurt most by the current system.”

The Illinois Economic Policy Institute (ILEPI) promotes thoughtful economic growth for businesses and working families.

The Project for Middle Class Renewal at the University of Illinois investigates the working conditions of workers in today’s economy with research, analysis and education in order to develop and propose public policies that will reduce poverty, prevent discrimination, create more stable forms of employment, and promote middle-class jobs.