The boys and girls in the Chicago City Council are at it again–haggling and bickering over minute line items in the city’s $2.7 billion budget.
It’s the annual budget battle. On one side of the fray, there’s that band of administration loyalists–those aldermen who swear up and down that Mayor Washington would never, ever, even in his weakest moment, waste one dime of precious revenue.
And then there’s what’s left of Edward Vrdolyak’s crew. To their last breath, they have sworn to see that the good taxpayers of Chicago (loyal, trustworthy, hardworking, God-fearing, etc) sacrifice no more in increased taxes.
For the moment, it looks as though Washington has the votes to win the day, and pass a budget that includes about 1,700 new jobs, financed, in part, by a property tax hike of about $84 million. Of course, a final decision will not be reached, most likely, until the end of the year, when the council is required to pass the budget.
Meanwhile, sitting through it all at the back of the council chambers, silently shaking her head and smiling ruefully, is Edna Pardo.
Pardo smiles because she’s heard most of the rhetoric before. Chairperson of the Chicago League of Women Voters fiscal policy committee, Pardo has listened to about 30 years of council budget debates. After a while, it kind of wears thin. For all the talk, little of substance happens, and the heart of the matter is rarely, if ever, discussed.
“Both sides are squabbling over small change, to a large degree,” says Pardo. “The city budget sounds like a lot of money, as does the school board budget. But in relative terms, they’re not that much. Compare it to military hardware, if you want the proper perspective. We spend about $27 billion on the B-1 bomber, which is now obsolete. Even if we were to remove all the waste from city government, we’d still be left with some fundamental deficiencies: the system we depend on is inherently unfair.”
It’s vintage Pardo, and one of several themes expressed in A Guide Through Chicago’s Tax Maze, a 44-page pamphlet recently cowritten by Pardo and her four colleagues on the league’s fiscal policy committee, Gertrude Bolton, Elinor Elam, Margaret Herring, and Betty Willhoite (copies of the $2 booklet can be ordered by calling the league at 939-5935).
“The theme of our study is that the task of solving the problems that plague the domestic economy have been dumped on the cities, which can least afford to pay for them,” says Pardo. “Think about it. We expect city residents to have housekeeping responsibilities for streets and sanitation, an awesome job in itself, while trying to house, clothe, feed, and educate the poor. And yet our resources are limited to what we can gain from taxing ourselves. The load is ours to bear, and it leads to petty fighting among ourselves. It’s not fair, and it’s not wise.”
The basic problem, as Pardo sees it, is larger than Chicago. The federal government has been diverting resources away from cities across the country.
Between 1979 and 1986, the portion of the federal budget going to aid state and local governments fell from about 15 percent to a little less than 10 percent, according to the league’s study.
At the same time, Chicago’s residents continued to pump their tax dollars to the federal government. Of all the tax dollars paid by Chicagoans, almost 56 percent went to federal, 27 percent to state, and 17 percent to local government. In other words, city residents are getting a smaller bang for their buck.
Instead, the federal government spends more and more of its tax dollars on the military, Social Security, and interest on the national debt. Military expenditures now consume about 27 percent of the federal budget, up from 23 percent in 1979; interest on the national debt equals 13.2 percent of the annual budget, up from 8.2 percent.
“Basically, the federal government is pulling out of its investment into the big cities,” says Pardo. “And we’re paying the price.”
As a result, Chicago mayors Michael Bilandic, Jane Byrne, and Washington have attempted to pay for city services by juggling a variety of local taxes, most notably the property tax.
“Nobody ever liked the property tax, or the collector,” the league writes in its pamphlet. “But for most of our history it has been the main base of support for the public services. . . . The property tax paid for all local economic connections: water, sanitation, roads, bridges, fire and police services.”
The tax paid by property owners is determined by the so-called fair market value of property. Every four years, Cook County Assessor Thomas Hynes calculates this value by analyzing trends in property sales. Property owners pay a tax on a proportion of a property’s worth; that proportion varies according to the property’s classification, or use. For example, the tax on vacant land is on 22 percent of its assessed value, the tax on residential property on 16 percent, and the tax on commercial property on 39 percent.
On top of that, property owners who feel Hynes has overestimated the value of their property can ask for a reassessment by the Cook County Board of Tax Appeals. This is typically the case with many older north-side residents who bought their homes years before an invasion of young professionals increased the price of property in neighborhoods like Lakeview and Lincoln Park.
“The property tax is the most reliable local tax there is,” says Pardo. “It is less regressive than the sales tax, but it’s an emotional tax because it’s visible. Your federal taxes are taken right out of the paycheck, but you have to pay the property tax yourself so it hurts more.”
The property tax hits hard at many older people on a fixed income, whose major lifetime investment is their home. And it is usually passed on to renters in the form of rent increases.
For all of these reasons, any increase in the property tax provokes howls of protest that few politicians want to risk. In fact, over the years many politicians here have attempted to cultivate support by vowing to cut back the property tax. Vrdolyak, in particular, has exploited Washington’s proposed property tax hike to rally support for the Republicans on the northwest and southwest sides.
To raise more money, the city has enacted taxes on cigarettes, parking, employees, hotels, and other goods and services. Perhaps most controversial, there is a 1 percent sales tax and a 3 percent tax on utilities, which, together, generate about $150 million a year.
“Because there is an antipathy to property taxes, Jane Byrne increased the utility tax and added a 1 percent sales tax,” says Pardo. “Politically, that was easier for her to do than increase the property tax. But the sales tax is the most regressive tax of all. It falls on all people equally. You can’t avoid a sales tax. Everybody, rich and poor, has to buy food.”
The disparity is exacerbated by recent changes in the federal tax code that have cut the tax rates for persons making more than $100,000. By the league’s estimate, low-income families lose a far greater percentage of their income to taxes than do wealthy families.
“We figured that a family of four that earns $8,000 a year pays about $52 in taxes for every $1,000 in income,” says Pardo. “A family earning $20,000 pays $64, a family earning $30,000 pays $43, and a family earning $100,000 pays about $38 for every $1,000 in income. That’s outrageous. It’s regressive taxation, and it’s getting worse. And as long as it continues, the harder it will be for big cities to pay their bills.”
On top of that, low-income residents of large cities get fewer services. The suburban school district of Niles, for instance, expends about $8,362 per school child, while taxing property owners at a rate of $1.61 for every $100 of equalized assessed property. Chicago, on the other hand, spends about $4,182 per school child, and has a tax rate of $3.18, according to the league’s study.
“If you’re a rich community with relatively few kids, you spend less of your income and get better schools,” says Pardo. “Since your property is worth more, your township can tax it at a lower rate, and still raise a lot of money. In Chicago, however, the more we tax, the more we tax the poor and working class.
“And, then, when we appeal to the state or federal government for more funds, they cry ‘Waste.’ Well, of course there’s waste in our school system and government. There’s waste in all school districts and government. And there should be reforms. But on top of the reforms, we’re back to the central issue of inequity. The rich communities have the money, and they use it to take care of their own.”
If Pardo had her way, she would like to see the state income tax rate rise from 2.5 percent to 3.5 percent for individuals, and from 4 percent to 5.6 percent for corporations. To ease the burden on the poor and middle class, Pardo would also double the state’s personal exemption from $1,000 to $2,000.
“The state’s tax rate has not gone up in years,” says Pardo. “I figure by raising the rate we could generate an additional $1.5 billion. Doubling the personal exemption would reduce that amount by $375 million but it would mean no tax increase at all for people earning less than $20,000 a year. The biggest chunk of new taxes would be paid by those earning $100,000 or more. That’s a progressive tax.”
Pardo also would like to see Chicago’s feuding politicians unite to devise more creative and less regressive taxes.
“I think we could use a tax on stock transfers,” Pardo suggests as an example. “Right now there is no such tax. That means people buy and sell stock in this city all the time, and Chicago doesn’t make anything out of it. Can you imagine how much money the city would have made if we had a stock transfer tax on Black Monday?
“Some of us were talking about this kind of tax a few years ago, and the guys from the stock exchange called us all in. They said it wasn’t practical, and that they would probably move to the suburbs or somewhere if we adopted it.
“But I don’t know. They just built an expensive new exchange. I don’t think they’re going anywhere. Besides, it’s just not fair. We have a tax on the sale of bread and milk, why not one on the sale of stock?”
Most importantly, Pardo would like to see a massive redistribution of government expenditures.
“It’s crazy the way this system is run,” Pardo says. “It’s as though the government wants people to be poor. We’re spending billions and billions and billions of dollars on the military, and the cities are supposed to scramble to fend for themselves. I would love to see social programs get the same attention as the military. I’m sick and tired of having to watch the city tax itself, and still fall behind. If the federal government redirected just a fraction of its resources, we could probably cut property taxes.
“To those who say we have to compete with the Russians for weapons, I say this: our country is more vulnerable if we neglect our human needs. How strong are we if we don’t have decent health care and education? These programs are not luxuries. They’re necessities.”
Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.