Ups and Downs - Winter 2022

 

Steve Cain
Winter, 2022

 

This is going to be an article that a lot of my readers are not going to like. But I feel that it needs to be said, even though it’s not going to win me a lot of friends.

There’s been a lot of effort lately to organize against Assessor Fritz Kaegi. This effort has produced angry meetings and appeals for money to support someone, anyone, who will run against him and get him out of office.

The main rationale for doing this is that he has “targeted” owners of commercial real estate, “unfairly” upping our assessments and, by extension, our taxes. He is, in a word, being blamed for all that is wrong with Chicago, Cook County and Illinois government.

Not that there isn’t a lot to complain about. There is. I’ve been one of the loudest critics. But this one is different. On this one, I truly believe we are directing our collective anger at the wrong target.

Yes, real estate taxes are way too high in Illinois, especially in Chicago and Cook County. And yes, there is no question that, by assessing properties at their true “market value” (as opposed to the inexplicably low and arbitrary values under Kaegi’s predecessor, Joseph Berrios), Kaegi is effectively shifting the tax burden from residential to commercial properties.

And, yes, there is no question this is hurting our industry – an industry already staggering under the assaults from all branches of local and state governments. We were overburdened by real estate taxes before Kaegi came along. Kaegi’s assessments will make things even worse.

So why would I defend him? Well, did you ever hear the expression, “don’t shoot me, I’m only the messenger?”

Let’s step back for a minute and consider what he is and is not doing, and what we have labeled “unfair.” Assessor Kaegi is using market date to figure out what buildings are worth. What he is not doing, and what had been routine under his predecessor, is allowing owners with big money and influence to hire expensive real estate lawyers – often with last names like Madigan and Burke – to challenge assessed values and dramatically lower taxes at the expense of all the little guys who don’t have the money or the sophistication to be part of the “pay to play” game.

Our accusations of “unfairness” ring hollow when we fail to recognize the harm that had routinely been perpetrated on the integrity of the system, and the injustice to the masses who had to pay more on their humble bungalows and two-flats to make up for the lost revenues from the big money guys who knew how to play the system and pay less on their downtown office buildings and apartment towers.

We call it the “Chicago way.” And it has probably done more harm to our city and our state than anything else.

So, to whom should we direct our anger? In my opinion, the focus should be tax fairness. The problem is not that we are being wrongly assessed. The problem is that we are being unfairly taxed.

Economists will tell you that the fairest way to raise taxes is on production, not consumption or assets. Very simply, this means we should tax income over retail sales or real estate. Illinois’ income tax is relatively low, and we remain one of just a handful of states that exempts most retirement income (including Social Security) from income taxes.

Taxes are a super complicated issue, and it would be easy to get lost in the weeds with everything the city, county and state should be doing differently regarding taxation. Our industry is justified in complaining that our tax burden is too high and tax policy in Illinois relies too heavily on real estate assets.

But we are fooling ourselves if we think restoring the “pay to play” policies of the Berrios years – or whoever successfully boots Kaegi from office – would “fix” this problem. I personally believe the one thing not going wrong with tax policy in Illinois right now (or at least in Cook County) is Kaegi’s determination to take “pay to play” out of the equation.

From my perspective, Fritz Kaegi is one of the few politician in Illinois who truly seems determined to break the “Chicago way” mentality and replace it with something that looks a little more like “good government.”

Of course it hurts to see our assessments go up, and we all know higher assessments will lead to higher taxes. But it’s also true that this year will complete a full, three-year reassessment cycle in Cook County. The shock we have experienced over the first years of the Kaegi administration are about to be replaced with actual predictability and “fairness” in a way we never knew under Berrios.

After this year, we should be able to look forward to predictable assessments based on actual market values. If those assessments are wrong, we will be able to challenge them using the same market data that we all recognize and use every day in our own business practices, and that Kaegi has used to determine our assessments in the first place.

I, for one, think that’s a heck of a lot better than never knowing what you assessment is going to be, and having to spend money on expensive, well-connected lawyers to beat that value back down again. This process smacks of bribery. It is corrupt, and it inevitably leads to further abuse.

Like I said, I know this is going to make a lot of people mad. But I also believe it’s the truth – a concept worth fighting for, especially in these times.