The Windy City is set to be hit by the ‘perfect storm,’ of new tax hikes that is. Just how bad could it get? What will it mean for Illinois real estate investors?
Prepping for a Barrage of New Taxes
It is typically big news when just one type of tax is lifted. Yet, while presidential candidates are competing on promises of lower taxes, Chicago seems to be going the opposite direction. Some of the new taxes hikes being proposed, or already being implemented, include:
- The highest sales tax in the U.S. at 10.25%
- Higher property taxes
- New taxes on garbage pickup
- Taxes on businesses that pay below a certain wage
The Fallout
Press coverage continues to herald the attractiveness of Chicago as a business destination and home. However, its attractiveness remains to be seen for the most part. It certainly isn’t the weather, nor the affordability. Chicago has been a big business city, and more recently popular with international buyers. However, many individuals probably aren’t aware of these tax hikes yet, and they haven’t yet felt it in their wallets. When they kick in, it could be a completely different story. If you are a middle income earner barely putting enough away for retirement, there may be no choice but to skip town.
Still, the tax hike spree is reportedly the result of a massive $700M budget deficit. Unless costs are slashed, and efficiency improved, there could be even larger financial consequences coming.
Of course, insolvent budgets really aren’t the burden of those that can move to greener pastures. So many Chicagoans could join the ranks of New Yorkers and others in search of cheaper places to live and do business. If you can make the same income, why not? Even those that can’t substantially lower their expenses by moving may choose to do so at least to benefit from better weather and public services.
In Search of Better Markets
So what should real estate investors be looking for in other markets?
Watch out for markets with severe budget deficits, and which may follow in the footsteps of Chicago’s tax spree. Look for secure ones. Or those that have moved on from the worst part of the recession. Even without higher taxation, broke cities can mean poor policing, utility challenges, poor emergency healthcare, higher crime, and declining schools. These are all factors which can negatively impact local real estate.
Some states and destinations clearly have more attractive property tax rates than others. It’s good to do our part in supporting the community, and that often comes back to help real estate investors. However, as Property Tax Adjusters Ltd. points out, it is not fair when so much corruption and waste is prevalent and drives up tax bills.
Summary
Chicago and its businesses, workers, renters, homeowners, and investors face some tough times ahead. Some may want to find other places to incorporate, invest, and live while the kinks get worked out. Some real estate professionals may find great win-wins in aiding individuals and organizations in this move. Wherever you choose to invest today, make sure not to overlook fundamentals including local taxes, and the financial strength of local communities.
