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Proposal: Illinois Homeowners Screwed for the State's Massive Unfunded Pension Liability?
Posted on 5/14/18 at 2:41 pm
Posted on 5/14/18 at 2:41 pm
quote:No words.
ILLINOIS, PUBLIC FINANCE
A Presentation to the Federal Reserve Bank of Chicago
How Should the State of Illinois Pay for its Unfunded Pension Liability? The Case for a Statewide Residential Property Tax
by Rick Mattoon, Thomas Walstrum and Thomas Haasl
May 7, 2018
The State of Illinois has a very large unfunded pension liability and will likely have to pay much of it off by raising taxes. The Illinois Commission on Government Forecasting and Accountability estimated the state’s unfunded liability at $129.1 billion in mid-2017,[1] which was about 19% of state personal income.[2] Benefits to public employees are protected under the Illinois Constitution, and a recent attempt to reduce the unfunded liability by reducing retirees’ benefits was struck down by the Illinois Supreme Court.[3] So, assuming that the state can’t reduce its current pension obligations and that it wants to maintain its current level of services, Illinois residents are going to have to pay higher taxes. What’s the best way to do it?
....
In our view, Illinois’s best option is to impose a statewide residential property tax that expires when its unfunded pension liability is paid off. In our baseline scenario, we estimate that the tax rate required to pay off the pension debt over 30 years would be about 1%. This means that homeowners with homes worth $250,000 would pay an additional $2,500 per year in property taxes, those with homes worth $500,000 would pay an additional $5,000, and those with homes worth $1 million would pay an additional $10,000.
....
Standard economic theory predicts that home values go down in response to new property taxes (that is, they are “capitalized” into home values). Current homeowners would not be happy about this, but it would be a good result for the Illinois economy. That’s because the new taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes. In addition, current homeowners would not be able to avoid the new tax by selling their homes and moving because home prices should reflect the new tax burden quickly.
LINK
Posted on 5/14/18 at 2:48 pm to NC_Tigah
Liberal logic: “the cost is offset because your home is worth less”
Posted on 5/14/18 at 2:53 pm to NC_Tigah
Correct me if I'm wrong but how I read this is if someone has property valued at $200,000 then the added tax would be $2,000, correct? For those blue collar workers that have a mortgage that tax would be factored into their advalorum hence an increase in their mortgage payments of $166.00 per month. This would be a heavy burden for the average household.
If the Dems keep on like this it could spell disaster come election time.
If the Dems keep on like this it could spell disaster come election time.
Posted on 5/14/18 at 3:23 pm to NC_Tigah
quote:
Illinois’s best option is to impose a statewide residential property tax that expires when pigs fly
FIFY
Posted on 5/14/18 at 4:56 pm to NC_Tigah
This could result in more Yankees and liberals from that state moving South.
Posted on 5/14/18 at 6:41 pm to TigerMikeAtl
Yep, and it says it would pay it off over 30 years, so if a younger family, say two income parents, buy that $1millon dollar dream home, they’re forking out $300,000 over those 30 years. Ridiculous
Posted on 5/14/18 at 6:53 pm to TigerMikeAtl
quote:
If the Dems keep on like this it could spell disaster come election time.
Nope. The Dems will have to just allocate more resources to getting out the cemetery and grave vote statewide.
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