Opinion: Voters Should Be Wary of Mayor Johson’s Real Estate Transfer Tax Hike
Opinion, Chicago Tribune | March 11, 2024
Chicagoans are one week out from the March 19 primary election, and Mayor Brandon Johnson’s controversial citywide referendum is back on the ballot — for now.
Initially, Johnson got a real estate transfer tax hike he has dubbed a “mansion tax” onto the ballot by claiming he’ll make the big corporations pay their fair share to help fund his “Bring Chicago Home” homelessness relief initiative.
However, newly released Chicago Teachers Union contract demands suggest otherwise. CTU documents show the union’s desire to use the possible $100 million in Bring Chicago Home revenue for its own housing proposal. So the money proposed for homelessness may not go to where Johnson has promised.
The last time Chicago voters passed a citywide binding referendum was in 1885, but Johnson hopes using progressive jargon will mobilize the young voters who elected him to support this unaffordable tax hike. Young voters trying to “do good” should be wary of Johnson’s real estate transfer tax hike: It’s not going to deliver on his promises, which are pretty vague, and it will hit the places where people who are unhoused are most likely to find jobs.
The flashy name leads voters to believe it will just increase the real estate transfer tax on “mansions” worth more than $1 million. But relatively few houses sell at that price. It will be commercial businesses, which by a 9-to-1 ratio, according to a Crain’s Chicago Business analysis, account for the value of transactions of more than $1 million, that will bear the brunt of the tax hike.
So the tax will hit businesses — including restaurants, boutiques and mom-and-pop shops — and perhaps force them to pass the new costs onto consumers. In other words, expect to pay more for your coffee or beer.
The fate and the legality of Johnson’s controversial referendum are unknown as the Illinois Appellate Court ruled that the courts can’t intervene on the ballot measure, even though a Cook County judge did last month. For now, residents will vote on the issue, but the courts are debating if the referendum can be enacted if it passes.
Despite the proponents’ messaging, this tax won’t soak the rich. Instead, it will add a financial deterrent to new business startups in a city desperately facing all-time high commercial vacancies.
Take, for example, Mr. Beef. The iconic Chicago restaurant was the inspiration for Hulu’s “The Bear” and was even used in filming. The property for the Chicago staple is valued at $1.5 million.
That’s a mansion in Johnson’s eyes. The same would be true of properties occupied by businesses such as supermarkets, bowling alleys and gas stations.
But anyone who has seen “The Bear” or the vintage restaurant knows it’s not fine dining for the elite: It’s where working-class Chicago finds a great sandwich. If the current owners sold today, under Johnson’s new rates, the transfer taxes would add nearly $5,000 to the new owner’s upfront costs, according to an Illinois Policy Institute analysis.
This is a significant hike for small business and restaurant owners. Paying $5,000 in added fees could prevent small businesses, the leading job creator in Illinois since the pandemic, from hiring another part-time employee. That doesn’t seem fair.
The Johnson administration projects the city could collect $100 million in annual revenue under the increased real estate transfer tax if the market holds. And that’s a big “if.”
Los Angeles saw its market of high-end real estate sales decrease after it implemented a similar system, much to the dismay of the real estate agents on Netflix’s reality TV series “Selling Sunset.” They have publicly bashed their city’s mansion tax. Chicago’s results could be even worse than Los Angeles.
But worse of all, young Chicago voters are being asked to back a tax hike when city leaders have no idea what to do with the new revenue. Johnson has not published any plans for how the tax revenue will be spent. What’s to stop him from spending the money on random initiatives in the name of “homelessness”?
Johnson already shifted an additional $95 million to the migrant crisis from funds intended for COVID-19 relief, and he did it without City Council approval. The city already has $44 million in unused money to fight homelessness just sitting there on top of $400 million allocated for homeless support services and migrants who are unhoused.
Before pursuing the additional $100 million per year from taxpayers and the city’s faltering business community, the city should ensure that it effectively uses the $440 million it has to deal with homelessness.
There’s a lot at risk for young voters if Johnson’s real estate transfer tax hike goes through. Don’t let a clever name such as the “mansion tax” fool you. Voting against the tax hike on the March 19 ballot is the only surefire way to reject Johnson’s ill-defined platform that could hurt homeless Chicagoans with no guarantees about how it would help them.
Micky Horstman is a communications associate for the Illinois Policy Institute, a conservative think tank that is supporting the Vote No on Chicago Real Estate Tax ballot committee. He is also a contributor for Young Voices, a nonprofit that promotes the voices of young independent thinkers.