Next Mayor Should Reduce Real Estate Transfer Tax To $2.50 per 1000

Posted on October 14th, 2010 in All Articles.

The “Mayor Daley Welcome to Chicago Tax” that Buyer’s pay when they move and buy a Chicago property is $7.50 per 1000 of purchase price is evidence of a City that has been run poorly-relying on income schemes that are not reliable–and are short sighted. This tax should be reduced to $2.50 or less per $1000 to make housing more affordable and re-start the housing market. This tax should be offset by a city-re-organization of departments and by renegotiating “hard ball” with city unions.( I sent a copy of this to the Mayor’s staff and the candidates to try to stir the idea, please do the same if you agree).

I personally think there is too much fat in City government. Refocus. Reorganize. And remove the anti-business tax on real estate sales and re-organize city government now in this election.

Until we stop seeing city employees reading the Sun Times at the courthouse on Huron at the front desk and not finding something more useful to do, or 4 Street and San guys showing up to cut down 1 small tree and when you talk to them they say that they have this tree and then lunch.

This transfer tax, which hits buyer’s much harder than sellers during a real estate transaction, is the highest I know of in Illinois. It’s something that has re-directed more than 5 buyer’s of my own over my seven years in real estate to NOT buy in CHICAGO. They bought somewhere else because of anger over the level of this tax compared to the suburbs around the city. Those 5 lost sales alone are out of 250 or so clients and you can start to see the impact of this tax is that it drives 2% or so of the people away from ownership in Chicago and accepting the cost of living here.  Wake up Mayoral candidates and Alderman on the budget committee.

This tax parlays into an increased closing cost of high proportion that disables and hurts the market as it tries to recover. The Mayor and his brain trust should have never passed this tax. This is a good time to repeal it.The mayoral candidate who commits to reducing this to $2.50 per 1000 for a buyer will get my vote.  It’s an anti owner, anti buyer, anti seller, anti real estate, anti-business measure that hurts people as they try to obtain home ownership. It kills deals. It kills appreciation. Similar suburban transfer taxes are a quarter of this amount typically. Chicago is known for the overarching nature of this tax – and many real estate agents I know call it the “Welcome to Chicago Mayor Daley Tax.”

One of the many reasons the City budget is in such a mess is that the city is  relying so heavily on such a unreliable source of income.

Mayor’s Daley’s budget unveiled in October 2010  indicates that three city taxes are expected to generate more than $1 billion less than they did in 2007.  The tax on real estate sales is expected to be down 68 percent, a drop of more than $500 million in the past four years. Real estate is cyclical so why ride this part of the economy so hard.. and why tax it so much that your drive away buyers?

The real answer for the next Mayor is: reform the whole way the city is run. Consolidate departments. Renegotiate agreements with the unions that are NOT sustainable or go broke.  Other examples of fiscal irresponsibility:  Daley has started to spend the  $756 million in reserves, established from long-term leases on the Skyway and Parking meter “fiasco”  of $2 billion. This will lower our bond rating and give us higher interest rates for any projects that we borrow for. Infastructure borrowing creates jobs. That just got more expensive. Stop the mismanagement and do the “hard thing” and re-organize the city to the size it can afford.

The new candidates have got to grapple with how  to completely reorganize city government to keep the city from running out of money. Who is the one who will raise the bar and talk straight. Alderman Waugaspeck started that conversation–now will other’s  who are actually running continue it please.