Scott Goldstein Vice President of Policy and Planning
Tax Policy: The Rules of the Regional Development Game
May, 2000
The Metropolitan Planning Council (MPC) released a study in May 1995, co-sponsored with the Federal Reserve Bank of Chicago, analyzing the effects of commercial and industrial growth on local property taxes in the six-county Chicago region.* Key findings include:
Business growth was associated with lower residential property tax rates than otherwise would have occurred. Communities seek business growth to bolster their own fiscal resources. However, unintended consequences may follow.
Population growth generally was associated with increased residential tax burden. Residential development can increase the tax burden by raising demand for services such as schools.
Because people tend to follow jobs, with business growth encouraging population growth in a cluster of communities, economic development in one community may create higher tax rates for nearby communities, which do not receive the tax benefits of the business growth.
Property taxes have long been a contentious issue in Illinois. In recent years the Illinois legislature has responded by placing tax caps on many local governments and by enacting other measures such as a freeze on property assessments for senior citizens.
MPC suggests that an effective legislative response to property tax issues should reflect a broad understanding of the underlying impact of property taxes on planning and development in the region.
