Mondays with Mike: Progressive idea or shell game?

Here in Chicago, tomorrow is a primary election. There are candidates for judges and state’s attorney and property tax board of reviews and, oh yeah, President. The elections with judges always require some research about who’s been approved by the Chicago Bar Association and, depending on your point of view, endorsed by the advocacy group of your choice. I’m still figuring out my choices.

That’s especially true of a referendum on the ballot regarding what’s been tagged as “The Mansion Tax.” It’s a proposal to increase the transfer tax on real estate transactions of $1 million or more. The transaction fee for sales under $1 million will actually decrease.

The ballot proposal is called “Bring Chicago Home,” as the (ideally) increased revenue from the act will be devoted to increasing funding for affordable housing and services for the unhoused.

I originally thought it was a no-brainer but am less sanguine now. For one, I don’t have a ton of confidence in Mayor Brandon Johnson, at least based on what I’ve seen thus far in his term. For two, he and the city council won’t pass  a plan that explicitly spells out how and where any increased revenue will be spent until after the referendum—and that is troubling. (Illinoisans remember that  decades ago when the Lotto was being promoted, we were promised that all of the lottery proceeds would go to education.)

For three, a similar measure has been something of a disaster in LA (so far). That’s owed partly to the phenomenon where the high-end real estate market froze up after a flurry of activity in advance because there are legal challenges and some people are holding off selling, hoping that it gets repealed.

I’ve found a bunch of stuff about how luxury real estate got hit and how people dodged it (Brad Pitt and Mark Wahlberg sold their places before the act went into effect). I really don’t care about a minuscule bit of pain for that sector.

I’m more concerned about any backfires from unintended consequences. My biggest concerns locally is that the $1 million threshold will include some relatively modest multifamily rental properties. That whole “mansion tax” thing is great propaganda but lots of relatively small rental building transactions will get hit. And that’s not a good way to make housing more available.

And the commercial real estate market is already pretty bad here post covid—in LA, the prices of commercial buildings took another hit with the transfer tax increase.

Those and other commercial properties then are appraised lower, and then you have less of a commercial tax base, and that could lead toward ultimately costing more of our sub-million dollar home taxpayers footing the bill on their annual property tax bills. (According to Crain’s Chicago Business, commercial properties are a disproportionate number of the properties sold over $1 million, at a ratio of 9-to-1.)

Which would, in my view, make it a shell game. If the revenues were spent wisely and it made a permanent positive difference to the plight of the unhoused, I can live with the shell game I guess.

All that said it’s a coin toss because I’m at that point where I say, “Well, it might not work but we have to do something.”

But it might not be until I’m at the polls that I decide.