Chicago Tax Hikes Still Does Not Solve City Pension Debt
This ARTICLE On Chicago Tax Hikes Still Does Not Solve City Pension Debt Was PUBLISHED On October 14th, 2019
Chicago has a new mayor, Lori Lightfoot.
- Mayor Lightfoot is walking into a city with major financial chaos
- Chicago has the highest tax rate out of any major U.S. city
- Despite the high city taxes and recent Chicago Tax Hikes, the city is by no way digging out of the financial hole they are in
- Former Chicago Mayor Rahm Emanuel implemented Chicago Tax Hikes back in 2015 when he was in office
- However, despite Emanuel’s Chicago Tax Hikes, the pension debt rose by more than $7 billion and is growing as time passes
- No matter how much the city raises taxes, the pension debt crisis will not be solved with the current model the city has
- Illinois is also in a major financial mess
- Newly elected governor JB Pritzker has been increasing taxes on everything he can think of
- To make matters worse, The Pritzker Administration has created new state taxes to cure its financial crisis
- Illinois recently doubled its gas tax
- Illinois has the second-highest property tax rates in the country right behind New Jersey
- Countless Illinoisans are fleeing to other lower-taxed states
In this article, we will cover and discuss Chicago Tax Hikes and how inexperienced and incompetent politicians are expediting Chicago and the state into bankruptcy.
City Leaders Sort To Chicago Tax Hikes To Solve Financial Mess
Raising taxes often solves the budget deficit on city, county, state government.
- However, increasing taxes and not cutting spending does not hurt and hurt taxpayers
- Why is Indiana booming and Illinois is on the brink of bankruptcy?
- You need to run government like a business
- It is not how much you make but what you spend
- Illinois politicians seem like they are clueless and lost when it comes to balancing the budget
- The pension debt in Illinois, especially Chicago, is in a major crisis mode
- Former Chicago Mayor Rahm Emmanuel increased taxes to solve the city pension debt crisis
- However, the city pension debt skyrocketed by more than $7 billion since 2015
- The pension debt is worse now than it was prior to Chicago Tax Hikes
- Some of Chicago Tax Hikes include record-high property taxes, an increase of city sales taxes, new tax on water and sewer, and higher 911 emergency fees on telephone services
The skyrocketing Chicago Tax Hikes with no caps is putting a stress on Chicago residents, homeowners, and businesses.
How Chicago Tax Hikes Were Justified By The Mayor
Here is what Rahm Emmanuel said justifying the Chicago Tax Hikes:
The proposal of these Chicago Tax Hikes is painful. I have a solution where the city will replenish the underfunded city pension fund. The extra money of these extra taxes, it will be part of a plan to get the woefully underfunded city worker pension funds on a path to solvency.
Unfortunately, the Mayor’s plan backfired and city taxpayers got the wrong end of the stick. Taxpayers got screwed and the pension debt has gotten substantially worse than it was 4 years ago. $7 billion more in debt than 2015. Back in 2015, the city worker pension funds were short $23 billion. Now, the city pension retirement fund exceeds a $30 billion shortfall.
See the chart below:
Here is what Massimo Ressa, the CEO of Gustan Cho Associates said:
There are three main reasons the gap widened by nearly $7 billion. By far the biggest is that the people who run the four retirement funds changed their economic assumptions. They reduced the amount they expect to earn by investing the money already on hand, and they increased how long they expect retirees will live and collect benefits. Second, Emanuel’s plan put off the largest increases in pension contributions to get the system back on track until after he left office. That meant even though the city was collecting as much as $822 million a year in new taxes for pensions as employees were kicking in more, it still wasn’t enough to cover the cost of retirement benefits going out. Emanuel said raising taxes any higher at that time could have hurt the city’s economy. And third, pension fund investments didn’t meet their expected rate of return in recent years.
Comparison Of Chicago Pension Funds Versus Other Major Cities
Chicago has the most underfunded retirement fund out of all major U.S. cities.
Here is what Standard And Poor’s Bond rating finds about Chicago in a September 23rd, 2019 report:
“(Chicago’s) pensions are the most poorly funded of the largest U.S. cities out of all pension funds in the nation. The annual contributions to pay off pension debt in cities like Chicago make it tougher to spend money on priority services and infrastructure investment. It is against that backdrop that Mayor Lori Lightfoot took office. The biggest increase in pension contributions for the city comes during the next four years, posing a huge challenge. She’ll have to come up with an additional $989 million a year for pensions by 2023, according to her administration’s projections. If there’s a downturn in the economy that affects pension investments, that figure could go even higher.
Issues The New Mayor Is Facing
Another democrat got elected as Chicago’s Mayor.
- Mayor Lori Lightfoot has her share of problems to deal with
- With a city in a major budget crisis, many city workers, especially teachers, are demanding pay raises
- This is money the city does not have
- She is exploring revenue options like increasing property taxes again, increase of the city sales tax, proposing Chicago Casinos, Marijuana Sales, and other revenue streams
- Increased and new Chicago Tax Hikes are forcing growth in the city
Many are leaving the city to neighboring Indiana. The city is losing businesses and taxpayers in record numbers.
Taxpayers Exodus From Illinois Due To High Taxes
Due to property tax hikes, many homes in the city and surrounding suburbs are stagnant and are depreciating in values when home values are skyrocketing in most other cities and states. Due to high taxes, the City of Chicago is losing more residents than any other city in the United States. Many property owners are fed up and over 64% of Illinoisans thought about fleeing to other states with lower taxes and cost of living. This is a developing story by Gustan Cho Associates Mortgage News. We will keep our viewers updated in the coming days and weeks on updates of the financial crisis in Chicago and the state of Illinois.