Don’t expect ‘Fair Tax’ or property tax hikes
by RUSS STEWART
It’s gotten a bit late in the year to make predictions about what will possibly occur in 2014, but the time is ripe to speculate about what definitely will not occur. Here are some predictions:
There will be no Chicago property tax hike in the 2015 budget, which is due by December.
The city’s pension deficit is $27.5 billion, nearly five times the current budget. The Illinois General Assembly has mandated that it be reduced by $590 million in 2015, which would necessitate doubling property taxes. There are other options: raid TIF district funds, impose a head tax on suburbanites who work in Chicago, borrow more money, increase the sales tax or impose a tax on professional services, The clock is ticking.
Mayor Rahm Emanuel and the 50 aldermen will contrive some ploy to "kick the can down the road" to 2016, and "fix" the pension "crisis" after they have been re-elected in 2015.
"A tax hike would be a catastrophe at this time," one Chicago alderman said, emphasizing that it not only would cost home owners $250 to $750 in added taxes, it would sock commercial property owners with huge hikes, from the thousands for small-business properties to the hundreds of thousands for Loop, Michigan Avenue and Lakeshore businesses and tenants. It also would be a catastrophe for the aldermen, as opponents would emerge from the woodwork. In short, a December vote in favor of a property tax hike by any alderman would be political suicide.
There will be no Fair Tax Amendment, corporate tax rate cut, or "millionaire’s tax" emanating from Springfield. However, the 2011 "temporary" income tax hike, which was supposed to "sunset" in 2015, will be made permanent. Individual rates were increased from 3 percent to 5 percent, and corporate rates were increased from 4.8 percent to 7 percent. That gave the state $31.6 billion in additional revenue from 2011 to 2014, yet the unpaid bill backlog is $7 billion, down slightly from $8.5 billion in 2011.
The consensus among insiders is that Bruce Rauner will be Illinois’ next governor, and they will let him "fix" the state’s fiscal woes.
The Fair Tax Amendment is especially pernicious. As proposed, it sets the state income tax at 2.9 percent on individual income under $18,000, 4.9 percent on income up to $180,000, and 6.9 percent on income above that. As it amends the Illinois Constitution’s revenue clause, the General Assembly must approve it by three-fifths majorities and put it on the ballot for voter approval. It’s an empty vessel, and once enacted, it can be modified by the legislature and rates can be hiked at any time thereafter. It won’t be passed this year.
Toni Preckwinkle will not run for mayor. The filing deadline to run for mayor in the Feb. 24, 2015, nonpartisan election is Nov. 24, 2014. Preckwinkle currently is unopposed for re-election, as no Republican is on the ballot for November. The period to circulate nominating petitions for mayor begins on Aug. 20. Preckwinkle has $696,812 in her campaign account, to $7,391,991 for Emanuel. If Preckwinkle is going to run, she can’t wait until after the Nov. 4 election. She must declare now.
Expect Alderman Bob Fioretti (2nd) to declare his candidacy for mayor within a month. He has $257,822 in his account, he will run as the anti-Emanuel candidate, and he will benefit from any anti-tax backlash.
The real estate market will no longer languish in the doldrums. Pent-up demand is bursting forth. First-time home buyers can get 95 percent FHA loans. Prices are rising, which means that home owners can squeeze enough equity out of their homes to "buy up." Interest rates are still low, at 3 to 4 percent. Condominium turnover is still slack, while the sale of homes is not quite robust, but getting there. "2014 will be a good year," one real estate agent said. "2015 will be a great year."
However, the surfeit of foreclosed, unsold properties is a danger. Lenders have been keeping them off the market, and the number of foreclosures has dwindled by a third. When those parcels hit and glut the market, prices will plunge.
The scapegoating of former mayor Rich Daley and the tarnishing of his legacy won’t abate. Daley was mayor for 22 years, and he was "present at the creation." Daley’s governing policy was simple: Don’t raise taxes. Don’t make unpopular decisions. Don’t irritate voters. Get re-elected.
The pension mess is entirely attributable to Daley. He consistently used pension contributions for routine city expenses, borrowed to the hilt, sold the parking meters, and used TIF district funds as needed. Of course, most of the 50 aldermen were under his thumb and voted as they were told, but the Daley name will soon be as reviled in Chicago as George Bush’s is nationally.
There will be no Pat Quinn re-invention. The governor is a master at grandstanding — getting media sound bites when hyping a minimum wage increase, gay marriage, driver’s licenses for non-citizens or higher taxes on the wealthy, and parroting the unions’ opposition to pension reform, but he’s a failure at governing. Illinois House Speaker Mike Madigan runs the state government; Quinn is just a figurehead.
Recent polling shows that Quinn has an unfavorable rating of 55 percent. Rauner is leading Quinn in the polls 42.7 percent to 40 percent. For a well known incumbent to hover around 40 percent is ominous.
In a shrewd move, Quinn has now signaled that if he is re-elected, he will not seek another term in 2018. That neutralizes Rauner’s two-term term-limit proposal. It clears the way for Attorney General Lisa Madigan to run uncontested, and it means that as a lame duck governor, he can be a political pin cushion, unafraid to accept blame since he won’t be on the ballot again. If Quinn wins, Lisa Madigan can run against his incompetence in 2018 in an open race. If Quinn loses, she would have to spend $30 million to beat an incumbent Rauner.
In essence, Quinn has given the Madigans and their allies a persuasive reason to elect him.
The poll trajectory of Barack Obama’s presidential approval rating will continue to tank, benefiting Republicans nationally. It’s now at 43.3 percent and falling. It was 26 percent for Richard Nixon in 1974, prompting a huge Democratic sweep. The Democrats also did well in 2006, when Bush’s approval rating was 40 percent, and in 1982, when Ronald Reagan’s was 47 percent. The Republicans scored big in 2010, when Obama was at 48 percent, and in 1978, when Jimmy Carter was at 50 percent.
The Obama Administration’s unpopularity will ensure that the Republicans will retain the U.S. House and take over the U.S. Senate.
The Democrats will lose their 55-45 U.S. Senate majority on Nov. 4. The "playing field" continues to expand, to the Republicans’ benefit. Polling and trends indicate that on Nov. 4 Senate Majority Leader Harry Reid’s majority will fall by up to 10. Democrats will lose seats in Alaska, Arkansas, Colorado, South Dakota, West Virginia, North Carolina, Michigan and Louisiana, and possibly in Iowa, New Hampshire, Minnesota and Oregon. An anti-Obama "wave" is building, similar to those in 1974, 1978, 1982, 1994, 2006 and 2010.
However, a 2015-16 Republican congressional majority will be no blessing. Gridlock will be rampant. Obama will blame the Republicans for his failures. In 2016 Hillary Clinton will run for president, and 23 of the 32 senators up for re-election will be Republicans, including Mark Kirk of Illinois. The Senate will revert to the Democrats.
The voters’ mood in Illinois, and especially in Cook County and Chicago, is decidedly sour. Disgust approaching anger over government dysfunction and politicians’ mendacity is cresting. Voters are infuriated by a governing class that won’t make tough decisions, that lies about the extent of the problems, that loots whatever cash cow is available, and that incurs debt to pay current bills. Who’s to blame for the pension crisis, who spent the money supposedly earmarked for those pensions, and where was it spent?
Any politician who is perceived as contributing to the problem, who has been in office for a lengthy period, or who votes for any tax hike to solve the fiscal shortfall is at grave risk, and longtime politicians, who were "present at the creation," are especially endangered. It takes somebody to beat an incumbent, and Republicans are uncompetitive (or have no candidates) in Cook County. If someone had filed or run as an independent against county Assessor Joe Berrios, he would be at risk. The 2014 poster boy for change is 20-year county Commissioner Pete Silvestri (R-9). All the insiders of both parties are for him, but the voters may be weary of him.
No tax hikes will be passed in Springfield. Despite Democratic majorities, neither the General Assembly nor Quinn are disposed to bail out Emanuel.
Emanuel is under serious time constraints. By the end of summer he must create the illusion that the pension situation has been permanently "solved," not just postponed. Otherwise, hundreds will file for alderman, all pledging to oppose a property tax hike. Aldermen are tough to beat, but many would succumb to an anti-tax wave.
Send e-mail to russ@russstewart. com or visit his Web site at www. russstewart.com.