Progressive Revenue

Future Now Plan Susana A. Mendoza

FIXING CITY FINANCES WHILE PROTECTING WORKING FAMILIES

1) Progressive revenue for stabilizing pensions and expanding educational opportunities

Illinois’s combination of a flat income tax, high sales taxes, and heavy local government reliance on property taxes gives it one of the most regressive tax systems in the country. According to the Institute on Taxation and Economic Policy, Illinois has the fifth most regressive taxation in the United States. This unfortunate fact is a driver of population loss and acts as a barrier to opportunity. While pension liabilities have been cut by nearly 20% over the last eight years, annual contributions are expected to grow by $864 million over three years starting in 2020, including a $300 million increase in 2020.

At the same time, Illinois ranks 49th in the country in state funding of education and 50th in funding the neediest school districts. After Susana’s tireless advocacy, a new education funding reform bill passed in Springfield in late 2017, calling for more than $3 billion in additional funding for public schools over the next decade with the new formula distributing those dollars to low-income school districts, including nearly one-fifth benefiting Chicago Public Schools.

Susana supports innovative and responsible changes to our revenue sources that will help hold the line for middle-class and working families as we address pension and education funding needs. To accomplish this goal, she will fight for the following solutions:

A responsible law, passed in consultation with law enforcement, to legalize cannabis use for recreational purposes can be a critical revenue stream to help address funding for social services and pensions. Moreover, legalization would help diminish the black market for marijuana and the crime and violence that goes along with it, cut down on unjust incarceration, and allow police to focus their efforts on more important types of crime. A 2018 study by Washington State University scholars found that states that had legalized recreational marijuana experienced improvements in clearance rates for violence and property crimes.

Susana will work with the Governor and State Legislature to pass responsible legislation based on best practices in other states and countries, and fight to guarantee participation for minority- and women-owned operators.

A responsible, transparent and well-regulated casino can be a critical source of revenue, with a portion earmarked to address pension payments.

Susana would make this a priority of her Springfield agenda and fight to have it built in a location that lures tourists rather than becoming a debt trap in Chicago’s under-resourced neighborhoods.

As Comptroller, Susana successfully battled Gov. Rauner to refinance state debt, saving taxpayers between $4 and $6 billion over the lifetime of the bond deal.

As mayor, Susana will work with the City Council in a collaborative and transparent way to explore available financing tools, including the possible issuance of a pension obligation bond to refinance pension debt to secure the retirement savings of city workers while reducing the burden on taxpayers.

Susana is committed to protecting working families and will oppose any attempts to raise the sales tax rate or other taxes on essential household items. Growing up in a middle-class family, Susana knows how much harder across-the-board tax increases hit working families. The disastrous implementation of the regressive soda tax last year was proof that instead of making government more efficient, the first instinct of some politicians is to simply propose more taxes that hit lower- and middle-income families the hardest.

As mayor, Susana will always recognize the disproportionate impact that regressive taxes have, and she will oppose increases in those taxes.

Chicago is not alone in facing big challenges with stabilizing its pension funds. For example, roughly one-third of the state’s more than 650 public safety pension funds are less than 50% funded. Susana understands the statewide implications of this crisis from her time as Comptroller, when mayors from across the state struggled to pay bills during the draconian 736-day budget crisis.

Drawing on the strong relationships Susana has built as Comptroller, she will work with public officials throughout Illinois to work with Governor Pritzker for equitable and sustainable pension revenue sources.  

2) Make fiscal discipline a priority

Susana has led by example when it comes to fiscal responsibility. When Susana took over the Chicago City Clerk’s Office, she found skyrocketing overtime bills and worked to rein them in, cutting overtime spending by more than 70%. She also reduced payroll by 10%. As Illinois Comptroller, she saved taxpayers millions of dollars.

She cut her office budget by $2.2 million and returned $1 million to the state after coming in under budget. She will bring that same fiscal discipline to City Hall.

Chicago is the only major city that places workers’ compensation decisions in its legislative body. Susana supports a top-to-bottom review of the city’s $100 million workers’ compensation program with the overdue goal of creating a transparent and efficient process in which decisions are subject to the Illinois Freedom of Information Act and the city’s Inspector General can investigate misconduct within the program.

3) Rebuild trust in our property tax system

In 2017, the Chicago Tribune published an investigative series on the Cook County Assessor’s Office that found that the assessment system was unfairly hitting low- and middle-income homeowners to the benefit of owners of more expensive homes. Experts have found that our current system of assessment has been staggeringly regressive. When the non-profit organization Civic Consulting Alliance studied the system, they found “significant inequity-wealth transfer from owners of lower-value homes to those of higher-value homes—within the current residential assessment system.” A study by the University of Chicago’s Harris School of Public Policy, was able to quantify that transfer, showing that between 2011 and 2015, at least $2.2 billion in property taxes was shifted from undervalued Chicago homes onto overvalued ones. New leadership in the office provides an opportunity to restore the public’s trust in the property tax assessment system.

Susana will work with Cook County Assessor Fritz Kaegi to shine a light on the office’s approach to valuing properties and allow for comment and review by ordinary Chicagoans as well as independent experts.

The current system favors the wealthy and connected, and must be opened to full public scrutiny to ensure reforms are comprehensive and include public input.

As Assessor Kaegi moves away from the system of “hand checks,” or manual adjustment of property taxes, there will be a need for more comprehensive data sets that help provide information needed to assess properties accurately.

The City of Chicago has access to many pieces of data that could help shed light on building characteristics and may be helpful in assessment. Susana will work with Assessor Kaegi to secure any data needed that will ensure assessment is done more uniformly and predictably.

In the Chicago Tribune’s analysis of property taxes, they also examined property tax appeals. They found that in every year between 2009 and 2015, the appeals process made regressivity worse for residential homes. This creates a two-tiered system that leaves the wealthy and well-connected paying less, while working-class families pick up the tab. Much of the distortion in appeals comes as a result of large commercial buildings downtown receiving huge assessment reductions. According to the Chicago Lawyer, reductions of commercial property assessments by the county’s Board of Review were five times greater than reductions of residential assessments from 2007 to 2014.

While Assessor Kaegi’s reforms will hopefully result in fewer appeals for everyone, Susana will take steps to ensure that the appeals process is depoliticized and disproportionate assessment reduction for high-value properties is ended.

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