Chicago Homebuyers Face Even Higher Taxes

The Chicago Sun-Times reports on high taxes:

Chicago aldermen held their noses this morning and held up their end of the deal that staved off massive CTA fare hikes and service cuts. But not before giving senior citizen homebuyers a reprieve.

Beginning April 1, Chicago homebuyers will be hit with a 40 percent increase in the city’s real estate transfer tax. Instead of paying $7.50 per $1,000 of sale price, they’ll pay $10.50.

Those 65 or older who buy homes for $250,000 or less and agree to live there for at least a year will get cash refunds.

The senior exemption made the bitter pill easier to swallow for some aldermen — but not all.

“How many buyers over 65 are there? They’re not buying. They’re selling. [And] what the hell good is an exemption for houses under $250,000?

“You can’t buy a house in my ward for under $250,000,” said Ald. Bernard Stone (50th), the morning after being unseated as 50th ward Democratic committeeman by a state senator backed by Mayor Daley.

“Quite frankly, this is a good show piece. But it isn’t worth a damn.”

The senior exemption wasn’t the only point of contention. So was the mayor’s decision to impose the 40 percent increase on buyers — not sellers.

“The buyer — the person who is scraping up dollars and nickels for a closing and has to borrow money. We’ve got zero on the seller’s side — the person who usually walks away with a huge gain because of the equity. What’s the logic in that?” said Ald. Tom Allen (38th).

Revenue Director Bea Reyna-Hickey said applying the increase to the seller when the buyer pays the rest would double the number of deadbeats and cost the CTA millions because her department lacks the manpower to go after them.

Allen called that a “feeble excuse.” The Finance Committee approved the increase, with Allen, Stone and Ald. Rey Colon (35th) casting the only “no” votes. The full Council is expected to give final sign off later today.

Realtors have warned that the transfer tax increase could have a chilling effect on a housing market that’s already in free-fall.

Aldermen have expressed similar fears just three months after raising taxes fines and fees by $276.5 million to balance Mayor Daley’s 2008 budget. But they had little choice but to approve the Springfield-mandated increase tied to the CTA bailout.

“My constituents would never forgive me if I didn’t support this…When we were out campaigning with our state rep candidates and going door-to-door, all we heard about from people was CTA — what were we doing to try to be sure that CTA didn’t collapse,” said Ald. Toni Preckwinkle (4th).

As for aldermanic demands that CTA pension and health care funds diversify their predominantly white roster of money managers, the ordinance authorizing the transfer tax increase simply urges them to “set 50 percent diversity goals.”

“I feel, in a way, like we’re buying a pig in a poke here. We’re in a position where we don’t have any choice about what to do. But we’re giving you carte blanche in an area where we have great concerns,” Preckwinkle said.

Finance Committee Chairman Edward M. Burke said the transfer tax will be a line-item in the city budget, allowing aldermen to put CTA officials on the hot seat during budget hearings.

“They don’t like to be there. I think you’ll see some improvement,” Burke said.

The increase is expected to add anywhere from $196 to the cost of a home in Riverdale to $1,896 to the price in Lincoln Park. On average, Chicago homebuyers will pay an extra $748.

David Hanna, president-elect of the Chicago Association of Realtors, has argued that transfer taxes “increase the amount a buyer must gather for a downpayment, the biggest obstacle to purchasing a home.”

You might say the costs of buying a house just went up in Chicago so government workers can retire in style.