High property taxes threaten small businesses in Cook County
Many small businesses in Cook County are struggling under property taxes that are significantly higher than they are in surrounding counties.
Property tax is a major source of tax revenue, and it funds most of the services local governments provide. The Cook County Property Tax Assessor determines the property tax owed based on the fair market value of the home or property being assessed.
Cook County, however, is the only county in Illinois that assesses commercial property taxes at a percentage higher than residential properties -- meaning that businesses in the county shoulder more of the property tax burden than residents do. In addition to property taxes, business owners must pay corporate income tax and sales tax.
The county also has one of the highest median property taxes in the country. It taxes properties using a complex formula based on whether it is classified as commercial or residential. Because of this, it's impossible to apply a simple tax rate as one could with income or sales tax.
In a blog post for the Oak Park-River Forest Chamber of Commerce, Executive Director Cathy Yen highlighted the fact that commercial property owners in Cook County pay three times as much as residential owners on the same property value and that the property tax calculation within the county is more complicated than it is in surrounding counties.
“If you view the tax structure in a vacuum, Cook County is at a competitive disadvantage relative to other counties where taxes are lower,” Yen recently told the West Cook News.
Critics of the county's property tax methods say getting rid of the classification would reduce commercial property tax rates in many communities, alleviating the financial strain small business owners face and helping the county, especially its border communities, compete more effectively for economic development opportunities.
If the current system doesn’t change and businesses continue to be taxed at an elevated rate, low growth of Cook County's property tax base would be inevitable, placing a greater tax burden on both residents and businesses.
Residential property owners ultimately will feel the pinch of the higher tax rates on commercial properties. High tax rates can promote a cycle where new businesses are discouraged from operating in the community, resulting in a tax base that grows so slowly that it struggles to support the cost of public services. This, in turn, may lead to even higher tax rates for businesses and residents alike.
One possible solution is more mixed-use developments, which have been proven to encourage business expansion, retain businesses and create jobs in communities. Ultimately, they could help alleviate the tax burden on businesses by creating a greater population density for the businesses to rely on for revenue.
“Office buildings without a residential component are particularly expensive from a tax perspective," Yen said. "Competitive advantages include Cook County's population density and business density. To offset the higher property taxes, businesses located in Cook County need to rely on density to help generate higher revenue volume."
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