A recent Chicago Federal Reserve study for dealing with the state’s fiscal crisis was perhaps a foreshadow of things to come. Mind you that I am referring to a legitimate, study done by The Federal Reserve, not some idea conscripted by a group of state legislators. The proposal suggests that a progressive statewide real estate tax, to be levied over a period of 30 years, would be the best solution for solving the intractable pension problems of the state. What was interesting was not only did it ignore the basic laws of economics but it was blatantly confiscatory in its tone and tenor. The basic premise is that the additional tax would be based on the value of the home and that such a tax would have a negligible effect on movement in an out of the state because:
“Current homeowners would not be happy about this, but it would be a good result
for the Illinois economy. That’s because the new taxes wouldn’t affect people thinking
of moving to Illinois. While they would have to pay higher property taxes, that
would be offset by not having to pay as much for their new homes. In addition, current
homeowners would not be able to avoid the new tax by selling their homes and
moving because home prices should reflect the new tax burden quickly”
In other words, home prices would drop so dramatically that people would be trapped into staying and people would be encouraged to move into the state because of reduced home prices. Debt at the Federal and State level are always someone else’s problem, until it becomes a collective reality. When proposals such as this begin to gain traction, the exodus from the state will be even more severe than it already is. Perhaps a wall?