January 9, 2019
Effective tax rates increased for all selected communities in ten-year period analyzed
(CHICAGO) The Civic Federation released its annual estimate of effective property tax rates in the six-county region of northeastern Illinois today. The full report is available here.
Among the 12 selected Cook County communities, Harvey had the highest effective tax rate for residential properties at 6.90% in tax year 2016, while Chicago had the lowest residential rate at 1.69%.
Effective tax rates increased for all analyzed communities in the ten-year period between tax years 2007 and 2016, the last year for which comprehensive data are available. In Cook County, increases for residential properties over this period ranged from a 21.7% increase in Arlington Heights to a 98.0% increase in Chicago Heights.
The full report also analyzes trends for selected communities in the collar counties of DuPage, Kane, Lake, Will and McHenry. Among these communities, Waukegan had the highest 2016 effective property tax rate at 3.88% and Oak Brook had the lowest rate at 1.06%. Most collar county communities analyzed experienced decreases in their estimated effective property tax rates between 2015 and 2016. Most notably, Woodstock experienced a 13.0% one-year decrease and Waukegan experienced an 11.4% one-year decrease—though all analyzed communities saw ten-year increases.
“While these estimates are powerful for showing high-level trends over time, it is important to recognize that the Federation’s calculation of estimated effective rates is just that: an estimate,” said Laurence Msall, president of the Civic Federation. “Therefore, individual properties’ trends may be different from the estimate.”
Effective tax rates are a measure of property tax burden for homeowners and businesses. They translate the tax rates on property tax bills into rates that reflect the percentage of full market value owed in taxes by a property in a given year. Effective tax rates allow an apples-to-apples comparison of tax burden across communities and over time. This report covers the period between 2007 and 2016, the most recent year for which comparable data are available.
Changes in effective tax rates over time are a product of changing actual composite tax rates, changing median levels of assessment and changing equalization factors. To calculate effective tax rates, the median level of assessment is first multiplied by the equalization factor to approximate the percentage of a property’s total value that is taxed. (Both the median level of assessment and the equalization factor are calculated annually by the Illinois Department of Revenue.) This percentage is then multiplied by the actual tax rate to produce the effective tax rate.
To calculate the effective tax rate for an individual property, a property owner would divide the tax liability for a property into its estimated market value for the same year. Thus, a property with a tax liability of $6,000 and an estimated market value of $300,000 would have an effective property tax rate of 2%.