Looking at the Bring Chicago Home "mansion tax" proposal

The first rule of taxes is, once they are invented, they never go away.

The proposed increase to transfer taxes by the pols behind the "Bring Chicago Home" movement illustrates this proposition perfectly. But to demonstrate this, we must first jump back in time some 259 years.

In 1765, representatives of nine of Britain's North American colonies met in New York City to discuss ways in which they could protest the British Parliament's imposition of several new taxes on the colonies. Perhaps the most unpopular of these, the Stamp Act, required colonists to buy stamps that had to be affixed to any document, including deeds, playing cards, and newspapers. This act was enshrined forever in the name historians gave to this first continental gathering, the Stamp Act Congress.

You may recall hearing about this during your school days. You may even recall that the British Parliament repealed most of their colonial taxes, including the Stamp Act, the following year.

But the Stamp Act never really went away. It no longer applies to playing cards or newspapers, and it is no longer paid to the British Crown, but every time a piece of property is sold in the City of Chicago, taxes are imposed, and stamps printed and affixed to the deed, showing that the transfer tax has been paid, in order for the transfer to be legal. (The County has its own stamps, too.)

It is this tax that Bring Chicago Home proposes to increase... but only on properties sold for more than a million dollars. The tax currently is $3.75 for every $500 of sales price -- or $7,500 on a million dollar sale.

The tax would go down to $3.00 for every $500 of sales price for sales up to a million -- so $6,000 on our hypothetical $1 million sale.

But the tax would go up to $10 for every $500 of sales price for betweeen $1 million and $1.5 million. Under existing law, the City gets $11,250 from a $1.5 million sale. Under the Bring Chicago Home proposal, the City would get $16,000 -- $6,000 on the first million, $10,000 on the next $500,000.

The transfer tax would go up still more for sales of more than $1.5 million. For each $500 of sales price north of $1.5 million, the City would get $15. So, assuming a sales price of $2 million, the City would get $15,000 in stamp tax under existing law, but $31,000 under Bring Chicago Home -- $6,000 on the first million, $10,000 on the next $500,000, and $15,000 on the $500,000 after that. (For more, see this WBEZ summary of the proposal).

Anyone can see how these new numbers could add up quickly. But, if the tax only impacts folks like Gov. Pritzker, should he decide to sell his Chicago mansion, who cares, right?

A lot of people on either side of the graduated transfer tax proposal are calling this a "mansion tax." But it will apply to a whole lot more than just mansions.

A quick search this morning of chicagorealestatesource.com, a Coldwell Banker site, shows that a 58-unit SRO hotel at 2847 W. Washington Blvd. has just gone on the market for $1.74 million. A 9-unit building at 3039 N. Harlem is on the market for $1.375 million. Another 9-unit building, at 3145 N. Nordica, is also available for $1.375 million.

This 6-unit building (one storefront and five apartments) at 904 N. California, pictured at left, is available for $1.319 million. An 8-unit building (two storefronts and six apartments) at 2232 W. Irving Park Road is new on the market at $1.599 million.

For $2.2 million, according to chicagorealestatesource.com, you can buy a 9-unit building at 1143 N. Rockwell St. A 7-unit building at 3226 W. Potomac is available for $1.599 million.

There's not a Pritzker or a Rauner or a Ken Griffin living in any of these.

Not all the multi-unit buildings on chicagorealestatesource.com are listed for more than a million. A separate page of 2-5 unit buildings seems to show most Chicago listings are priced under a million. A 9-unit building at 3064 E. 79th St. is listed for $950,000. Another 9-unit building, at 7363 S. Coles, is on the market for $975,000. A six-flat, at 1854 S. Fairfield, is on the market for $875,000.

But this is more a six-flat tax than a mansion tax. And it will be people who buy and sell apartment buildings, and, ultimately, the people who rent from people who buy and sell apartment buildings, who will shoulder any burden from this proposed new tax.

The linked WBEZ article, above, links to a paper issued by some experts at the University of Chicago. The paper claims, according to WBEZ, "tax increase’s impact on rent would be minimal with 'a unit that currently rents for $1,000 per month would be likely to see an average rent increase of less than $1.'"

These are some experts. Where can anyone get an apartment in Chicago for $1,000 a month? Apartment.com recently said, "As of February 2024, the average rent in Chicago, IL is $1,777 per month. When you rent an apartment in Chicago, you can expect to pay about $1,421 per month for a studio, $1,777 for a one-bedroom apartment, and around $2,249 for a two-bedroom apartment. If you opt for a three-bedroom rental, you could pay $2,742 or more."

Opponents of Bring Chicago Home, like Protect Chicago Homes, a group of Realtors, offer a parade of horribles, about who will be taxed next, and how much, and question whether we can trust the current City administration.

And maybe these are all valid questions.

But maybe the question for Chicago voters on March 19 is not 'who will pay the next tax' but, rather, who will really pay this one?