Chicago Tax Hikes

Chicago Tax Hikes

There are only two things guaranteed in life, death and taxes.  Will the tax hikes be the death of Chicago?

The residents of Chicago are now facing increases in taxes that have come at arguably the worst time. In a time when presidential candidates are promising lower taxes for most people, the Chicago tax hikes are pretty much across the board.

–        Higher taxes on property

–        New taxes for the pickup of garbage

–        Businesses that pay below a set wage face new taxes

–        A total sales tax of 10.25%

One big question is how this will affect real estate investors who have previously seen plenty of opportunities in the Chicago.

Repercussions

While many in the press have depicted Chicago as an attractive business destination and place for opportunity, it remains to be seen if the result will live up to the promise. Historically, Chicago has been a place for big business and has been popular with buyers from other countries.

However, the news of the Chicago tax hikes is certainly not a welcome one for investors who are looking at hanging on to their properties for a few years in order to either make a profitable sale or reap the cash flow of renting out what they own. While right now the taxes are considered high, but tolerable, there is no telling what will happen when they do fully kick in. Putting aside investors for a moment, a middle class individual struggling to put money away for retirement just might consider finding a new place to live.

Why is the Tax Hike Happening?

The answer is simple, the city is facing a shortfall of roughly $700 million and unless new money is raised and their expenditures cut, this might be the beginning of a real tumble in terms of their financial state. Of course, city budgets that are out of control are nothing new and the result in places like New York for example have been many people leaving the city to find better, less expensive places to live.

Even those who may not see the tax hikes as all that crippling might be convinced to move to a place with better weather, more job opportunities and public services that do not require unreasonably high taxes to maintain.

What Should Real Estate Investors Do?

Essentially, cities that have severe budget issues are generally not the places for real estate investors. This is because the demand for property will be much lower as the city slashes its public services and jacks up taxes to support its basic functions like police, emergency responders, and school which are something real estate buyers look for in a good purchase.

Higher taxes are generally not a reason to abandon investment. However, when it is combined with poor city management that adds plenty of waste, then investments become far more risky and expensive.

In conclusion, the Chicago tax hikes are indicative of the tough times that their citizens, businesses, homeowners and investors face when staying in the city. There will be many who will be tempted to leave to find greener pastures elsewhere while others will try to stick out the current crisis. Until the city can better manage its money and lower taxes, do not expect much real estate investment in the foreseeable future.  Some people are saying that Chicago will become the new Detroit with the higher taxes.  Tell us what you think of Chicago Tax Hikes…