Evanston aldermen Monday may decide to ask voters to approve a 40 percent increase in the real estate transfer tax. Or they could borrow an idea from San Francisco and seek a graduated or “progressive” tax rate on property sales.
City staff is recommending the flat 40 percent increase in the tax — from a rate of $5 per thousand dollars of the value of a property to a $7 per thousand rate.
Alderman Ann Rainey, 8th Ward, has suggested an alternative approach — leaving the rate unchanged for properties valued at up to $1.25 million, and raising it on properties valued at more than that amount.
San Francisco has a transfer tax that starts at the same rate now charged in Evanston but escalate to as much as $30 per thousand for properties valued at more than $25 million. (Details of San Francisco’s rates can be found on page 230 of this document.)
A scheme along those lines could also be devised for Evanston that would cut the current transfer tax for properties below a certain threshold, maintain the current rate for mid-priced properties and boost it to San Francisco levels for the most pricey ones.
City staff has estimated that the 40 percent hike in the real estate transfer tax would yield an extra $1.5 million in revenue for the city.
Based on a breakdown of last year’s property sales by price included in Monday’s council packet (at page 157), it appears that the San Francisco model would roughly double the city’s take from the transfer tax.
That would leave room for reducing the current tax rate on properties valued at $1 million or less and still generating even more revenue than under the staff proposal.
The city likely would face a legal challenge to a progressive real estate transfer tax — because it would be the first such tax in Illinois. But the city’s legal staff has found no legislation that would preclude imposing such a tax.
Given that voters have rejected flat-rate increases in the transfer tax twice in the past 12 years, the aldermen may need a new approach this time if they hope to actually get more transfer tax revenue.
Transfer tax hike debate to continue (7/11/18)