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Assessor, REBECCA M. TONIGAN

Everyday there is news about the “declining” and “troubled” real estate market. So, I wasn’t surprised recently when a taxpayer asked when he could expect his taxes to go down, since home values were obviously going down. The sad truth is, they probably won’t. If market prices decline (and, so far, that isn’t apparent in all segments of the market), assessments may go down, but generally tax bills will not. Why? Because taxes are based on spending and if spending doesn’t go down, taxes won’t go down.

 

This fact is the least transparent part of the property tax process and one that many elected officials either do not understand or do not want to admit. Instead, the truth that spending creates the tax bill is clouded by statements similar to the one I recently read in the Village of Libertyville’s 2007 Annual Report, where the administration took credit for the declining tax rate - “…the Village Board consistently works to lower the Village tax rate.” SIMPLY NOT TRUE! The tax rate is nothing more than a calculation that is made by the county and the village does not control it.

 

To understand why, we have to look again at the basic tax rate formula:

 

      _____LEVY_______       

              ASSESSED VALUE    =     TAX RATE

 

The LEVY is the amount of tax dollars that your taxing body requests-

The ASSESSED VALUE is the total of the assessments in the taxing district-

The TAX RATE is nothing more than a calculation;

the result of dividing the LEVY by the ASSESSED VALUE.

 

Taxes go up because LEVIES go up. ASSESSED VALUES and TAX RATES are just the TOOLS used to divide up the total tax burden created by the combined LEVIES of our local taxing bodies.

 

Here’s an example of how it works-

 

Our taxing body requests $100,000 (the LEVY) and total assessments are 2,000,000.

      The tax rate is .0500 ($100,000 divided by 2,000,000).

If your assessment is 10,000, then your taxes will be 10,000 X .05 or $500.     

 

Now, going back to the question above, “If property values go down, won’t my taxes go down?” Let’s see…

 

      Our taxing body is still requesting $100,000 (the LEVY), but total assessments are 1,800,000, down 10%.

          The tax rate now is .0556 ($100,000 divided by 1,800,000).

      If your assessment is 9,000 (down 10%), then your taxes will be 9,000 X .0556, STILL $500.

 

Taxes didn’t change - even though assessments went down - because the LEVY didn’t change.

                      The LEVY drives the tax bill!

 

And, what happens if the levy increases but my assessment goes down?

                 

          The LEVY is $110,000, 10% more, and assessments are 1,800,000, down 10%.

          The tax rate is .0611 ($110,000 divided by 1,800,000).

      If your assessment is 9,000 (down 10%), then your tax bill will be 9,000 x .0611 or $550.

 

              Up 10% like the LEVY, not down 10% like your assessment.

                 

                  The LEVY drives the tax bill!