Chicago Landlord, Business Groups Sue To Block Transfer Tax Hike

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Voters are set to decide whether to increase the tax paid on real estate sales above $1 million. Landlords and business groups say referendum violates the state constitution.

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A group representing Chicago landlords sued the city’s elections division on Friday, seeking to block a referendum that would increase the taxes paid on sales above $1 million from reaching the March ballot.

Mayor Brandon Johnson pushed the proposal through the city council in November, with advocates hoping to raise as much as $100 million per year for homelessness services.

The lawsuit is being led by the Chicago Building Owners and Managers Association, which names the Chicago Board of Elections and takes issue with the wording of the referendum.

As currently written, the referendum would ask voters three questions and also point out that the transfer tax on properties worth less than $1 million would be lowered if the referendum passes.

“The Illinois State Constitution guarantees ‘free and equal elections,’ and the coalition contends that it is unconstitutional to include more than one question in the referendum because it prohibits residents from voting on the three individual policy points,” the coalition said in a news release.

Voters have a right to decide each of the questions separately, BOMA argued in its lawsuit, which was first reported by Crain’s Chicago Business.

“Many voters likely support the first question (lowering taxes), but oppose the second and third questions (raising taxes),” BOMA argues. “However, they cannot express their support for the first proposition without also expressing support for the second and third propositions that they oppose.”

There are no apparent polls indicating how voters in America’s third most populous city feel about the referendum, which would quadruple the tax rate paid on properties over $1.5 million and apply to both residential and commercial properties.

Currently, all buyers in Chicago pay the same tax on real estate purchases regardless of the sale price. If passed, the referendum would create new rates for sales above $1 million but below $1.5 million, with the highest tier for sales above $1.5 million.

That would put more pressure on commercial real estate values, which are already down as much as 80 percent, BOMA said.

“Homelessness is a critical issue in our city that should be addressed with a serious plan involving all stakeholders. These important public policy questions should be presented to voters with fairness, detail and transparency,” said BOMA/Chicago Executive Director Farzin Parang. “Instead, this referendum is playing politics.”

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