Committee: Property sellers will pay CTA bailout taxes
City Council's finance committee voted today to put the burden of Chicago's increased real estate transfer taxes on property sellers.
If the full council approves the plan, taxes on homeowners who sell their properties will rise 40 percent beginning April 1. The increased revenue from property sales will pay the city's portion of the Chicago Transit Authority bailout.
The city had originally planned to make buyers pay the taxes. Some aldermen had been hoping to tweak the ordinance so that buyers and sellers would evenly split the entire tax, says the bill's sponsor, Alderman Patrick J. O' Connor (D-40).
"That seemed to be a more fair way to divide the tax," says O' Connor.
However, Illinois state law prohibits such a split.
Currently, buyers pay $7.50 in tax for every $1,000 of the property's sale price. Under the ordinance approved today, that will remain unchanged.
The additional tax of $3.50 per $1,000 of the sales price will be paid by the seller.
The seller of a $400,000 house will pay $1,400 in taxes if the current proposal becomes law.
Paul Colgan, CEO of the Attainable Housing Alliance, a lobbying group that represents homebuilders, blasted the decision to switch the tax burden to the seller.
"By leaving it on the buyer, they have a choice of whether to purchase this property," says Colgan. "The seller, especially in this negative market, frankly has no choice."
"You are essentially stripping them [the seller] of equity," says Colgan. "It [the tax] is taking it out of their pocket."
Alderman Bernie Stone (D-50) holds a different view of the situation.
"Home prices have appreciated so greatly over the past few years--as much as 100 to 200 percent-- so I'm not going to cry too much for the sellers," Stone says.
Zeke Morris, a realtor who does business on the south east side of the city, says buyers will have a harder time negotiating concessions because sellers face with additional taxes.
The real estate tax is expected to generate $100 million annually for the CTA retiree and healthcare fund.
City Council is likely to vote on the tax Wednesday.