City concedes tax on high-end homes could go further

Finance officials are examining whether to raise more money from commercial sales of Chicago property.

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Mayor Lori Lightfoot

Sun-Times files

Mayor Lori Lightfoot has embraced a tax increase on the sale of expensive homes in Chicago as a partial antidote for the city’s deficit, but her administration conceded Friday that the actual proposal might cover far more than residential property.

Officials are considering whether to apply the graduated tax to sales of commercial property, a potentially lucrative source of revenue. It would allow the city to capture additional money from the sale of downtown office towers, hotels, and retail and industrial property citywide.

A spokeswoman for the city’s Finance Department said the agency is examining whether to make commercial property a part of the tax increase. If it’s included, it would be the second time the administration has expanded the proposal’s reach since Lightfoot began publicly discussing the idea in recent weeks.

Initial discussions involved applying a higher tax rate to sales of homes valued at $1 million or more, similar to a proposal offered by progressive aldermen who want the money earmarked to help the homeless. But in her address about city finances Thursday night, Lightfoot said the tax should apply to sales for $500,000 and up, potentially casting a much wider net.

With a campaign promise in mind, Lightfoot suggested some of the revenue could go to programs for the homeless, with the rest used to chip away at an $838 million deficit for next year.

The progressives’ proposal called for raising the city’s flat tax on residential sales to 1.95% from 0.75% for sales in the $1 million dollar category.

In any case, she needs approval from the state Legislature to adopt the tax increase. But real estate interests are a powerful lobby in Springfield, and some lawmakers may be disinclined to help the city when the state wants to push through higher income taxes on wealthier people.

Brian Bernardoni, senior director of government affairs and public policy at the Chicago Association of Realtors, said his group will spend the next few days calculating the impact of added taxes on home sales of $500,000 and more. He said that in targeting higher-end homes, the city is focusing on the weakest part of the residential market.

Michael Cornicelli, executive vice president of Building Owners and Managers Association of Chicago, could not be reached for comment Friday. But in an interview before Lightfoot’s budget speech, he said he always figured the city would try to include commercial property in the tax hike.

Doing so would make Chicago a more expensive place to do business, he said. “Companies are coming to Chicago for the work force, and part of the attractiveness is that Chicago is still an affordable place to live,” Cornicelli said.

In other taxing matters related to business, Lightfoot on Friday told the Sun-Times editorial board there is “not much of an appetite” in Springfield to let the city tax high-end services such as lawyers or accountants. And she told the editorial board of Crain’s Chicago Business that she opposes a tax on futures trading at the Chicago exchanges, business she called “incredibly important” to Chicago.

The exchanges, she said, have backup systems in Aurora and New Jersey and have said they could throw a switch and take the business beyond Chicago. “They are very adamant, and I don’t think it’s a bluff,” Lightfoot told Crain’s.

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