CHICAGO | Economic & Business Development

[Handro]

Originally Posted by the urban politician

What matters is, McMansions in Chicagoland are performing more poorly than McMansions in 99 other major American metros. So large numbers of people in our region, comparative to pretty much the rest of America who made similarly bone-headed investments, are losing wealth (or not gaining it). That is never a good thing for a regional economy, especially in light of our growing pension balloon and tax liability (see my post above).

Based on what? A quick google search actually pointed to the opposite being true—that McMansion prices are plummeting across the country, save for maybe the aberration that is Silicon Valley.

[marothisu]

TUP, I don't think your "income taxes is about to go up" is actually based on any factual evidence. Luckily, The Chicago Tribune had a calculator on how the new tax law would affect you. Keep in mind that the current rate is 4.95%.

New tax rate at various yearly salaries. 1 exemption for single filer:
$10,000: 4.75%
$25,000: 4.83%
$50,000: 4.87%
$75,000: 4.88%
$100,000: 4.88%
$150,000: 4.91%
$200,000: 4.92%
$225,000: 4.92%
$250,000: 4.92%
$255,000: 4.95%
$275,000: 5.18% (0 exemptions. +$635/yr)
$500,000: 6.37% (0 exemptions. +$7085/yr)
$1,000,000: 7.99% (0 exemptions. +$30,400/yr)
$200,000,000: 7.99% (0 exemptions. +$6.08M/yr)

New tax rate at various yearly salaries. 1 exemption for joint filer:
$10,000: 4.75%
$25,000: 4.83%
$50,000: 4.87%
$75,000: 4.88%
$100,000: 4.88%
$150,000: 4.91%
$200,000: 4.92%
$225,000: 4.92%
$250,000: 4.92%
$255,000: 4.95%
$275,000: 5.16% (+$573/yr)
$500,000: 6.33% (0 exemptions. +$7085/yr)
$1,000,000: 7.09% (0 exemptions. +$21,435/yr)
$200,000,000: 7.99 (0 exemptions. +$6.08M/yr)

So basically, any household single or joint filer making $250k or below has their tax rate go down. Basically anything above is going to, tho if you make something like $260k, then new rate is 5.04%.

Now, let's look at tax rates for $1M single filer in other areas:

Los Angeles: 10.77%
San Francisco: 10.77%
San Jose: 10.77%
San Diego: 10.77%
NYC (state+local): 10.51%
Honolulu: 10.40%
Portland: 9.67%
Minneapolis: 9.31%
Baltimore (state+local): 8.77%
Washington DC: 8.41%
Chicago (with proposed changes): 7.99%
Jersey City, NJ: 7.45%
Philadelphia (state+ local): 6.99%
Cleveland (state+local): 6.73%
Detroit (state+local): 6.63%
Atlanta: 5.94%
Boston: 5.08%
Chicago (current): 4.95%

So essentially even with the proposed upper incomes hike, the tax rate in Illinois still be a lower rate than all comparable urban centers (I.e. Walkable, public transit, etc) except Boston and Philadelphia (by 1%).

This also isn't even touching on the fact that in NYC at $10M, the tax rate would be 12.46% but in Illinois it would be capped at 7.99%. In California, it's 13.05% .. you'd pay over $500,000 more a year in California in state income tax at making $10M than you would in Illinois if the proposed changes happen. Yet, these areas have no issues attracting new millionaires and make existing ones stay.

What you think about the income taxes going up for most people is not based in reality. Maybe they will for you and my main point was that it's still not even as bad as the comparable urban centers of this country even after an upper end hike. Nobody is going to be fleeing Illinois for New York after this if income tax is everything...but they might. For other reasons. They'd be paying tens of thousands a year more on income tax if they did. But maybe they don't care, and there's other things you haven't considered for why these places have no issue getting high income earners to stay despite really high tax rates.

But you know, these places have no issues having millionaires. Interestingly, chicago has the lowest current rate for $1M+ outside of Texas, Washington, Florida, Nevada, Tennessee.. yet many other places are still keeping millionaires at a higher rate than Chicago. Perhaps the taxation thing for many is more of a straw man than most people realize and it's truly more complex as to why various people stay or move.

And I'm not saying that taxation is the cure, but this "woe is me" bullshit that so many have in Illinois is sometimes...bullshit. People think the income taxes in Illinois is high, and it's not. And even with the proposed changes, the income tax rate for most people in Illinois would actually slightly go down. Again, I'm not saying it's a cure...I'm just pointing out actual facts here. And my opinion apart from these facts is that many people in Illinois are ignorant as hell to these realities.

[the urban politician]

Originally Posted by marothisu

TUP, I don't think your "income taxes is about to go up" is actually based on any factual evidence. Luckily, The Chicago Tribune had a calculator on how the new tax law would affect you. Keep in mind that the current rate is 4.95%.

You are right. The current tax plan, what I refer to as the "get our foot in the door to get public support for a Constitutional amendment" tax plan isn't that bad.

Now lets remember that we have a whopping $133 billion pension backlog that is guaranteed by the Constitution, and zero political will to amend that. What are your predictions regarding what will happen to those those tax rates you posted? Lets have a bet where these numbers will be in 5 or 10 years, shall we?

This also isn't even touching on the fact that in NYC at $10M, the tax rate would be 12.46% but in Illinois it would be capped at 7.99%. In California, it's 13.05% .. you'd pay over $500,000 more a year in California in state income tax at making $10M than you would in Illinois if the proposed changes happen. Yet, these areas have no issues attracting new millionaires and make existing ones stay.

What you think about the income taxes going up for most people is not based in reality. Maybe they will for you and my main point was that it's still not even as bad as the comparable urban centers of this country even after an upper end hike. Nobody is going to be fleeing Illinois for New York after this if income tax is everything...but they might. For other reasons. They'd be paying tens of thousands a year more on income tax if they did. But maybe they don't care, and there's other things you haven't considered for why these places have no issue getting high income earners to stay despite really high tax rates.

But you know, these places have no issues having millionaires. Interestingly, chicago has the lowest current rate for $1M+ outside of Texas, Washington, Florida, Nevada, Tennessee.. yet many other places are still keeping millionaires at a higher rate than Chicago. Perhaps the taxation thing for many is more of a straw man than most people realize and it's truly more complex as to why various people stay or move.

First of all, continuing to hike taxes may not necessarily raise revenue. If it accelerates a population exodus, it may eventually become a net zero endeavor.

Also, lets not confuse causation with correlation. Having high taxes do not cause States to have millionaires. I know you know that, but I just want to make that clear.

So why do California and NY keep millionaires despite their high taxes? Well, for one thing you could argue that they both pay a lower property tax rate than we do in Illinois.

But another reason is obvious--for many people, they would'n't think of living anywhere else. California for many is heaven. It has the weather, the top tech industry jobs, the top entertainment jobs. We can't compete with California--we lost that war 40 years ago. And NY? Same thing. NYC is the capital of the universe. For some people it's just too worth it to live there.

We. Don't. Have. That.

And until California and Manhattan are under the sea, that will never change.

And I'm not saying that taxation is the cure, but this "woe is me" bullshit that so many have in Illinois is sometimes...bullshit. People think the income taxes in Illinois is high, and it's not. And even with the proposed changes, the income tax rate for most people in Illinois would actually slightly go down. Again, I'm not saying it's a cure...I'm just pointing out actual facts here. And my opinion apart from these facts is that many people in Illinois are ignorant as hell to these realities.

I think you aren't giving the whiny Illinoisans enough credit. A lot of people whine--everywhere. I agree. But this time I actually think the whiners are right. It's not just one or two taxes--it's the combined tax burden that's having a toll.

We got away with our high property taxes (which are going up fast) precisely because our State income tax was low for countless years. That advantage is now evaporating. Couple that with very high sales taxes and the fact that we are located in "flyover country" in a colder part of America--at some point it's reasonable to ask oneself, "why the hell am I still here?"

And that's not me whining. I'm just trying to lay out what I feel is the legitimate state of mind of many who are complaining and thinking about leaving.

[marothisu]

All of the people I talked to were talking about the existing plan, not the proposed plan. This goes back to most of my friends all in Chicago too before and after I moved. This goes to taxation and even not knowing how bad COL is in comparable cities. Plain and simple - ignorant. I see it all the time - people just think whatever it is, they have it the worst, and are ignorant to how various things are elsewhere.

Also, I never stated once my opinion about whether raising taxes is good or bad here. This has absolutely zero to do with my point. My point is that grass is always greener on the other side and that too many people in Chicago are are just flat out ignorant about how their income tax rates compare to other walkable urban centers of the country.

I'm not here to discuss whatever straw man you constructed for only my post because my post literally had nothing to do with whether the new proposed hike is good or bad.

[the urban politician]

^ I think it's fundamentally unfair to blow off people's concerns about a real financial nightmare as mere "whining" and "grass is greener" attitudes.

What do you think a $133 billion pension exactly is? A joke? It's by far the largest hole in the country right now.

How would you underwrite Illinois' present situation? Using an analogy, if you were renting an apartment to somebody with historically good credit for $1000 per month, and he earned $3500 per month, that sounds good, right? What if he suddenly had court-enforced alimony payments that he skimped on for years, and now had to pay $2000 per month on those? Even if his income went up by $500 per month (tax increase analogy), he suddenly looks like a disaster. Add to that the fact that alimony payments go up every year. Does this guy look at all stable to you? If you reject his application, do you think it's because you're "whining" about him?

[LouisVanDerWright]

TUP, there's no point in even discussing it, there is no way to actually pay the pension obligation revenue or not. The problem keeps getting bigger and bigger and nothing can or will be done about it.

Let's be real people: the State of Illinois is having difficulty servicing these costs during the lowest interest rates in the history of human civilization and what is likely to be the longest economic expansion in US history.

What exactly does anyone expect will happen next time rates spike and a recession occurs? How will this debt be serviced if Illinois needs to start paying 5, 6, 7, 8%+ on it? How will that work if those rates couple with falling revenue due to economic downturn? The fact is no amount of new revenue is going to make the numbers work. The State, and to a lesser extent Chicago itself, has a date with destiny. There will be a default and bankruptcy of some kind that wipes all of this nonsense out. I just don't see any path to cut obligations it's pretty much mathematically impossible to extract enough revenue to catch up with taxation. So the only endgame is a Federal bankruptcy court of some kind quashing the pension amendment and writing off some of the obligations.

[maru2501]

^ agree. Default and court outcome. pensioners ultimately receive less

[bnk]

https://www.chicagobusiness.com/comm...ng-bill-passes

May 08, 2019 10:36 AM updated an hour ago

FanDuel eyes Chicago office if sports betting bill passes
The company is dangling the prospect of as many as 300 jobs in Chicago to help encourage lawmakers to legalize sports gambling.
Danny Ecker


Bloomberg
A FanDuel office in Edinburgh. The company has about 800 employees across several offices on the East and West coasts and in Scotland.
Daily fantasy sports giant FanDuel wants Illinois lawmakers to legalize sports betting, and it's offering to bring hundreds of jobs to Chicago if it does.
As legislators in Springfield meet today to discuss the prospect of allowing sports wagering statewide, the company's CEO says he'd like to establish FanDuel's first Midwest outpost in Chicago–complete with as many as 300 new jobs–if a bill comes to pass.

Pritzker's sports-betting plan sparks industry war over who wins
It's an extra carrot to entice elected officials to bring Illinois aboard the sports gambling bandwagon. Eight states now offer full-scale legal sports betting after a U.S. Supreme Court ruling last year struck down a federal law blocking states from allowing regulated gambling on sports.
Chicago "is definitely a growing and really cool tech environment to be a part of," said FanDuel CEO Matt King, who lives in Chicago but runs the New York-based company. "So as we thought about where we could scale, we thought Chicago made a ton of sense. It gives us a Midwest headquarters to service surrounding states."

[marothisu]

I don't know what part of "my point had nothing to do with whether increasing taxes can fix anything" you don't understand. When someone starts complaining to me about income taxes in Chicago and then tells me I must have it better in New York, this has nothing to do with whatever the hell you're talking about. Sure, have that conversation with someone else, but not me. You still can't grasp my point that my statement literally has nothing to do with whether x and y will work. It has to do with people being ignorant and assuming their situation is the worst without have the slightest clue. My statement has nothing to do with state finances. And this is not just finances. It goes into many other topics too, but since this is economics thread...


And also, I tend to agree with some of what LVDW says on this. The number is really high for debt - and while raising taxes for the more well off at a higher rate may help alleviate a tiny bit, but it won't even come close. IMO there needs to be a lot that happens economically and this is probably why Pritzker is kind of big on the marijuana legalization. He probably realizes that no one thing can solve this big financial issue. Not that it will come even close, but again little by little. There's so much that needs to happen if they don't want to declare bankruptcy, basically. Who knows if it's even feasible without that.

But again, my statement literally has nothing to do with this. No matter whether they implement the tax plan (which would slightly lower income taxes for the vast, vast majority of residents), it has nothing to do with people thinking their 4.95% income tax rate is terrible and worse than everywhere else in the country. Ignorance. These things (being ignorant versus what the state should do with taxation/if it's the right thing to do/etc) are entirely unrelated. And it's not just about finances really - pretty much everything. I think the negative media is honestly taking a toll on people and indirectly getting people to think everything in Chicago is worse. It reminds me of the time someone I know was complaining about a few train lines in Chicago not running 24/7 (I agree, it would be cool to have a few more run 24/7 instead of the 21/7 or whatever) - but then they tried to talk about how it should be like Europe with hours. Except for most transit systems in Europe stop running around midnight - even Paris, London, Moscow, Istanbul, Rome, Amsterdam, etc end in the midnight or 1am-ish range. Yet there they and everyone else was bashing this using an example of how things should be that's literally not even true - completely ignorant and just assuming things. Too many people like this. They just automatically assume everywhere outside of Chicago does whatever Chicago does better. And I'm not saying Chicago does things the best at these things, but the idea that Chicago is the worst at literally anything to people in Chicago is just incredibly unfortunate, and I've noticed it even more since moving away. There's a difference between knowing something is bad and wanting it to be better and thinking something is bad when it's not and complaining about it.

[Bonsai Tree]

Originally Posted by LouisVanDerWright

TUP, there's no point in even discussing it, there is no way to actually pay the pension obligation revenue or not. The problem keeps getting bigger and bigger and nothing can or will be done about it.

Let's be real people: the State of Illinois is having difficulty servicing these costs during the lowest interest rates in the history of human civilization and what is likely to be the longest economic expansion in US history.

What exactly does anyone expect will happen next time rates spike and a recession occurs? How will this debt be serviced if Illinois needs to start paying 5, 6, 7, 8%+ on it? How will that work if those rates couple with falling revenue due to economic downturn? The fact is no amount of new revenue is going to make the numbers work. The State, and to a lesser extent Chicago itself, has a date with destiny. There will be a default and bankruptcy of some kind that wipes all of this nonsense out. I just don't see any path to cut obligations it's pretty much mathematically impossible to extract enough revenue to catch up with taxation. So the only endgame is a Federal bankruptcy court of some kind quashing the pension amendment and writing off some of the obligations.

^^I agree. In the end we all know the outcome here, the pensions are going to have to evaporate somehow. Honestly, I don't see any way that a massive tax hike gets approved statewide (and even in Chicago). Eventually voters will realize that the democrats "taxes on the rich" have become across the board tax hikes and they will be voted out. It won't be a "my taxes will go up 10%" scenario. When that happens, the state will eventually default on its payments, or the constitution will be rewritten.

Also responding to all the "California is heaven" and "New York is the Capital of the World". People are leaving both California and New York because of their high taxes and shit governments, sure not at the same rate as us but nevertheless they are leaving. New York and California are becoming the permanent "lands of the snotty rich" so I don't see any reason for us to strive to become them. We have our own unique place in the US, a place that we've just failed to fully take advantage of so far.

[the urban politician]

^ I agree.

One thing we can all agree on--Illinois simply cannot tax its way out of this mess.

[marothisu]

Originally Posted by Bonsai Tree

Also responding to all the "California is heaven" and "New York is the Capital of the World". People are leaving both California and New York because of their high taxes and shit governments, sure not at the same rate as us but nevertheless they are leaving. New York and California are becoming the permanent "lands of the snotty rich" so I don't see any reason for us to strive to become them. We have our own unique place in the US, a place that we've just failed to fully take advantage of so far.

The people leaving here (NYC) as well as CA are not the millionaires nor people making 6+ figures. Just like Chicago, places like SF and NYC are losing households making under $125K/year but gaining households making $125K+ per year. There's only about 12 or 13 cities where this is true in the entire country - NYC, Chicago, San Francisco, DC, Boston, and San Jose to name a few. Los Angeles is actually not one of them, surprisingly (but could be on that list soon..). Saying that millionaires are leaving LA, NYC, SF, etc is just false - the people leaving these places (including Chicago) are lower class and lower/solidly middle class. Upper middle and upper class are expanding in all of these places.

Taxes in CA and NYC are already high, so couple that with a high COL and it makes sense why they would move. I've had many co-workers move from NYC to Dallas for the reason of COL + taxes, but almost all of them have young children and are finding it harder and harder to have a comfortable life, even in the suburbs of New Jersey. So they move to Texas where the housing prices are much cheaper because my division has open opportunities there. The reason why people making under $100K are being priced out is directly due to the big increases of 6+ figure households in the same areas and landlords increasing prices as a result. And the high taxation doesn't help, so they leave. Unfortunately, there are many people who don't realize that Chicago is actually a very good option for them to move to with a much lower COL and lower income taxes. Maybe property tax washes this and evens it up, but the housing prices certain drive it over in favor of Chicago. My friend bought a house in the very north end of of the Bronx for around $700K - nearly out of the city and not in Riverdale (upper middle/upper class area of the Bronx). A lot of the loss of the city of Chicago are in African American neighborhoods and are due to other factors such as less opportunities, crime, etc. Completely different than NYC, SF, etc on why they're moving even though the numbers show the same high level trend. Not talking about the white non-hispanic population declining in the suburbs - only the city.

Just for the sake of having these numbers, here is the change in households in a few cities from 2013 to 2017 of households making $200K+ - sorted by % change. Numbers are from the 5 year ACS table B19001:

Seattle: +17,472 households (+67.9%)
Portland: +7381 households (+59.67%)
Austin: +11,743 households (+59.53%)
San Francisco: +27,508 households (+56.64%)
San Jose: +19,928 households (+53.9%)
Denver: +8018 households (+51.85%)
Phoenix: +8682 households (+46.29%)
Philadelphia: +6304 households (+44.35%)
San Diego: +15,025 households (+43.02%)
Charlotte: +6842 households (+38.46%)
Houston: +16,972 households (37.41%)
DC: +11,418 households (+36.52%)
Chicago: +19,485 households (+35.76%)
Dallas: +8887 households (+33.79%)
Los Angeles: +28,313 households (+33.4%)
San Antonio: +4476 households (+32.37%)
NYC: +70,305 households (+32%)
Atlanta: +4156 households (+27.1%)

Interestingly, Chicago still outpaced Dallas by nearly 2 percentage points and was behind Houston by a little under 2 percentage points. Atlanta the lowest of here.

Not saying it's a good thing - it's not good actually all in all, but people who are comfortable or people with money are not getting driven away from any of these places right now. And yes, I don't think that taxing the "rich" is going to even come close to solving Illinois' problem. It might help you get some extra money but it's not going to even come remotely close. There has to be like 50 different things that happen to fix this whole thing if they're trying to steer clear of bankruptcy. Tax increases, at least on residents or ones that affect residents, probably will not come close to fixing it so I agree that it's not a solution at all.

[ChiMIchael]

Has anyone ever considered Chicago (and Illinois) finding ways to expand its economy significantly? Part of the problem is there hasn't been a major economic expansion in the long time.

[marothisu]

Originally Posted by ChiMIchael

Has anyone ever considered Chicago (and Illinois) finding ways to expand its economy significantly? Part of the problem is there hasn't been a major economic expansion in the long time.

Isn't that part of the whole point in trying to do things like legalize (partially) recreational marijuana, legalize sports betting, etc? Not saying they're going to fix it, but they could definitely help if done correctly.

[ChiMIchael]

Originally Posted by marothisu

Isn't that part of the whole point in trying to do things like legalize (partially) recreational marijuana, legalize sports betting, etc? Not saying they're going to fix it, but they could definitely help if done correctly.

My point is more ambitious. It would be nice to see Chicago the epicenter of a booming new industry instead of merely just finding footing. Even heavily consolidating a legacy industry would be nice.

[marothisu]

Originally Posted by ChiMIchael

My point is more ambitious. It would be nice to see Chicago the epicenter of a booming new industry instead of merely just finding footing. Even heavily consolidating a legacy industry would be nice.

Agree, but that's just not easy to do of any area in the country. Unless your country leans more on socialism and basically forces that - it's not going to just happen easily.

[VivaLFuego]

There have to be reasonable limits on the dream of "growing our way out of it." Chicago is the capital of the Midwest, which is a relatively very stagnant region and has been for some time - there was a hard inflection point in the 1970s with the shift to fiat (fake) money and the growth of global trade in a low-tariff system, with a minor blip in the 1990s where at least much of the Midwest performed close to the national average. Otherwise, almost the entire region has seen growth (or decline) well below the national average, for the better part of 40+ years now.

The pension fiasco is largely an Illinois-specific problem - some other states have major messes as well albeit with differing important details and history - but the economic growth challenge one is super-regional.

A bipartisan Great Lakes caucus in Congress that was unified in advocating for things like (off the top of my head):

- Winding back imbalanced free trade. Trade with peers Canada, Germany, Japan etc. is good for the Midwest in high-value-add products and services. Trade with Mexico, China, SE Asia has largely decimated the value of much of the existing manufacturing base and its supporting infrastructure.
- Ending ongoing subsidization of the sunbelt, or at least make the subsidies equal. Why don't we get FEMA money after major snow storms and severe cold spells, which cause major damage to infrastructure and buildings and for which we need to eat the full cost? Sure it's a totally predictable weather event, but so are F'ing hurricanes and wildfires and coastal flooding that we're all supposedly obligated to chip in and pay for. Why do freeloaders in Galveston get a new roof every few years but we don't get new tuckpointing and bridge repairs paid for by daddy Fed and its infinite fake money? Cut the midwest in on that party, or cut them out from support for statistically inevitable and predictable events that should be addressed by the private insurance market.
- Re-orient federal infrastructure spending to be overwhelmingly about funding maintenance and renewal.
- A major federal safety and environmental housing retrofit program - to really tackle the legacy costs of old structures like lead paint, lead pipes, poor insulation and fire safety, etc - could be bipartisan, have national benefit, and would disproportionately concentrate on the Great Lakes and Northeast.

[moorhosj]

Originally Posted by ChiMIchael

My point is more ambitious. It would be nice to see Chicago the epicenter of a booming new industry instead of merely just finding footing. Even heavily consolidating a legacy industry would be nice.

I want to clarify what you mean here by way of examples. Are you referring to things like Seattle's dominance in cloud software (Microsoft/Amazon/Tableau/Concur/etc.) and San Fran's ownership of the app-based economy (Facebook/Twitter/Snapchat/Netflix/etc.)?

It's an interesting concept, I think you could make an argument that logistics and food/agricuture-tech are two areas that Chicago is a clear leader. Logistics is kind of booming, but by it's nature doesn't necessarily centralize a bunch of jobs in one location. The food and agriculture scene is pretty hot right now (ADM, Con Agra and McDonald's moving to the city, Home Chef selling to Kroger, GrubHub is both food and logistics, RXBar selling)

Advanced manufacturing (DMDII) and healthcare/biotech are probably the next closest. I know lots of people in the local tech industry want Chicago to be the center of the B2B software world. Which makes sense due to the concentration of Fortune 500 companies in the area that a startup could sell software to.

[SIGSEGV]

I wonder if we could lure AbbVie etc into the IMD to form an urban biotech campus competing with Cambridge.

[sixo1]

Originally Posted by SIGSEGV

I wonder if we could lure AbbVie etc into the IMD to form an urban biotech campus competing with Cambridge.

That would be awesome!