June 18, 2026
Definition - Property Taxes
Property Taxes are taxes on residential and commercial property that are based on the property's assessed value. They are among the most significant sources of local government revenue in Illinois and are levied to fund public services such as education, public safety, infrastructure, parks, and other governmental functions. Because property taxes are generally stable and predictable, they provide an important foundation for local government budgets.
A comprehensive discussion of the Cook County, Illinois property tax process can be found here.
Why it Matters
Property taxes are a foundational source of funding for local governments, school districts, and special districts throughout Illinois. Unlike many other revenue sources, property taxes are generally stable across economic cycles, allowing governments to provide consistent public services and engage in long-term financial planning.
At the same time, property taxes are among the most visible taxes paid by residents and businesses and can create significant affordability challenges, particularly because tax liability is not directly tied to income. In Illinois, property owners often pay taxes to multiple overlapping governments, meaning decisions by individual taxing districts can compound the overall burden on taxpayers.
Sound property tax policies help governments balance the need for reliable revenue with the responsibility to manage taxpayer burden. When governments rely too heavily on property tax increases, automatically levy to the maximum amount permitted by law, or fail to consider the cumulative impact of overlapping taxing districts, public trust can erode and affordability concerns can increase. Conversely, thoughtful property tax policies can help governments maintain essential services, support long-term financial stability, and demonstrate accountability to taxpayers.
- Unrealistic or unsupported revenue projections undermine fiscal credibility and can result in mid-year budget gaps that require service cuts, reserve use, or emergency measures
- Lack of transparency in assumptions prevents stakeholders from evaluating whether a budget is reasonable and sustainable
- Overreliance on a narrow or volatile set of revenue sources increases exposure to economic downturns and reduces stability across the economic cycle
- Misuse of one-time revenues creates structural imbalances by deferring difficult fiscal decisions and increasing future budget pressure
- Poorly structured revenue decisions can weaken long-term financial planning and reduce public trust in government financial management
Strong revenue practices help governments:
- Maintain stability across economic cycles
- Improve transparency and public trust
- Align revenue decisions with long-term financial planning
- Avoid structural imbalances
What Good Looks Like (Criteria)
1. Use Restraint of Property Tax Levy Authority
(For tax-capped governments) Do not reflexively levy to the maximum allowed under the Property Tax Extension Limitation Law. The Property Tax Extension Limitation Law (PTELL) was passed in reaction to rapid growth in property taxes in the collar counties in the 1970s and 1980s. In the counties where the law applies, it generally limits the growth of a non-home rule taxing district’s levy to the lesser of 5% or the increase in inflation, with some exceptions such as for new property. The law’s intention was not to create a floor for property taxes whereby governments increase their tax levies every year. Instead, governments should exercise restraint and make a case for why a property tax increase is necessary and on what services such funds would be spent.
2. Consider the Total Property Tax Burden
Consider the composite impact of a property tax increase given what overlapping governments have implemented in their budgets. It is imperative for governments not to consider their budgets in a vacuum, but instead understand that their decisions, particularly with regard to property taxes, compound the burden on taxpayers.
3. Appropriate Use of New Property and Expiring TIF Increment
(For both tax-capped and home rule governments) It is generally acceptable to levy for expiring TIF increments and new property in order to generate additional property tax revenue. The Civic Federation has generally supported governments extending their property tax levies to include expiring TIF increment and new property as a way to increase much-needed revenue without over-burdening taxpayers. PTELL allows non-home rule units of government to apply their levies to expiring TIF increments and new property without that levy counting toward their PTELL limit, a practice known as levying “outside the cap.” For both tax-capped and home-rule units, levying for expiring TIF increment expands the amount of money the government is able to access through its aggregate extension without increasing the taxes paid by taxpayers because the taxpayer previously paid the revenue to the TIF District and now pays it to the overlapping government instead. For new property, the tax is limited in its impact to new and improved properties only.
4. Limit Reliance on TIF Surplus for Ongoing Operations
(For the City of Chicago and overlapping governments) Limit use of TIF surplus to balance the budget. Governments whose tax base overlaps the City of Chicago should not rely on annual TIF surplus distributions to balance their budgets. The Federation encourages the City to recognize that TIF districts should not be used to temporarily reduce the short-term financial pressures facing the City and its overlapping governments. TIF districts should be used as an economic development tool and do not have unlimited resources for purposes outside the district. The City should review each TIF district and close out or eliminate TIF districts that are no longer needed for development projects and shrink TIFs that are generating more revenue than is needed for their projects. TIF funds are better directed toward one-time expenditures or building reserves.
Common Pitfalls
These reflect recurring issues identified through Civic Federation analysis:
• Automatically levying to the maximum amount allowed under PTELL
• Treating PTELL levy authority as a floor rather than a limit
• Failing to justify property tax increases within the budget context
• Ignoring the cumulative impact of overlapping property tax levies
• Increasing property taxes without considering taxpayer affordability
• Failing to utilize revenue from new property and expiring TIF increment
• Relying on annual TIF surplus distributions to balance operating budgets
• Using TIF surplus to fund ongoing operations
• Maintaining TIF districts that are no longer needed for economic development
• Using TIF resources to postpone structural budget solutions
Examples and Applications
The following reports and analyses illustrate how these property tax principles have been applied, evaluated, or challenged in practice across Illinois governments.
Restraint of Property Tax Levy Authority
- Metropolitan Water Reclamation District of Greater Chicago FY2015 Budget Analysis, 2014
- Chicago Public Schools FY2023 Budget Analysis, 2022
Consideration of Total Property Tax Burden
Appropriate Use of New Property and Expiring TIF Increment
- Cook County FY2024 Budget Analysis, 2023
- “How are Local Governments Able to Access Extra Property Tax Revenue from Expiring TIF Districts?,” 2013
Limit Reliance on TIF Surplus for Ongoing Operations