Why People Are Leaving Illinois

Why are people leaving McHenry County?

The answer is obvious: the governments are paying us to move.

The combination of property taxes, sales taxes and income taxes is simply much lower right across the border to the north.

The median home value in Crystal Lake, according to the most recent bond prospectus, is about $229,000. The median family income is $89,000.

The property tax rate in Crystal Lake is about 4.2% of market value, or $9,600.

If the family buys an identical house in Brookfield, Wisconsin, the property tax rate will be closer to 1.9%, or about $4,300.

That same family faces a sales tax rate of 7.75% in Crystal Lake but only 5.60% in Brookfield.

That means about $2,100 in Crystal Lake but only $1,500 if they move to Brookfield.

They will pay higher income taxes in Wisconsin.

Here in Illinois, at the current rate, they will pay about $4,400.

In Wisconsin, which has an income tax rate of 6.27% for people in the median tax bracket, the income tax will total about $5,500.

Comparing tax burdens between Crystal Lake, Illinois, and Brookfield, Wisconsin.

Comparing tax burdens between Crystal Lake, Illinois, and Brookfield, Wisconsin.

In short, the Crystal Lake family pays almost $5,000 more than if they moved to Brookfield, Wisconsin; a total tax burden 43% higher than in Brookfield, Wisconsin.


Why People Are Leaving Illinois — 19 Comments

  1. Nailed it.

    Seen my property taxes steadily increase while values drop or are stagnate.

    The sales tax is insane.

    We’ve created a new social class – government employees (the new 1%ers).

    My move out time frame is summer of 2017.

    It’s a shame I really like the people here, but it makes no sense to be punished financially to live here.

    Looking at Tennessee – warmer, no state income tax, LOW real estate tax.

    They’re sales tax is high – over 9% in most areas, but that’s not much more than the 7.75% in CL and is easily offset by the other savings.

    Now you can say the government provides so much more and the infrastructure, services, etc. are better in CL.

    This may be true in some areas.
    However, in CL/IL I’m forced to pay for government services I don’t want, need or use.

  2. What a good format for quantifying the severity of the property tax crisis in this county.

    I hope that before upcoming elections, every candidate will answer this question:

    “At what property tax RATE will you actively work to cut levy?”

    or put another way:

    “What is the maximum property tax RATE that you believe is sustainable before destruction of the community is assured?”

  3. Wow.

    It would be great to see the comparisons for local towns.

  4. Any particular reason you failed to share Brookfield’s median home value or family income?

    Without that information, your posts qualifies as an incomplete analysis.

    Why not post property taxes for rural Arkansas or Mississippi communities?

    Even less that Wisconsin!

  5. Having lived and moved from Brookfield to McHenry County – income is in the same ball park.

    I did have a better built solid lanan stone custom home there and had to buy a home that was not as nice because they were more expensive here.

  6. Also, please note that the bill for all the unfunded but constitutionally mandated public pension and governmental liabilities is coming due and will have to be paid by Illinois taxpayers who cannot pick up and leave.

  7. Consider the impact our high property tax rates have on the pool of potential buyers for our real estate.

    In order to qualify for the same conforming mortgage loan (of $200,000 at 4.1%), a buyer needs 36% higher income to qualify for a mortgage here than in almost all of America:


    $200,000 loan at 4.1% for 30 years

    Monthly Payment Amount: Principal&Interest MonthlyPayment:Property Taxes MonthlyPayment:Total

    In America (1.4% average property tax rate) $966 $233 $1199
    In westernMcHenry County(4% property tax rate) $966 $666 $1632

    Conforming loan calculation (max 28% of income to pay interest, principal, and property taxes)

    Formula: Monthly payment x 12 months (1/.28)= annual income needed to qualify for loan

    Income required to qualify for conforming mortgage loan of $200,000 at 4.1% for 30 years:

    In America (1.4% property tax rate) $1199×12(1/.28) =$51385
    In western McHenry County IL (4% property tax rate) $1632×12(1/.28) = $69942

  8. McHenry County Board get busy!

    Reduce our taxes, save tax dollars like Sheriff Bill Prim is doing.

  9. Back at you said “Having lived and moved from Brookfield to McHenry County – income is in the same ball park.”

    Only true if you compare county to county, Waukesha County to McHenry County.

    The City of Brookfield would have a median income well higher than McHenry County as a whole.

    For those unfamiliar with Brookfield, it is the Milwaukee area’s equivalent of South Barrington.

  10. A yearly $5 K Kleptocracy Tax.

    Cal’s figure looks about right to me.

  11. You’re halfway there.

    What you’re trying to describe is Tiebout Sorting (http://en.wikipedia.org/wiki/Tiebout_model), where taxpayers vote with their feet.

    That is to say that people who prefer lots of government services move to high tax areas, people who prefer low levels of government services move to low tax areas, and that if two locations provide a comparable bundle of government services people will move to the lower tax area of the two.

    You need to compare both the level of government services and the tax burden imposed to provide those services.

    Comparing only the tax burden of two locations is just as meaningless as comparing the sticker price of a Chevrolet and a BMW.

    You can’t conclude that the Chevy is a better car merely because it’s cheaper.

  12. To get a better picture of future tax hikes look at bond debt & unfunded pension & retiree healthcare liabilities of those taxing districts plus any other taxing districts on the property tax bill.

    That would be largely hidden future taxes.

    Factoring that into the above analysis, Brookfield would likely look like an even better deal.

    Here is a Forbes article about a retired school teacher moving to Tennessee.


    Fleeing Illinois For Tennessee In Retirement

    By Ashlea Ebeling
    June 30, 2014 (6/30/2014)

    The teacher and her spouse called a financial adviser at Vanguard.

    Vanguard ran the numbers and determined that at their desired lifestyle, there was a 60% chance their retirement income would carry them through a comfortable retirement in Illinois, vs an 80% chance in Tennessee.

    So they moved to Tennessee.

    But what was the retirement teacher pension, not even factoring in any other savings the couple may have?

    Here is the teacher’s pension and pensionable income from 1999 – 2014.

    Naperville CUSD 203

    Year – Pension — Years of Service
    2014 – $051,168 – 21.65
    2013 – $049,678 – 21.65
    2012 – $048,231 – 21.65
    2011 – $046,826 – 21.65 (estimated pension dollar amount)
    2010 – $045,462 – 21.65 (estimated pension dollar amount)
    2009 – $044,138 – 21.65 (estimated pension dollar amount)
    2008 – $042,852 – 21.65 (estimated pension dollar amount)

    Retired 2007. Benefit Start Date June 2, 2007.

    Year – Pay ——- Years Worked
    2007 – $101,763 – 15
    2006 – $097,875 – 14
    2005 – $081,651 – 13
    2004 – $075,285 – 12
    2003 – $068,435 – 11
    2002 – $061,092 – 10
    2001 – $056,239 – 09
    2000 – $054,930 – 08
    1999 – $052,216 – 07

    She retired with 15 years worked.

    But her years of service for pension purposes is 21.65 years.

    How did she get from 15 years to 21.65 years?

    There are a variety of ways, but the most likely are exchanging unused sick days for years of service credit, and retiring under the Early Retirement Option (ERO).

    In ERO, the school district contributes twice the amount as the employee to the Teachers Retirement System (TRS) pension Fund.

    ERO is more technically known as early retirement without a discount.

    ERO was extended by the state legislature through June 30, 2016.

    If it’s not extended again, it will end June 30, 2016.

    ERO extension was Public Act 98-0042 (PA 98-0042), Senate Bill 1366 (SB 1366).

    ERO extension was signed by Governor Pat Quinn on June 28, 2013.

    Senate Sponsors: Senators Daniel Biss & Pam Althoff

    House Sponsors: Elaine Nekritz, Rita Mayfield, Elgie Sims, Jr., & Camille Y. Lilly.

    McHenry County Votes:

    Senate Concurring Vote May 31, 2013: All McHenry County Legislators Voted Yes – Pam Althoff, Dan Duffy, Karen McConnaughay.

    Senate Roll Call for the Third Reading on March 13, 2013: Althoff & McConnaughay voted Yes, Dan Duffy had No Vote (NV) meaning he did not vote.

    House Roll Call May 30, 2013: Everyone in the entire House voted yes except Jack Franks had a No Vote (NV) meaning he did not vote, and Scherer had an Excused Absence. Thus, Dave McSweeney, Mike Tryon, & Barb Wheeler voted Yes.

    Teachers and Administrators can already retire with 75% of the average of their last 4 years pay.

    Thus, add up the last 4 years pay and divide by 4, then multiply by .75.

    To get that 75% they must have 35 years of service.

    75% is the maximum.

    Using the accrual rate .022, 35 x .022 = .77.

    But you cannot get .77, the maximum is .75.

    34.1 x .022 = .75.

    So, teaches need at least 34.1 years of service to obtain the maximum 75%, but there are reasons why teachers may want more than 34.1 years of service.

    One reason is the minimum requirement to retire at age 55 is 35 years of service.

    Years of service is different than years worked.

    For example 340 sick days (2 years worth) can exchanged for 2 years of service credit.

    And there are plenty of other loopholes.

    Once again the TRS accrual rate is 2.2% (.022).

    That’s how much pension is accrued for each year worked.

    The teacher in the Forbes story worked 15 years, but has 21.65 years of service.

    15 x .022 = .33.

    21.65 x .022 = .4763

    Without ERO, the pension would have to be discounted (reduced) 6% per year from the normal accrual formula.

    With no discount (reduction).

    $101,763 + $097,875 + $081,651 + $075,285 = $356,574.

    $356,574 / 4 = $89,143.

    $89,143 x .33 = $29,417.

    $89,143 x .4763 = $42,458 (pretty close to our estimated starting pension of $42,852).

    So starting pension was not $29,417, rather it was about $42,852.

    Her starting pension was about $42,852, thanks for whatever incentives and perks and loopholes she took advantage of, likely exchanging unused sick days and ERO, to boost years of service credit.

    ERO allows the employee to purchase years of service credits via a contribution by the employee and school district.

    Once again the employer (school district) contribution is 2x the employee contribution.

    The contributions go to the TRS pension fund.

    Here is the general TRS retirement requirements.

    To retire in TRS the member needs a combination of a minimum age and minimum years of service.

    Years of Service – Age
    05 ——————– 62
    10 ——————– 60
    20 ——————– 55 (discounted annuity or ERO)
    35 ——————– 55*

    * means there are loopholes.

    * If you are eligible to receive a retirement annuity of at least 74.6 percent of the final average salary and will reach age 55 between July 1 and Dec. 31, we consider you to have attained age
    55 on the preceding June 1.

    * If you are a TRS member currently employed by a state of Illinois agency, you may retire under the Rule of 85.

    The teacher in the Forbes story was age 67 in year 2014.

    67 – 7 (2008 – 2014) = 60.

    So the retired teacher in the Forbes story retired at about age 60 after 15 years worked.

    So the teacher met the minimum requirements to retire, which was 10 years of service at age 60.

    But, the teacher wanted a larger pension, so they were able to add years of service from 15 to 21.65.

    21.65 – 15 = 6.65.

    6.65 / 15 = 44%.

    The teacher was able to increase their years of service by 44% by purchasing years of service credit through ERO.

    ERO is largely a program to buy years of service credit to boost the starting pension.

    Here’s where we learn more about ERO.

    Discounted retirement annuity
    If you retire between the ages of 55 and 60 with at least 20 but fewer than 35 years of service, your retirement annuity is reduced by 6 percent for each year (half percent per month) that you are under age 60.

    You can avoid this reduction if both you and your employer make a one-time contribution to TRS.

    (See “Early Retirement Option,” page 15.)

    A discounted annuity is based on your average salary, years of service, and age.

    – page 14 (page 16 of pdf), TRS Tier 1 Member Guide 2015.

    Remember this teacher retired with 15 years worked at age 60 (estimated).

    Taxpayer dollars through the school district contribution to TRS pension fund via the ERO program allowed her to do that.

    Any shortfall that results from that program just gets added to the unfunded pension liability which the State of Illinois contributes to via the annual State of Illinois Contribution to the TRS pension fund.

    The TRS unfunded liability has been increasing for over a decade, so the State is not paying down the unfunded liability, just making a payment to the unfunded liability which keeps increasing.

    The ERO program benefits have been hiked several times by state legislators.

    The ERO program has been extended several times by state legislators.

    If not extended, it would have expired.

    So there’s a little about why Illinois taxes are increasing.

  13. I get a kick out of some people who attempt to defend states with an increasing government presence associated with high taxes.

    Government always screws it up eventually.

    Government is a necessary evil that needs to be limited or tamed.

    But, there’s always the product of public education who suggests that government is really a force for good.

    Then why is EVERY state that is expanding government losing population?

    Virtually every state with small government is growing in population?

    Lessen to be learned from our County Board and our municipalities as well as our out of control state.

    Limit government = GOOD

    Expand government = BAD

    It’s really that simple

  14. My sense is that we do NOT have superior services here compared to Brookfield WI (or most other places).

    How can we quantify and measure?

    Schools’ relative quality: perhaps by comparing test scores?

    Ratio of police to residents?

    Homelessness or poverty rates? (Problem is low rates might be attributed to high government-provided services when voluntary-generosity is the cause. High rates could be indicative of low availability of government-provided social services, OR, a very HIGH availability of social services is attracting an aberrant high influx of needy population).

  15. Over the course of a 30 year mortgage, $4,800 ($15,900 – $11,100) is $144,000.

    That’s not factoring in investment returns or inflation.

    That’s an undergraduate college education for 1 child, especially if the child attends a community college their first 2 years.

    But the current situation is not the worst.

    The worst is the hidden bond debt and unfunded pension and retiree healthcare liabilities.

    The worst is yet to come.

  16. In response to John Lovas:

    In fact, Brookfield is modestly wealthier than Crystal Lake.

    So your statement about rural Arkansas is irrelevant.

    Further, the comparison between Crystal Lake and Brookfield has been normalized:

    It is for families making the same amount of money and buying a comparable house in both locations.

    Therefore the median income data and median household income data are also irrelevant.

    In response to Fedor:

    Your assertion is that service levels are different.

    I find this to be highly unlikely.

    Both cities are well-to-do suburbs.

    Both cities offer the usual array of municipal services: schools, police, fire protection, street maintenance, etc.

    Test scores in the schools are similar.

    Crime rates are similar.

    In short, there is no reason to believe there is any meaningful difference in the array of services provided or in service level.

    In short, it is hardly a comparison of a Chevy and a BMW. (Oh, and I’m hard pressed to think of a City that offers “BMW” services. Within my experience, they tend to offer Yugo services no matter what the tax level.)

  17. I’m a former Mchenry county resident that has moved to Wisconsin.

    My husband actually works in Brookfield.

    We call it the mini Schaumburg.

    There is something that is not being figured into this equation.

    There are numerous suburbs around Brookfield that have very affordable housing with low taxes.

    The traffic here is non-existent compared to Illinois.

    The schools are excellent, and very very safe.

    As a former Chicagoan I never thought I would live in Wisconsin, and now I can’t believe we stayed in Illinois so long.

    I think about lost retirement revenue.

    We paid 10K in property taxes, year after year.

    We actually had friends that said they were jealous of our low taxes (compared to Lake county).

    They are building a new Portillos here next year, so we feel right at home!

  18. Very expensive. Real Estate Taxes are sky high.

    Schools in McHenry Stink.

    Many have Bullying problems.

    Crime is high.

    Poor Government is to blame.

    Also the big lack of good paying jobs.

    Very strange that friends of ours who live in Deerfield area pay about the same percentage wise in taxes and have much better schools and much lower crime.

    But i agree Wisconsin is the place to be.

    Soon for us.

    I am sure many will be moving out of this state, warmer climates, lower taxes, etc.


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