How many times have we gathered around the water cooler or sat at the bar or opened book club with a rant about taxes? Those rants may not change much — taxes are too high and there are too many — but the geographic dimension just shifted.
A study by John Foster, an assistant professor at Southern Illinois University Edwardsville, shows that Illinois and Missouri homeowners have roughly the same tax burden. The difference is less than a percentage point across most income levels at the current Illinois income tax rate of 3.75 percent, and was a shade over 1 percent greater here when the Illinois income tax rate was temporarily jacked up to 5 percent.
Here’s your cold comfort: If Illinois lawmakers do try to hit us again with a higher income tax, our area housing market should still be competitive with the Missouri side of the Mississippi River.
This study was paid for by the Illinois Realtors, the Greater Gateway Association of Realtors and the Realtor Association of Southwestern Illinois. That might raise your eyebrows about the study’s integrity, but Foster walked us through his work and it appears thorough and solid, with reasonable assumptions.
What the study doesn’t look at is the relative value of homes on one side of the river versus the other. The perception has long been that you get more home for the same dollars in Illinois. If I need a three-bedroom brick ranch, then getting that house for less in Illinois means I have more disposable income for other items.
Someone who invests in a new or existing home will spend more than $11,000 in the first year and more than $7,000 per year thereafter on appliances, furnishings and repairs. That makes homeownership good for local economies, so maybe local communities should again look at incentivizing home ownership as has sporadically been done in the past.
We’ve got several decades of experience with giving incentives funded by property taxes to draw new business. Maybe encouraging home purchases will create the business opportunities that draw business just because there are willing customers.