Regional Economy: Tax Policy

Modernizing revenues and encouraging sustainable economic growth

Tax policy shapes the types of development that communities pursue and whether they have the revenue needed to fund public services. Under Illinois’ current tax structure (which relies heavily on property tax and retail sales), communities that lack sales tax-generating businesses or dense commercial development often have few options to cover the cost of services and infrastructure. This reliance can lead to a lack of resources in communities that want other types of development and a cycle of disinvestment for places with weaker markets. 

ON TO 2050, the region’s long-range plan, recommends reforms that modernize tax policy, offer communities more revenue options, and encourage sustainable economic activity. Reforms could also provide better support for infrastructure investment and promote long-term fiscal sustainability in local governments’ transportation and land use decisions. 

Informed local reform efforts

Cook County’s elected leaders are taking an in-depth look at how the property tax system affects taxpayers and communities that need services to thrive. From 2023-2025, the Chicago Metropolitan Agency for Planning (CMAP) and the University of Illinois Chicago (UIC) Government Finance Research Center partnered with the Cook County Office of the President to inform discussions about the future of property tax relief programs like homestead exemptions and business incentives. These are important tools for lowering tax bills and encouraging development, but they can have drawbacks. 

In December 2025, the Cook County Office of the President released CMAP and UIC’s independent study, Opportunities to revamp Cook County’s incentive classifications, outlining ways to modernize incentives for commercial and industrial properties. More than 90 Cook County municipalities use these incentives to lower businesses’ tax assessment levels, attract investment, and reactivate vacant properties. The study found that while incentives remain critical development tools, the process that the county uses to administers them has become difficult to navigate, opaque to outsiders, and fractured across different public offices. View five key opportunities to revamp the incentives.

CMAP and UIC also analyzed how exemptions (which reduce a home’s taxable value) can affect taxpayers and taxing districts differently, as well as Cook County’s options to mitigate some unwanted effects and enhance homeowners’ savings. Current and future use of homestead exemptions in Cook County shows that taxpayers in some areas — particularly in the south suburbs — save much less from exemptions than what proponents anticipate and what is currently reported on their tax bills. View a summary of the findings. 

Improved local development incentives

Local governments use many types of incentives to encourage development, but there can be drawbacks like high costs, diminishing returns, heightened competition, and unequal outcomes. To enhance northeastern Illinois’ economic and fiscal position, ON TO 2050 calls for governments to reform local development incentives within a larger program of smart, regional economic development. 

Cook County property tax classification

In Cook County, property tax classification can drive up commercial and industrial property tax rates, hurting disinvested communities. This policy does not exist in the collar counties. Using a higher assessment ratio for businesses than residences, this system shifts a higher share of the property tax burden to businesses. By reforming its classification system, Cook County could grow the tax base over time and eventually reduce the tax burden on residents. This would reduce the need for potential increases in residential rates.