CMAP analyzes the interaction of tax policy, land use and development, and the economy in order to facilitate a regional perspective on how the tax system affects the region and its communities. The region needs a tax system that provides ample opportunity for local governments to generate revenue that supports their plans, goals, and desired development patterns and their ability to adapt to changing local economic conditions.

Current tax policy can make communities highly dependent on the property tax or retail sales, leading to overdevelopment of retail, lack of resources for communities that want other types of development, and a cycle of disinvestment for some places.

ON TO 2050, the region’s new comprehensive plan, recommends that reforms both modernize tax policy and encourage sustainable economic activity. These recommendations have evolved since the plan’s predecessor, GO TO 2040, first recommended that the CMAP Board establish a task force to advise it on state and local tax policy matters.

Tax policies should be modernized to address systemic issues that affect communities’ ability to adapt to changing consumer preferences, technology, and mobility. A reformed state tax system that offers communities more revenue options could better support regional economic development as well as the goals of the region’s communities, even in the face of a changing retail landscape. It could also provide better support for infrastructure investment and promote long term fiscal sustainability in the transportation and land use decisions that local governments make.

A 2017 ON TO 2050 strategy paper on Tax Policies and Land Use Trends explored the extent that municipalities are able to support desired land uses with the disbursements of state revenue they receive from the State of Illinois. This paper built from a 2014 CMAP report, Fiscal and Economic Impact Analysis of Local Development Decisions, which highlighted the choice between economic and fiscal outcomes that a series of case study communities faced.

Along with other strategies, ON TO 2050 recommends that the State of Illinois modernize and expand its sales tax base to include additional services. Doing so would generate needed revenue for transit and help communities to create a more balanced land use mix. These reforms would also ensure that similar consumers are taxed in similar ways, minimize the influence of taxation on consumer purchases, and mitigate the cascading nature of sales taxes. To expand on this recommendation, CMAP published an issue brief addressing the benefits of adding more services to Illinois' sales tax base.

State tax policies can also create wide divergences in revenues among municipalities. As explored in the 2017 ON TO 2050 strategy paper on Municipal Capacity, municipalities with strong revenue levels may be better able to maintain their fiscal condition, which may lead to greater capacity to achieve local and regional goals.

Cook County’s elected leaders are taking an in-depth look at how the property tax system affects taxpayers and the communities that need services to thrive. To support this work, CMAP and the UIC Government Finance Research Center have partnered with the Office of the President to analyze the use of property tax relief tools in Cook County, including homestead exemptions, incentive classifications, and the foreclosure and sale of delinquent taxes. These are important tools for lowering tax bills and encouraging local development, but they can have drawbacks — especially in areas that already have greater need for private investment and jobs. Through this multi-year project, CMAP and UIC are applying their research expertise to inform discussions about the disparate and often-inequitable outcomes across the county.

In 2023, CMAP and UIC analyzed how exemptions (which reduce a home’s taxable value) can affect taxpayers and taxing districts differently as well as options to mitigate some unwanted effects and enhance homeowners' savings. The report, 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 may anticipate and what is currently reported on their tax bills. View a summary of the findings.

Additional work will be released as the team looks at process improvements in the use of incentives for commercial and industrial properties, as well as their economic and fiscal impacts.

State and local governments spend or forgo significant tax revenues to spur and support development. ON TO 2050 calls on the State of Illinois and local governments across metropolitan Chicago to pursue performance-based approaches that help make the best use of limited resources and use data and stakeholder feedback to improve decision-making. In support of this plan recommendation, CMAP conducts analysis on local development incentives. In 2020, CMAP released a technical guide for local governments on reforming incentive use.

Prior work on development incentives include policy updates on the recurring use of sales tax rebates and their effects across jurisdictional boundaries. CMAP also published a 2013 report analyzing how local governments use incentives to accomplish a variety of policy and planning objectives.

ON TO 2050 recommends communities incorporate market feasibility and assessments of long-term infrastructure costs in local planning efforts and development decisions. Underpinning plans with market and fiscal analyses is necessary to help communities develop in a manner that they can sustain over the long term.

Currently, many communities assess fees for short term infrastructure needs, like water main extensions or new stoplights and turn lanes. However, they often do not assess the mid and long term costs of maintaining new infrastructure or more heavily utilized existing facilities. This can lead to quickly increasing taxes to maintain or rebuild road, water, and other infrastructure. At other times, communities may extend infrastructure for prospective development that is not realized, leaving them few options to recoup costs.

Planning for current market conditions as well as major shifts in the context of local and regional goals can help local governments create implementable plans. In addition, planning must strongly incorporate assessment of both local fiscal impact as well as long term costs to supporting jurisdictions. This is a particularly important consideration for communities at the developing edge of the region, who must align expansion proposals with the immediate and long-term cost of the new infrastructure required to support that development. Fiscal and Economic Impact Analysis of Local Development Decisions also provided information on municipal fiscal impact analysis practices.

Basing plans primarily on potential near term fiscal outcomes without tying those outcomes to market realities can lead to overbuilding of some development types and construction of underutilized public infrastructure, leaving communities with the costs of supporting development without revenues to match. In particular, the state distribution of sales taxes to municipalities based on sales made within their jurisdictions may lead some municipalities to promote excessive retail construction, which results in high vacancy rates compared to other regions.

In Cook County, property tax classification is an additional factor that drives up commercial and industrial property tax rates, hurting disinvested communities in particular. This may discourage business investment in Cook County in favor of opportunities elsewhere. By using a higher assessment ratio for businesses than residences, this system allocates a higher share of the property tax burden to businesses. This policy does not exist in the collar counties and can deter reinvestment in affected communities, as well as hindering potential growth in their property tax base. In many communities, high commercial and industrial tax rates present a barrier to attracting development, even when infrastructure and infill opportunities are plentiful. By reforming its classification system, Cook County could grow the tax base over time and eventually reduce the tax burden on residents, thereby mitigating the need for potential increases in residential rates.