The Impact of Property Taxes and Property Tax Classification on Business Activity in the Chicago Metropolitan Area

Abstract

The City of Chicago and the inner suburbs grew much more slowly than the outer suburbs in recent decades. In the central county of the metropolitan area, commercial and industrial property is “classified,” in that it is assessed at a higher ratio of market value than residential property. Classification is not used in the surrounding suburban counties. The empirical analysis finds evidence consistent with the notion that property tax classification contributes to differential rates of economic growth. High property tax rates lead to significantly slower growth rates for employment, commercial property, and industrial property.