For years, Chicago Mayor Richard Daley has played fast and loose with the state's tax increment financing (TIF) laws. Aside from creating dozens of districts in areas that are far from blighted, the mayor has used the vast TIF network as a shadow budget, avoiding oversight as he spends billions of taxpayer dollars. In the past year, we've seen some members of the City Council -- and the local media -- begin to speak up about the TIF problem.  Encouragingly, members of the General Assembly are also beginning to grumble about how the economic development tool is being exploited. And it looks like this could be the year that TIF reform finally makes the legislative agenda in Springfield.

Concerned about the pressure that TIF districts are putting on taxpayers who are forced to pick up the slack for the billions that are siphoned off the tax rolls across Illinois each year, the legislative Property Tax Reform & Relief Task Force is recommending that the General Assembly finally review the state's TIF statutes in an effort to rein in the billions that are diverted off the tax rolls each year. Here are some key areas they'd like to see addressed, per their report (PDF):

-Review the way TIFs are created and approved;
-Redefine redevelopment project costs;
-Determine whether a TIF’s tax base should be adjusted each year to reflect land value changes;
-Require more transparency on the existence and use of TIF funds;
-Strengthen standards for how TIF funds are allocated.

Questionable TIF spending in Chicago is proof enough that the TIF law need to be revised. But the issue has added urgency thanks to the recession and corresponding drop in tax revenues. We're crossing our fingers that this latest research -- combined with the ongoing TIF blowback in Chicago -- gives lawmakers the nudge they need to finally move TIF reform up on their legislative agenda. Only then will Mayor Daley finally be forced to get creative with the city's vast TIF resources.

In their report, the task force also draws attention to the regressive nature of Illinois' tax system. The combination of low, flat income taxes and a high sales tax on goods (but not services) puts a tough burden on low-income Illinoisans.  The lack of adequate income tax revenue has also resulted in higher property taxes.  For instance, as property tax bills hit mailboxes late last year, it was revealed that folks in impoverished Ford Heights would be subject to a 20 percent tax rate versus 5.5 percent in the North Shore's Winnetka.  The SouthtownStar's Phil Kadner summed up the phenomenon best.  "Poorer communities, mainly in the south suburbs," he wrote, "need to really sock it to their residents to pay for schools, police, and fire protection."

Aside from calling for the consolidation of local units of government, the task force is challenging the legislature to "rebalance" the state's tax policy and ultimately level the tax burden. To do so, they recommend drawing more revenue from growing sectors of the economy -- such as services -- and increasing the income tax rate to a level that is still "relatively low" compared with most other states. They also recommend extending property tax breaks currently provided to seniors to low-income homeowners of all ages.

Encouragingly, the Senate already took a major step toward achieving a majority of these  goals by passing Sen. James Meeks' HB 174 back in May. That plan would raise the income tax to 5 percent, generating new tax revenue to stave off financial collapse in the short-term and buoy cash-strapped schools for years to come.  It also included an increase in the Earned Income Tax Credit as well as some property tax relief.  The latest report only reaffirms the fairness of Meeks legislation, which we'll be tracking closely when lawmakers return to Springfield following the February 2 primary.

In the meantime, the tax reform report is chock-full of interesting research. Download it here.