On November 9 Mayor Daley released his 2005 budget and declared that all Chicagoans would have to pay higher fees and taxes so the city, strapped in hard economic times, wouldn't have to make huge service cuts. He didn't mention that when it came to property taxes some Chicagoans were going to arbitrarily pay more than others.

Daley, for example, will pay an extra $146 in property taxes for his upscale town house in the South Loop. But Congressman Bobby Rush, who lives just two and a half miles south, will pay an additional $3,205 for his single-family home in Bronzeville.

How did one south-side politician escape reassessment with a paltry 3 percent hike while another got socked with a 286 percent increase? I'm not saying Daley got a break because he's the most powerful politician in town, though the thought did cross my mind. And I'm not saying Rush was punished for daring to run against Daley in 1999, though anything's possible in Chicago politics. I'm saying this is more evidence that the whole property-tax system is screwy--something even the folks at the assessor's office agree is true.

"Inconsistency and confusion seem to rule the day," says Merlin Tripp, a member of the tax-reform group Citizens for Fair Assessments and Taxes. "In some cases, just crossing the street you'll find the same type of property can have hugely different assessments. It's unfair and arbitrary."

A computer systems analyst with a passion for public policy, Tripp did an extensive Internet search to figure out what various politicians are paying in property taxes. He used voter-registration lists and financial-disclosure statements to find out where they lived and the Cook County assessor and treasurer Web sites to find how much they pay in property taxes. (He didn't check every elected official in the city because he couldn't find every home address.)

Congressman Rahm Emanuel got an 80 percent increase on his current bill (taxes are paid in two installments per year). OK, he lives in North Center, one of the city's hottest north-side real estate markets. But Cook County commissioner Forrest Claypool, who lives just a few blocks from Emanuel, got socked with a 125 percent increase. Why the difference?

Governor Rod Blagojevich got a 25 percent increase on his Ravenswood Manor home. But his father-in-law, 33rd Ward alderman Richard Mell, who lives about two miles to the south in the gentrifying neighborhood of Avondale, saw his taxes fall by 10 percent. Blagojevich's house is larger than Mell's bungalow, but we're talking relativity here. Mell's neighborhood is one of the hottest in the city, hotter than Blagojevich's, so why the discrepancy?

Assessor James Houlihan got a 19 percent increase on his home in east Lakeview. But Alderman Vi Daley, who lives a mile and a half south in Old Town, saw taxes on her condo rise by 47 percent.

Senator-elect Barack Obama didn't take a huge punch--the taxes on his Hyde Park condo went up 15 percent. But Fourth Ward alderman Toni Preckwinkle, who also lives in Hyde Park, nine blocks to the northwest, did much better--the taxes on her condo went down by about 18 percent.

Taxes on the house of 46th Ward alderman Helen Shiller went up 71 percent, while taxes on the home of county commissioner Michael Quigley went up 10 percent. Shiller lives in Uptown, Quigley two miles south in Lakeview. Both neighborhoods are hot, and property values have accelerated at roughly the same rate over the past three years. Go figure.

"You have this discrepancy between people who live in essentially similar neighborhoods in which real estate's going up at roughly the same rate," says Tripp. "Yet some people get a break, and others pay more."

One reason it's hard to figure out why is that taxes are calculated using bewildering formulas. But if you strip away the complexities that don't really change the bottom line--the state equalization factor, the equalized assessed value--you can see that property taxes are essentially calculated by multiplying the assessed value of a property by the current tax rate (6.433 percent in Chicago), then subtracting the home owner's exemption. The exemption was created to lower taxes for property owners who live on their property--as opposed to renters and commercial property owners, who are getting shafted even more than home owners.

The key to the system is the way a property's value is determined. Houlihan's technocrats reassess property every three years by analyzing real estate sales throughout the city. If the sale price of property in a given area goes up, so will the taxes (unless of course city and county officials drastically cut the tax rates--ha, ha, ha). In an attempt to be precise, the assessor divides the city into hundreds of neighborhood code areas. Your property's assessed value is determined by recent sales prices of comparable properties in your code area.

Of course, Houlihan understands that rising real estate prices in a neighborhood don't necessarily reflect the residents' wealth, since many people bought their properties long before their neighborhood gentrified. Last year he proposed decreasing this regressivity with a cap of 7 percent on assessment increases. Under his proposal a house assessed at $100,000 last year could be assessed at no more than $107,000 this year, no matter how high the sale prices of comparable houses in the area had risen.

In May the General Assembly quietly amended Houlihan's proposal. House speaker Michael Madigan and senate president Emil Jones, backed by Governor Blagojevich, thought the cap would be regressive, so they put a "cap on the cap." It's not actually a cap on the cap on assessments; under the law Blagojevich signed this summer the legislators increased the home owner's exemption from $4,500 to $20,000, which was supposed to attack the problem of big tax increases from a different direction. But the jump in housing prices in some neighborhoods has been so high that even the larger home owner's exemption won't prevent a big tax increase--as Rush and Claypool, among others, have discovered.

As I wrote on October 29, many taxpayers opened their bills this fall to discover that their tax increase hadn't been limited to 7 percent, as they'd expected. Some of them got increases of up to 200 percent. This is complicated, so let's go back to Daley and Rush to see how it works. The assessor's office calculated that the assessed value of Daley's town house rose from $64,520 to $80,239, a 25 percent jump. After subtracting the home owner's exemption, Daley wound up owing $5,778, or $146 more than on his last installment. The exemption worked well for him because his home's value hadn't jumped much.

But Rush got hammered, because the assessor raised the assessed value of his house from $12,467 to $34,405--a 175 percent hike. Even after subtracting the exemption, he owed $4,324 in taxes, or $3,205 more than he'd owed on his last installment.

You might ask, what's the big deal? Rush is still paying less than Daley. Well, Daley lives in a newly built gated community of relatively well-off people who moved in knowing they could afford the good life. Rush lives in what used to be a poor neighborhood, one that's still full of older residents on fixed incomes who can't afford a big tax increase. The new law was supposed to make the property tax less regressive, but it doesn't seem to have worked. In this instance, the tax burden has simply been shifted from Daley's neighborhood to Rush's. And the same thing seems to have happened all over the city.

Given Chicago's reputation for everything being political, you have to wonder why Houlihan got a smaller increase than the folks down the street. Was it just a coincidence that two of the city's most powerful politicians, Madigan and Jones, got tax cuts? Madigan, who lives in West Lawn, saw his taxes drop by 10 percent; Jones, who lives in Roseland, saw an 8 percent dip. Could it be that Mell, a savvy operator with allies in all branches of government, had better local contacts than Blagojevich, who's alienated many local politicians during his time in office? Did Claypool get hit hard because he's a reformer who's always pushing for county spending cuts?

At the risk of sounding naive, I doubt it. My hunch is that the people at the assessor's office are struggling with a hopelessly flawed system, and we ought to give them the benefit of the doubt. If the assessed value of homes in Rush's neighborhood rose more than those in Daley's this time around, it's probably because the assessor's office was for some unknown reason slow to see that the cost of property in Bronzeville was rising fast.

The problem doesn't seem to show up when you look from one house to another within the same code area, but it's obvious when you look at similar homes in different codes. These disparities often seem astonishingly random, and the bigger home owner's exemption doesn't begin to fix the problem. "The one thing you can count on with property taxes in Cook County is that someone somewhere is getting screwed," says a sharp businessman who owns property all over town. "I think they keep it complicated on purpose. The more complicated it is, the more you're at the mercy of the people who run it, and the more you get screwed."

And so the system is still one of winners and losers. The assessor's office estimates that roughly 70 percent of home owners saw their taxes drop or stay the same, thanks to the increased exemption. The other 30 percent took a big hit. According to Tripp's numbers, that ratio holds for politicians. Among them, this year's big winners, whose taxes decreased, were, aside from Madigan and Mell, aldermen Preckwinkle (taxes down 18 percent), Ed Burke (down 10.8 percent), William Banks (down 10.8 percent), Emma Mitts (down 10.8 percent), Patrick Levar (down 10.8 percent), Ginger Rugai (down 10.7 percent), Carrie Austin (down 10.7 percent), and Madeline Haithcock (down 10 percent), as well as Cook County state's attorney Richard Devine (down 6 percent). Among the big losers, besides Rush and Claypool, were state representatives Sara Feigenholtz (up 85 percent) and John Fritchey (up 77 percent) and aldermen Danny Solis (up 51 percent) and Ted Matlak (up 49 percent).

Both Rush and Claypool laughed when they heard they'd come in first and second in the losers' category. "Where's my trophy?" quipped Rush. Claypool said, "Tell the congressman congratulations."

But both were quick to add that the system has to change. "It is a dubious distinction to have a neighborhood with high taxes," says Rush. "I'm glad that there's a lot of new housing and a lot of rehab. But I really feel for many of my neighbors who are less able to pay the high increase."

According to Tripp, the system's even harder on commercial property owners. As part of another study, he looked at a stretch of commercial properties--small, locally owned eateries, shops, stores, offices, and an auto-repair business--on the 5000 block of North Clark. The expanded home owner's exemption doesn't apply to people who don't live on the property they own, so they don't even get that break. All of the owners on this block saw their total taxes for the year go up; most doubled, and the increase ranged from $11,365 to almost $39,000. "They either pass the tax hikes on to customers by raising prices, or they go out of business," says Tripp. "It's not good for the city."

Businesspeople make the same point. The Chicagoland Chamber of Commerce recently filed a suit to overturn the new tax law, arguing that it forces businesses to bear an unfair portion of the tax burden.

Renters aren't going to escape the tax hikes. Their landlords don't get any protection from the exemption either, and they'll undoubtedly pass on their tax increases.

As Tripp sees it, the city is reaching a financial crisis point because its schools, parks, and pensions are largely funded by a tax that fewer and fewer of its residents can afford to pay. "I don't think we can keep going the way we're going," he says. "Eventually we're going to have to go to a more progressive tax, like a graduated state income tax. This is madness."