Leaders are obliged to look forward, not back.
That’s why I’m opposed to the ballot question that will ask voters in October if they want to increase the amount of the exemption from property taxes that senior citizens enjoy from the first $150,000 of the value of their homes to the first $300,000.
Certainly that change would help lower property tax for residents 65 and older (and for disabled military veterans) but it’s a crude tool that will help some homeowners who don’t need the exemption and it will surely penalize younger taxpayers by placing more of the tax burden on them.
The proposed exemption, if approved, will blow a $296,000 hole in the borough budget that will need to be filled either by increasing the rate of taxation on remaining property tax payers or by finding another revenue source.
Moreover, the problem identified by the petitioners – keeping senior citizens in their homes while increased valuations cause tax bills to rise – can be addressed more fairly and directly through revision of the borough’s property tax hardship exemption. Or by a smaller increase in the exemption, say to $200,000.
The proposed expansion of the exemption is too big and it sends too much forgiveness in the direction of comfortable citizens who don’t need the exemption. The hardship exemption bases the exemption on need, not on age.
Here’s the history. The Alaska Legislature in 1972 created the property tax exemption for seniors and voted to reimburse municipalities for the money lost to their coffers by the exemption. In 1997, however, the state government stopped paying towns the difference, leaving local governments on the hook for its cost.
(In the past year, the Haines Borough paid $423,000 for covering the exemption. If the ballot question passes, the borough will pay $719,000.)
But with real estate values soaring for the second time in less than 20 years, the $150,000 exemption doesn’t go as far for homeowners as it once did. That’s a legitimate concern, particularly for seniors on fixed incomes. The question is how best to address it.
State law allows municipalities to offer an additional exemption based on 2 percent of annual income – instead of age — and to set the income limit for qualifying for this exemption.
Currently in Haines Borough law, seniors with a household income at or below 135 percent of the poverty level qualify for a second exemption. The tax they pay on the value of their property above $150,000 is capped at 2 percent of their total income. It’s in the borough’s power to raise the threshold for qualifying for the second exemption.
For example, Juneau’s hardship exemption extends to individuals making 120 percent of a median income or less – defined as $101,000 for an individual or $116,000 for a couple. So seniors in Juneau with an annual income of $50,000 pay no more than $1,000 in property tax total and they only pay that amount if the value of their house exceeds $150,000. Haines could adopt the income limit Juneau has set for the second exemption – or set its own income limit.
Or voters could go back to the polls with a lesser increase in the exemption, say $200,000. That amount would help low-income seniors struggling to pay bills and stay in their homes while maintaining reasonable taxation on seniors who have the wherewithal to pay.
Seniors already get a significant break on their tax bills. The question is to find a fair way to craft an additional exemption that shields seniors who need it from the effect on their taxes of a spiraling real estate market.
Expanding the hardship exemption to more seniors is a fair and equitable way to do that. A small increase in the exemption works, too.