November 28, 2005

Exemptions Based Only on Age...There is A Better Way...

Yesterday's editorial in the Concord Monitor (NH) gets it's right when it comes to eliminating tax breaks that are unfairly targeted to the elderly. While it might be seen as politically unpopular (and heartless) to eliminate exemptions that are specifically targeted for the elderly, it's the right thing to do.

The Monitor editor writes, "High property values and high taxes mean younger people cannot afford to raise a family in their hometown." but yet in Concord, NH "the [property tax] exemption ranges from $67,000-plus at age 65 to $187,000 at age 80. The latter, with 124 members receiving exemptions, makes up the largest group. Those exemptions add up. Last year, the 304 granted by Concord were worth roughly $600,000 in taxes forgiven. That number will grow rapidly once the baby boomers, a generation notorious for saving too little, begin retiring."

Not only are these elderly exemptions going to cost more in future years, but as the Monitor so rightly points out later in the article, some of the elderly being given these large tax breaks could actually afford to pay more of their property taxes then they do now.

The real solution is not to simply eliminate these exemptions - afterall, some of elderly would be "taxed out of their house" if it weren't for these special tax breaks. Instead, New Hampshire policy makers should create an income specific "circuit breaker."

According to ITEP's Policy Brief about Circuit Breakers: a circuit breaker protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload” level.

Because circuit breaker credit amounts vary with income, the use of these credits
introduces an “ability to pay” criterion that New Hampshire's current age exemption lacks. Circuit breakers identify the individual taxpayers for whom property taxes are most burdensome and reduce their tax to a manageable level.

The introduction of a circuit breakers is good fiscal policy too - because they are almost always guaranteed to be less expensive than New Hampshire's current "across the board" age exemption.

So while it may seem like a cold and heartless thing to do, it's better tax policy to eliminate age specific exemptions like this one and replace them with exemptions based on people's income.

1 Comments:

At 9:41 AM, Blogger Prakash Nakka said...

My comments are not based on any research nor any scientific polls. Just my opinion.

There are more people utilizing loopholes in the tax system then there are people trying to pay taxes. I am too lazy to do my own taxes so I go to a guy who does it for me. He tells me all kinds of stuff that will enable me to get more taxes back then I can imagine. I may sound weird, stupid, idiotic and all the other stuff but I do not try to get all the extras my tax guy talks about because I don't feel I deserve it.

There is more to the taxes than the laws. Everyone needs to think about how the government can pay for unexpected hazards like hurricanes and other things.

Next time everyone starts getting mad at the government for getting into more debt maybe you need to stop asking for help when a calamity comes your way.

 

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