Property Tax Issues and Options

In Kansas, two senators are championing a new amendment to the state constitution that would freeze the assessed value of a home upon the homeowner’s sixty-fifth birthday. The proposal, designed to help fixed-income seniors struggling with their property tax payments, is a popular one. While few would argue against the intent of the bill, however, some have doubts about whether the bill is the best way to achieve these goals.

The main criticism of the bill is that it is poorly-targeted. It would help all seniors, including the most wealthy, and not just those struggling to pay their bills. Notably, the AARP came out against the bill, saying “It's not that we aren't concerned about older Kansans and their ability to pay property taxes, we just believe property tax relief should be more targeted”. The issue is that, as the share of property taxes paid by one group (in this case, the elderly) goes down, the share paid by others will likely increase. In the article linked above, Randall Allen, executive director of the Kansas Association of Counties, explained it like this: "It's like a balloon. If you push one end down, the other naturally goes up. If the valuation is suppressed by artificial means, then the tax rate is going to go up because it has to generate the same dollars."

There are multiple ways to increase the cost efficiency of property tax reductions. Some have suggested that the measure should be tied to the value of the home, so that, for example, only houses valued at less than $200,000 would have their assessed value frozen. Such a move would make the amendment much less expensive to the state, while still helping elderly homeowners.

However, an even better solution would be to expand the current Kansas property tax "circuit breaker". A circuit breaker kicks in when property taxes exceed a given percent of the taxpayer's income, providing targeted relief only to those who need it. Circuit breakers directly tie the tax reduction to ability to pay the tax, making the measure much more effective for each dollar spent. For more information, check out the the latest report from the Center on Budget and Policies, which takes a hard look at circuit breaker programs across the country.