Thursday, March 22, 2012

Time to raise the homestead exemption?

Here is one of those issues I am perplexed has not even been raised yet.

So we all know by now there is a mass property reassessment going on in Allegheny County.  The news of late is that the reassessment itself is complete.  It is not really complete of course, but complete in that the new numbers are all calculated and distributed.  Still have appeals, tax rate resetting and so on and so forth. 

We all know there is lots of angst over the new numbers.  Much concern is for long time homeowners, particularly older homeowners, who may not be able to afford higher taxes if indeed they get hit with higher taxes.  Let's skip the debate over whether many will actually see reductions in the end. 

Here is the thing.  If there is really concern for lowr income homeowners and what jumps in their property value will be, there is a simple and legal way to help them comprehensively.

There is in Pennsylvaia a provision in the law called the Act 50 Homestead Exemption.  Allegheny County has enacted the provisions of Act 50 to give resident homeowners in the county an abatement on a part of their home value in order to lower their property tax.  Right now many if not most resident homeowners in the county make use of the act and claim a $15K reduction in their property value for taxation purposes.

So what do we know?  City property values have gone up by 50% or so in aggregate.  Countywide it is 25% and every other school district and municipality has some different number.  

Some straightforward math:  Now if the homestead exemption stays at a fixed $15K then in a sense it is a regressive tax change.  The 15K is going to be a smaller percentage of new valuations on average.  So if you want the impact of the homestead exemption just to stay the same, the value exempted has to at least be raised proportionally to the aggregate value increase.

Can you do that?  I don't see why not.  From what I read the limit to the amout of the homestead exemption is:
 "The exclusion is a flat-rate uniform dollar amount, and it cannot exceed 50 percent of the median value of all homestead property within the taxing jurisdiction as certified by the county assessment office."
  Well, by my quick division, the $15K is well below that threshold and if Allegheny County so wanted to increase the amount, it is at least not prevented by statute. You could probably double the homestead exemption and still be well below that threshold with the new assessed values. Raising the exemption would also have the impact of dealing with a lot of the inequity issues arising from the new assessment numbers. If indeed lower valued homes have been overassessed, an increase in the homestead exemption amount would redress that directly. Not raising it actually hurts those same homeowners even if the assessment was perfectly accurate.  I'll leave to others what political machinations have to happen to change the amount.


Anonymous Anonymous said...

The thing I really don't get is when seniors say they can't afford to stay in their homes, particularly if they have paid off the mortgage. There is no way that their property taxes are higher than it would cost to rent something.

It’s like they can’t do simple math. Say they pay $3,000-$5,000 in property taxes a year. Where will they be able to rent for less than $400 a month?

I understand that there are other costs associated with owning a home, but renting just has those costs wrapped into one monthly payment including the landlord’s tax bill.

Thursday, March 22, 2012 12:45:00 PM  
Anonymous BrianTH said...

Seniors can also address the "problem" of relatively high property appreciation rates with reverse mortgages.

Anyway, I'm a little uncomfortable with the notion of addressing what might be a systematic overassessment problem for lower-value properties through the homestead exemption. That said, I don't see any reason the homestead exemption should not at least keep up with inflation.

Thursday, March 22, 2012 5:33:00 PM  
Anonymous Anonymous said...

The homestead exemption applies only to county taxes which is the smallest portion of your property taxes - even with this year's 21% increase. No way will the county increase the percentage - first because they like all this angst over the reassessment and second because it makes sense!

Friday, March 23, 2012 1:51:00 PM  
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