Senior Citizens and Property Taxes

February 15, 1994

Rising real estate values are a mixed blessing for the elderly. While the value of their property increases, so do their property taxes. Some retired people who rely on pensions and Social Security for income have trouble keeping up with the increasing tax levy.

Giving these elderly some form of relief is an admirable legislative goal, but Carroll Del. Richard N. Dixon's proposal to freeze assessments for any property owner older than 65 creates -- rather than solves -- inequities.

Property tax is a tax on wealth, but the tax itself is paid out of income. Any tax relief should be directed at alleviating the demand that local property taxes place on the elderly's incomes.

To freeze assessments for all senior citizens misdirects the tax relief. The wealthiest elderly with the largest incomes will receive the largest benefits from such a program because the assessment increases on their homes would be the greatest. The poorest homeowners would see only small benefits.

Freezing assessments also means that the local tax burden will be shifted to people under 65. A U.S. Office of Management and Budget analysis of the relative tax burdens among different age groups shows that the people who are now 65 and older have paid a smaller percentage of their lifetime income in taxes than will younger age groups. Americans born in 1900 can expect to pay nearly a quarter of their incomes in federal, state and local taxes; those born in 1950 will pay a third of their income, according to the OMB calculations. Any local property tax relief should avoid aggravating this distortion.

Maryland already has in place a property tax credit that is available to homeowners of any age.

Under this program, individuals are given credits against their property tax bills; each dollar of credit reduces their property taxes by a dollar. For example, a household with a combined gross income of $29,000 could receive a credit if its actual real estate property tax bill exceeds $1,880.

If additional tax relief is needed, then the General Assembly should look to defer a portion of the elderly homeowner's property tax until death or until the home is sold. Such a measure would reduce the tax bite on senior citizens and enable them to remain in their homes but would not unfairly burden other taxpayers.

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