Easing Property Tax Burden

Posted May 24, 2010, at 6:12 p.m.

A new law that aims to help seniors remain in their homes by lowering their property tax bills is an example of state government at its best. The bill, sponsored by Rep. Kathleen Chase, R-Wells, allows municipalities to defer property taxes for elderly residents. To be eligible, seniors must be 70 or older, have lived in their homes for 10 or more years, and earn less than 300 percent of the federal poverty level (that’s about $33,000 for a single person, $42,000 for a couple).

Rep. Chase, who had served as a tax assessor in her town of Wells for 18 years, was inspired to craft the law when she learned of a woman who faced an annual property tax bill of $7,000. The woman, who had retired to Wells with her late husband 35 years earlier, saw the value of her home appreciate greatly because of the commercial district that grew up around her property. The woman had an annual income of just $23,000.

The program is effective state governance because it does not force towns to offer the benefit, but rather allows them to create and then adopt an ordinance allowing such property tax deferral. And the property tax deferral isn’t a giveaway. When the heirs sell the house, the deferred tax must be repaid, including interest. The interest rate is that which the municipality assesses to late property taxes, plus one-half percent.

“It’s an investment in your citizens,” Rep. Chase said of the program. “It’s people supporting their neighbors.”

She’s right. One of the inherently unfair outcomes of the property tax system, seen especially along the coast and in the southern part of the state, is that houses appreciate astronomically in value — often based on what an out-of-stater might offer to pay — with no correlation to income. When seniors are forced to sell their homes and move late in life the stress can be debilitating or worse. Or, if they remain in their homes and pay the tax, they may be doing without heat, food or medicine. The program allows municipalities to respect seniors by being sensitive to their fixed-income plight.

And as Rep. Chase notes, the investment by the municipality is also wise in a purely pecuniary respect. “They’re not losing,” she said.

Under the law, seniors can pay part of their taxes and defer the rest, if they like. And towns that adopt the ordinance allowing the program can later repeal it, though seniors granted deferrals remain protected. Rep. Chase said a similar state program aimed at assisting seniors with property taxes was offered in the mid-1980s, but only about 50 people used it, probably out of wariness about government or pride.

The only downside to the law is that there is no model ordinance; municipalities must craft the document themselves. The Maine Municipal Association should create a framework towns and cities can use. The new law takes effect July 12.

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