JEFFERSON CITY — A state tax break meant to ease the property tax burden for senior citizens and the disabled on fixed incomes is predominantly benefiting people who don’t own — much less owe taxes on — their homes.
Yet the tax break has been touted at the Capitol as part of the solution to homeowner complaints about escalating tax bills.
Missouri law describes the income tax credit, first enacted in 1973, as “a property tax credit.” Yet the law allows the tax break not only for those who pay taxes on their homes, but also for renters.
And rent covers not only payments for houses and apartments, but also for nursing home rooms and even some extended-stay hotel rooms.
According to the Department of Revenue, 55 percent of the 184,366 people who received the so-called circuit breaker “property tax credit” rented their residences in 2006, the latest year for which statistics are available. Sixty-one percent of the $85 million paid out went to renters.
Various legislative proposals this year would increase the size of the maximum tax credit and expand the number of people eligible for it.
But Rep. Chuck Portwood contends that lawmakers would be fooling themselves — and the public — if they raise the property tax break under the belief it would answer the cries for help from elderly homeowners.
That’s because less than 40 cents of every $1 distributed through the tax break goes to homeowners.
“I’ve not had one renter, one person that lives in a nursing home, or one person that lives in an apartment call me and say, ’Representative Portwood, this property tax is just killing me.’ I’ve not had one,” said Portwood, R-Ballwin. “I’ve had thousands and thousands of people that are at the other end of the spectrum that live in their homes that are actually paying the property tax.”
The problem with increasing that tax break is “it does not address the needs of the people who are actually asking for the relief. It doesn’t help the homeowner,” said Portwood, who led a failed initiative petition effort in 2002 to limit the growth of property taxes.
Senators voted to expand the tax break as part of a multi-pronged property tax measure given initial approval Thursday. But they did so in a way that could help homeowners a little more than renters.
The legislation increases the maximum tax credit from $750 to $1,100 for both homeowners and renters. But it expands the number of homeowners who could be eligible.
Current law sets the income cutoff for people to qualify for the tax credit at $27,500 annually for individuals and $29,500 for married couples. The Senate bill raises that to $30,000 annually for individual homeowners and $40,000 for married homeowners.
Senate President Pro Tem Michael Gibbons counts the increased tax credit as an important, but not the most essential, part of his legislation.
The biggest change, Gibbons said, is to mandate that local taxing districts lower their tax rates to compensate for increased property values following assessments. As it is, some governments are avoiding a tax-rate rollback and reaping a windfall by raising the assessed value of real estate, he said.
Gibbons said the various taxing districts in St. Louis County collected a windfall of $46 million after last year’s property re-assessments.
“So the rollback is really a critical feature of that bill — that’s what protects seniors and everybody,” said Gibbons, R-Kirkwood.
Many of this year’s property tax proposals have come from lawmakers in the St. Louis area. From 2006 to 2007, St. Louis County had a 15 percent increase in assessed valuations, excluding new construction and improvements. That was the second highest in the state behind only a 33 percent increase in Phelps County, according to a report by State Auditor Susan Montee.
Missouri has more than 2,700 entities that levy property taxes. Those include school districts, cities and counties, fire and ambulance districts, libraries, community colleges, public hospitals and nursing homes, road districts, and soil and water conservation districts.
To ensure they all abide by a requirement to roll back tax rates when their assessed property values rise, Portwood believes it’s necessary to amend the Missouri Constitution. A House committee on Thursday endorsed his proposal to do that.
Portwood couldn’t succeed in getting enough citizen petition signatures for a more restrictive property tax proposal six years ago. Since then, he believes homeowners have only grown more frustrated about their taxes, despite several legislative attempts to help.
“It was a problem (six) years ago, now it’s a problem times 100,” Portwood said.