Extending tax credits seems like the best option for some seniors.
Last month, Governor Mike Parson signed Senate Bill 190 into law. This new law could freeze property tax rates for residents ages 65 and older and has created many questions for taxing entities. The bill received support from both Missouri Democrats and Republicans because it also eliminates state income tax on Social Security benefits in 2024 for some.
Each county will still have to approve the property tax freeze before it goes into effect.
Offering a property tax freeze for seniors is a great idea politically, especially just before an election year. It’s also a great idea to help seniors living on a fixed income receive property tax relief since property values have soared in the last few years because of a lack of housing inventory levels. However, most baby boomers, getting ready to retire or already retired, don’t need the tax break that could last 30 years or more, and they are the age group pushing up real estate prices.
Counties, municipalities, school districts, and other entities would be better served if the state expanded the property tax credit already available to seniors and disabled residents rather than give the wealthiest generation another tax cut.
Millennials have reached the “peak” homebuying age and, since 2014, made up a majority of the homebuying market until affordability and higher mortgage rates pushed them out. Then baby boomers, whose overall wealth is $73 trillion compared to millennials — $9 trillion — become the largest segment of homebuyers. Boomers have had the opportunity to gain wealth through homeownership appreciation, and some were lucky enough to collect massive sums of inheritance.
Now, boomers are downsizing as they enter retirement and, in doing so, are competing to buy houses against millennials trying to buy their first or second-time home. Millennials now face competition from boomers who can buy with cash or finance a smaller portion of their purchases, negating a doubling of mortgage rates. A buyer paying cash has a huge advantage when a seller is considering offers, especially in a multi-offer situation. The fewer hoops a buyer must go through to get to the closing table, the better through the eyes of a seller.
For several years, Missouri has provided a property tax credit claim for seniors and disabled individuals. Renters making less than $29,000 can receive up to $750, and $1,100 for those who occupy their home and make less than $30,000 ($34,000 if filing jointly). With an $8 billion surplus, the state could’ve easily extended the income limits and tax credit amounts to provide tax relief to seniors without providing a tax cut to those who don’t need it.
No one likes opening their property tax bill in mid-November and paying a huge bill before the end of the year. However, property taxes are an essential source of revenue for local entities. Proper funding, especially for schools, helps maintain property values, and without enough revenue, those entities will decline, and so could property values for the rest of us. If a property tax freeze is approved, the rest of us will end up picking up the tab through increases on other taxes, and that can be regressive — especially for seniors on a fixed income.
Brian Toohey is the chief executive officer for the Columbia Board of REALTORS