As I mentioned in my last post , the Census projects that by 2030 one in four West Virginians will be over age 65. As a result, it could cost state and local governments a lot revenue. This is because seniors, in general, are not part of the labor force. This means they pay less in taxes and demand more services. Today, I want to talk about just one of those potential costs – the loss of property tax revenue due to the Homestead Exemption.
The Homestead Exemption provides an exemption of up to $20,000 of assessed property value based on age (65 and older) and disability. If the Census’s estimates are correct, then counties can expect a sizable reduction in property tax revenue because the number of home owners over 65 will have also increased. My calculation* says that the loss of property tax revenues will cost an additional $20.3 million dollars by 2030.
Two-thirds of the expected property tax revenue loss ($13.4 million) will affect state school board budgets while one-fourth of the loss ($5.2 million) will come from county budgets. Municipalities’ budgets will be reduced by nearly 8% ($1.6 million) and the state’s budget less than 4/10 of 1%. The good news for counties is that most of it could be made up via the school aid formula. The bad news is that the state will have to find the additional dollars to send to the counties. This means raising taxes, reducing the exemption, or cutting the budget.
So, for state and local officials more “gray”could equal less “green.” Next time I’ll look at some other tax credits and preferences for seniors, including the Senior Citizens Credit for Property Tax Paid ( -$7.7 million), the Senior Citizen Property Tax Payment Deferment (-$900,000), and the Decreasing Modification for Senior Citizens which results in a current revenue loss of (-$39.6 million).
*The West Virginia Tax Department reports the total value of Homestead Exemptions in CY 2008 was $44 million dollars, which included tax filers who qualified based on both aged and disability. County assessor and state tax department officials estimate that 88% of the total Homestead Exemption revenue lost in the state was due to age, while 12% was based on a qualifying disability. In CY 2008, approximately 185,000 West Virginia tax filers received $38.7 million dollars in property tax relief under the Homestead Exemption as a result of their age. According to population data of the US Census, in 2008, there are 285,000 West Virginians aged 65 and older. The US Census projects the number of residents aged 65 and older will increase to 435,000, an addition of 150,000, or 53% additional “grays” to West Virginia’s population. Part of this phenomenon is the result of a negative population trend for younger West Virginians (see, The “Graying” of West Virginia’s Population). A 53% proportional increase in Homestead Exemptions will increase the revenue lost by an additional $20.3 million dollars by 2030, ($38.7 X .526 = $20.3).
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