State eyes property tax relief for seniors

Governor Mitt Romney and legislative leaders say they are determined to lighten the tax burden on Massachusetts seniors who own their homes, seeking to ease the strain of property tax bills that are growing rapidly as residential property values spiral up across the state.

House Speaker Salvatore F. DiMasi put senior property tax relief at the top of his agenda for the new legislative session, along with education and health care. Romney said last week that he also believes Beacon Hill should curb property taxes for seniors this year, and legislators have filed more than a dozen bills proposing various forms of relief.

Yesterday, Senate President Robert E. Travaglini joined the call. "It is an issue that every member of the Senate feels strongly about, and if any sector of the population warrants our assistance, it's the elderly homeowners on a fixed income," Travaglini said. "We're not going to encourage them to sell their homes to keep pace with the standard of living here."

Adding urgency to the issue is a recent report by the Department of Revenue that argues that the value of the existing property tax exemptions should be increased and that exemptions should be made available to more seniors. Income and asset restrictions haven't kept up with inflation and rising property values, leading to a decline in the number of exemptions because fewer senior citizens qualify, the report said. The number of senior exemptions fell from 33,203 in 1992 to 20,359 in 2003.

The Department of Revenue proposes raising the current property tax exemption for low-income seniors who are 70 or older from $500 to $1,400; the average tax bill in 2004 was $2,894. The Revenue Department also wants the state to change the income restrictions so more seniors are eligible. Under current law, a single taxpayer must have assets worth $28,000 or less, excluding his or her home, and an annual income of no more than $13,000 to qualify for the exemption, although cities and towns can raise those limits to $40,000 and $20,000.

But lawmakers are likely to go further than the Revenue Department by reviving a proposal that foundered at the end of last year, according to Representative Paul C. Casey, the Winchester Democrat who is cochairman of the Legislature's Taxation Committee.

That legislative proposal would have created a new property tax exemption for seniors 70 and older that would be worth 10 percent of the average assessed value of houses in the community where the senior lives. Cities and towns could opt to raise the exemption to 20 percent or reduce the age requirement from 70 to 65.

Under the 10 percent proposal, a senior in the town of Milton (where house values averaged $403,000 last year) would get an exemption worth $4,030. The average tax bill is $4,886 without the proposed exemption.

The income requirement for the new exemption would be tied to the state's circuit-breaker law, which already gives seniors income tax credits, in addition to the exemption, to cushion the impact of rising property taxes. The current income limits for the circuit breaker, which are tied to inflation, are $44,000 for singles and $66,000 for couples filing jointly.

In 2003, the Revenue Department handed out roughly $18.5 million in circuit-breaker credits to about 31,000 people.

In addition, Casey's proposal would seek to expand the number of seniors eligible for the circuit-breaker credits by raising the maximum property value allowed under the circuit-breaker provisions from $440,000 to $600,000 and tying future increases to housing prices, instead of the rate of inflation. Lawmakers also are interested in reducing the interest rate that cities and towns charge seniors for deferring property tax payments. Under current law, lower-income taxpayers older than 65 can defer property taxes until property is sold or upon their death. In the latter case, heirs must pay the full amount of deferred taxes plus interest. The current interest rate is 8 percent a year on taxes owed when property is sold and 16 percent a year on the total after the taxpayer dies.

Rapidly rising real estate values are at the heart of the property tax debate. In fiscal 2004, according to the Revenue Department report, residential property values around the state rose 17.2 percent statewide, compared with a 4.7 percent increase in the value of commercial and industrial properties. In Boston, the average property tax bill increased by more than 14 percent, and this year city residents will see an average 12 percent increase.

Cuts in state aid to cities and towns have also played a role in bringing property tax proposals to the fore, because dozens of communities have overridden Proposition 2, the state's property tax limit, to replace lost state revenue. Under Proposition 2, a community's total tax revenues cannot increase more than 2.5 percent from year to year, excluding tax revenue brought in by new construction. But a report released last year by the Massachusetts Taxpayers Foundation found that residents in 39 communities voted to override the tax limit in 2003, approving a total of $48 million in new revenue. That amount is twice the total of overrides in 2002 and more than six times the annual average between 1994 and 2000.

Seniors' "costs are going up so much that they are choosing between medicines and food, and one way we can help them is to try and hold property taxes down," said Senator Karen E. Spilka, an Ashland Democrat who has filed eight bills to provide tax relief to seniors. "We have a diverse community, and seniors are a strong part of that."

Support for senior tax relief appears to be strong on Beacon Hill, but potential pitfalls remain.

Last year, Romney rejected the final tax relief plan, because it included a provision that would have allowed cities and towns to exempt seniors from tax increases brought on by Proposition 2 overrides. Backed by antitax groups, Romney argued that the provision would have increased the chance of overrides by blunting the opposition of seniors, who tend to vote against them.

Instead, the governor proposed letting voters in the city or town decide whether to exempt seniors, arguing that the people should have the power to decide whether to shift the tax burden from one group of citizens to another. Time ran out before a final compromise could be reached.

Although Romney is professing support for the idea again, any plan that lightens the tax burden on seniors is likely to increase it for everyone else, because most cities and towns will tax up to their Proposition 2 limit.

"Currently, there are myriad options available to provide tax relief to various groups in Massachusetts," the Revenue Department report states. "Generally, when these programs provide relief to one group, other local or state taxpayers must pay more."