Senior tax breaks: Selectmen lean toward means test
With tax breaks for senior citizens already approaching $4 million, the selectmen are moving carefully on the idea of creating more tax credits or deferment programs to reduce the burden on property owners over 65.
The selectmen seem to have reached at least a loose consensus in favor of putting a “means test” on any new or expanded senior tax breaks, so the benefits would be targeted to lower income seniors — as opposed to all taxpayers over 65.
“We felt if we do anything, it would be means tested,” Selectman Steve Zemo said Oct. 10, recalling the selectmen’s previous discussion of senior tax breaks back in June.
The board had returned to discussion of a request made early in last year’s budget deliberations by the OWLS senior citizen group.
John K. Fisher, president of the OWLS (the seniors group whose name comes from “Older Wiser Livelier Set”), laid out a three-pronged proposal for increasing tax programs that benefit senior citizens in February.
Fisher proposed three changes the OWLS had voted to request from the town:
- They sought an increase in the annual property tax reduction or “tax credit” for people over 65 from the current $1,048 per year to $1,200 per year.
- They also asked that the town “consider freezing the real estate taxes for people 75 years or older” so they would pay the same taxes year after year, exempt from increases in the tax rate.
- The OWLS also asked that the cut-off point for participation in the town’s “tax deferment” program for the elderly be raised from the current limit of an annual income of $55,000.
This program is designed to allow people with lower incomes to delay paying taxes, or a portion of their taxes, while living out their senior years in their homes. The money is collected by the town when the house is eventually sold, either when the senior moves from town or passes away.
In their Oct. 10 discussion, the selectmen reviewed background materials from Assessor Al Garzi.
The tax credit program giving any taxpayer 65 or older $1,048 off their tax bill is enjoyed by 1,675 households that receive a total of just over $1,739,000 a year, Garzi said.
Increasing the tax credit from $1,048 to $1,200 as requested by the OWLS — a $152 per taxpayer increase — would cost the town’s other taxpayers an additional $254,600 a year, Garzi projected.
A smaller increase, to $1,100, would cost $87,100 annually.
On the proposal to freeze taxes for property owners over 75, Garzi said there were 949 households with taxpayers over 75 that would qualify, and projected that with an estimated 2% annual tax increase by the town, the proposal to exempt people over 75 from the increases would require about $225,000 a year more from other taxpayers.
The third proposal would raise the cut off point for people to qualify for the senior tax deferment program, increasing it from the current $55,000 to $65,000 or $75,000.
Garzi said that currently — with only households with annual incomes of $55,000 or less eligible — there are 47 households taking advantage of the tax deferment program.
The total of deferred taxes is about $2 million, Garzi said.
“Are we going to start seeing some payback on that?” Selectman Steve Zemo said of the $2 million deferred.
“Every once in a while we do get $150,000 or so. Someone decides to sell or, unfortunately, passes away,” Garzi said. “It’s not something you can count on.”
The tax credit program granting seniors a $1,048 deduction from their tax bill is fairly stable, Garzi said, adding about 100 people a year but also losing about 100 a year as homes are sold to younger taxpayers who don’t qualify.
The biggest difference, the selectmen noted, is that taxes deferred are eventually collected by the town, whereas the tax credit or a freeze program actually reduces the amount seniors owe.
“The credit program, we don’t get it back,” First Selectman Rudy Marconi said.
Discussing the logic of a means-tested program, the selectmen recalled Fisher’s original pitch had emphasized the plight of hard-pressed seniors.
“He said folks at the lower end of things are really hurting,” said Selectman Steve Zemo.
The selectmen agreed that many seniors would be troubled by the notion of not carrying their full share — though that may be changing.
“There may be a different perspective from baby boomers,” said Zemo.
Marconi said some seniors felt strongly about means-tested programs, regarding senior tax breaks not as charity but as a recognition of the contributions they’d made to the town and society throughout their lives.
He recalled a senior arguing vehemently that putting a means test on senior tax programs amounted to a devaluing of the contributions more affluent seniors had made.
“That’s an insult,” he quoted the man as saying.
Some seniors defer just a portion of their taxes — they may “use it fix a roof,” Garzi said — while others “defer the entire bill.”
He added, “Of the 50 people, 25 refile every year, and average a tax bill of $13,000.”
Discussing the income limit on the deferment program, Zemo was struck by the extent of the burden lower income seniors bear.
“If you think about $55,000 and an average tax bill is $13,000, people are paying a quarter of their income,” he said.
Marconi noted that the $55,000 cap on incomes eligible for the deferment program was set 18 years ago when the program was created. As a result of inflation, a $55,000 income’s real value would have declined over the 18 years.
“Would we consider bumping that up a bit?” Marconi asked.
Garzi said he does get some inquiries from people interested in the tax deferment program, but who didn’t qualify due to the $55,000 income limit.
“We’ve had several people, five or six people,” he said.
Selectwoman Maureen Kozlark asked how quickly the total of taxes deferred had gotten to $2 million.
“It’s been in place 18 years,” said Selectwoman Barbara Manners.
“Is this likely to balloon up to $5 million?” Selectman Bob Hebert wondered. “Or, are we in a range — people come off and people come on?”
“People are living longer,” said Kozlark.
Zemo said “the bigger issue” was the OWLS request to increase the $1,048 tax credit that all seniors are entitled to.
The idea of adding a means test to that program had been proposed in the past, but people opposed had ended it.
“We’ve had the selectmen try twice to put an income requirement on it — it never got past 8 o’clock,” Garzi said.
As discussion ended Marconi said, “That leaves us with…”
“Increasing the deferement — the income cap for the deferment,” Selectwoman Barbara Manners said.
“We’ll put it back on the agenda,” Marconi said. “Get a little more information.”