In 2007, then-Gov. Ted Strickland proposed and state lawmakers approved an expansion of the homestead exemption. They departed from past practice, removing the income threshold, making all homeowners age 65 and over eligible for the property tax relief. In 2012, the exemption translated into $400 million returned to senior property owners across the state.
Thankfully, the policy has been changed. As part of the current state budget, Gov. John Kasich and state lawmakers have restored a means-test. Starting with the new year, they have restricted eligibility to those senior homeowners with annual incomes of $30,000 or less. Actually, state officials argue the threshold is somewhat higher, because Social Security and other retirement and investment income are not included.
This is a smarter approach, scarce resources managed more effectively, property tax relief directed to those in need. Yet, as Policy Matters Ohio, a Cleveland-based think tank, noted in a report last month, the exemption remains “out of whack” in certain ways.
For instance, those wealthier homeowners who have enjoyed the relief the past four years continue to receive the tax break. Nothing has changed. They have been “grandfathered.”
Joe Testa, the state tax commissioner, told the Gongwer News Service that once the tax relief had been given, the Kasich administration didn’t think it was appropriate to take the exemption away. That reasoning runs counter to Testa also explaining to Gongwer that the program has returned to its original purpose of helping lower income seniors stay in their homes.
Some wealthier seniors with little, if any, chance of losing their homes continue to receive the tax relief. As Policy Matters Ohio pointed out, the resources routed to these homeowners could be used more productively, say, bolstering education and other services under stress, or supporting a more generous state Earned Income Tax Credit, aiding the working poor.
More, the exemption now is glaringly unfair. Consider a wealthier homeowner, just turning 65 and now ineligible for the tax relief. He or she may have a neighbor who still benefits. The Strickland administration clearly pandered to seniors in expanding the exemption. Now the Kasich team essentially has done the same, unwillingly to roll back the relief for an obvious reason: the potential backlash from seniors.
Defenders of the change argue that it should be seen in the context of other tax relief. Yet that hardly alters the essence of the problem, the unfairness at work. This isn’t a sound version of tax reform. The governor and lawmakers deserve credit for moving in the right direction. Now they must take the necessary additional steps to fix the problem they have created.