The Upcoming Senior Property Tax Freeze Vote in Boone County

A version of the following commentary appeared in The Columbia Missourian.

Several years ago, my colleagues and I were debating what the worst possible tax policy change could be. (I work at a think tank, so conversations like this are normal.) We settled on “exempting lottery winnings from income taxes.” While it may not be quite as bad, the ongoing proposals before Missouri counties to freeze the property taxes for senior citizens are similarly misguided attempts at tax reform. Boone County is the first county to put this question before voters, who will vote on Proposition One on April 2. Hopefully, Boone County voters will see through the sympathetic arguments for the plan and realize that this is very poor public policy.

Last year, state legislation authorized any county to freeze the real property taxes of the primary homes for senior citizens who qualify. Their property taxes will stay at the same amount they are when they become eligible for the plan, which for most people would be when they turn 62. The purpose of the proposal is to help senior citizens stay in their homes as they age, but there are several major problems with this idea.

This proposal is harmful simply because it reduces the property tax base. Unless local governments in Boone County cut services in response to the enactment of this tax freeze for seniors, it will almost certainly lead to higher tax rates on those property owners not eligible for the freeze. Proposition One will be every bit as much of a tax increase on non–senior citizens as it is tax relief for some senior citizens. People who live in homes of similar value with similar public services should pay similar property taxes. The recent college graduates in Columbia who have lived in their home for a year should not pay higher property taxes than their neighbor just because the neighbor has lived there for two decades.

Concerns over reducing the tax base are especially applicable in Boone County, with its substantial amount of university-owned property that is already off the tax rolls.

Passage of this proposal would also lead to the problematic situation in which people vote on property tax increases that they themselves do not pay. The single best aspect of property taxation is that it imposes the costs of local services on the people who use those services, unlike sales or hotel taxes that are exported in part to visitors, shoppers, and others. Instituting a system in which people vote on property taxes they won’t pay breaks that beneficial connection.

For a cautionary tale about the dangers of property tax subsidies, consider California’s famous Proposition 13, which was passed in 1978. Prop. 13 limited the increases in property assessments and taxes for homeowners. The measure has certainly had its intended effect of keeping property taxes low for longtime California homeowners. However, it has also reduced mobility, dramatically increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities between similar properties. This is not what Boone County needs.

According to data from the Federal Reserve, people ages 65 to 74 have the highest net worth of any age group. So why, if we were to pick any age group for tax exemption, would we pick the wealthiest among us? (People over 75 have less wealth than those 65–74 or 55–64, but they have a higher net worth than any age grouping under 55.) We shouldn’t be handing out property-tax exemptions to anyone, whether those exemptions take the form of corporate subsidies, developer abatements, or senior-citizen tax freezes.

Passage of Proposition One would certainly benefit some of Boone County’s senior citizens, but it would alter the county’s property tax and assessment system in a myriad of harmful and biased ways. Property taxes work best when the assessments are accurate, the base is wide, and the rates are low. Proposition One does not move Boone County in that direction.