Working Families, Elderly Slated to Pay Higher Property Taxes

Thursday, April 4, 2013 at 11:56 AM by

Low-income people will continue to face steadily increasing property taxes unless the Legislature takes action to adjust an important property tax credit for inflation, according to a new analysis from the Wisconsin Budget Project.

The Homestead Credit lowers property taxes for owners and renters of limited means who are generally ineligible for the state’s Property Tax Rent Credit. More than a quarter of people receiving the Homestead Credit are 66 years old or older, and more than half of all recipients have income of less than $15,000 per year, according to the Wisconsin Department of Revenue. Unlike almost all of the state tax code, the Homestead Credit is not adjusted for inflation.

Because it is not adjusted to keep up with the cost of living, the value of the Homestead Credit has been significantly eroded by inflation and will continue to erode further unless policies change. As a result of the gradually decreasing value of the credit, low-income owners and renters are paying higher property taxes. The average value of the credit has fallen by 27% over the last two decades, as shown in the chart below.  In addition, the number of people eligible for credit declines as their incomes gradually rise above the frozen eligibility limit. 

The current administration and legislature place a high priority on implementing tax cuts, but policymakers have not yet taken action to head off the steady property tax increases that accompany the shrinking Homestead Credit. If policymakers are concerned about holding down taxes for low-income people, they could slightly reduce the cost of the income tax cut proposed by Governor Walker and use those resources to adjust the Homestead Credit for inflation. The cost of indexing the Homestead Credit would only be about five percent of the cost of the income tax cut.

The full analysis can be read here: Property Taxes for Low-Income People Will Rise Unless Legislature Takes Action.

Tamarine Cornelius


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