Thumbs up, down, sideways on the Homestead tax credit
You've been having a very interesting conversation about the fairness, or not, of the Homestead tax credit, which caps property-tax increases for owner-occupiers once they've been in their home a full tax year. (The idea is to prevent tax shocks for longtime owners, but it also means that their newcomer neighbors pay more. Sometimes a lot more.)
Aaron, arguing in favor of the credit, wrote: "The homestead credit encourages people to stay where they are and discourages flipping, in principle. It promotes stable neighborhoods. Whether it's high enough now to actually do that (or policed well enough) is another question. But it's not designed to make everyone's tax bills equal, or equally low, nor should it."
Jelena, who's looking for her first house, took the no-thanks view: "Taxes pay for roads, schools, emergency services, etc. If someone bought a house 30 years ago, they are using the roads today and they need to be maintained today at ... today's cost. And I agree that it's 'robbing Peter to pay Paul'."
Andy can see it both ways:
elweedz offered a proposal: "Both tax credits and the federal tax deduction for home mortgage interest should be abolished. There is no reason so subsidize homeownership. Renters have no such subsidy. Why should we favor one group over another? The net effect will be to reduce home purchase prices. Rooting for high home values is like rooting for a high energy bill. When will the mass public realize the false sense of wealth that the gov't and the banks portray as it relates to owning a home?"
(See the rest of the proposal here, which drew an "elweedz for President! Or at least for Governor" response from Jelena.)
And mjm shared a personal experience about buying a home in the area:
My only miscalculation: the Homestead credit whammy. ... Listings and estimated monthly payments reflect the seller's situation, not yours if you buy the house. In my case the seller had been there 32 years and had huge Homestead and other credits. Homestead limits property taxes increases to 4% -- except for the first year in a new home. So I saw a 74% increase in my property taxes! ...
I can see how this inhibits home buying (if you knew your taxes might double) -- or could send some new homeowners into foreclosure (if they didn't see this coming). I think it is good to promote longevity and ownership to make stable neighborhoods (too many careless renters was causing our old neighborhood to fall apart). But there should also be a cap on how big this first-year property tax whammy can be: even a 20% cap would be much much better than the 74% I saw. Ouch!