Senior tax freeze gains traction

Lawmakers agree on income limits based on county

By SHEILA WISSNER
Staff Writer, Tennessean.com
May 1, 2007

Thousands of Tennessee's senior homeowners would get a break on their property taxes as early as next year under a proposal that is gaining the kind of support on Capitol Hill that gives it a serious chance of passing.

Those 65 and older — and who have lower incomes — can have their property taxes frozen at 2007 levels under a constitutional amendment approved by voters last year.

Legislators are now discussing a plan that would vary the standard for "lower" incomes from county to county, depending on the relative wealth of the people who live there. Some 249,000 senior households statewide would qualify for it, the comptroller's office estimates.

The idea has quelled the concerns of cities and counties fearful of losing money if too many residents' taxes were frozen. With their guarded support, it might pass into law.

That pleases retirees like Dorothy Cunningham.

"It will keep me from having to go up to the assessor's office every year, trying to get it down,'' said Cunningham, 74, a widow living in Woodbine.

Right now, those age 65 or older making $20,000 a year or less can get rebates on property taxes they pay. More than 55,000 Tennesseans got the tax breaks last year, according to figures from the state comptroller's office.

Many people like Cunningham have too much income to qualify for that tax relief program, however.

But their incomes are low enough to qualify for the freeze, which would prevent their tax bills from growing any higher as long as they didn't make any home improvements that added to its value.

Median income is cutoff

For the tax freeze, the new plan would set the income limit at the median household income of people age 65 to 74 living in the county, as determined by the U.S. Census Bureau. The median is the middle point — half would make more than that amount and half less.

State Attorney General Bob Cooper had suggested using that method after ruling earlier this spring that the constitutional amendment voters approved last fall did not allow counties and cities to set their own income caps.

Though the calculation would be based on people 65 to 74, the tax freeze would be open to anyone 65 or older. Social Security benefits would count as income.

With the end of the legislative session just weeks away, lawmakers made a giant step forward last week in working out the plan on varying the income levels. Senate Majority Leader Mark Norris, who is also the plan's sponsor, said he expects it will pass, though a few details may change.

Even if it passes this year and becomes law, each city council and county commission in the state will have to decide individually whether to offer the tax freeze to its residents.

Where it's offered, the process by which people sign up for the freeze would probably be similar to the one used for the existing property tax relief program, which starts with homeowners filling out some forms with their county trustee's office or city tax office. Cities and counties would be able to pay the state comptroller's office to verify the incomes of seniors who apply for the freeze.

Some oppose proposal

When it was debated last year, critics of the freeze feared retirees who could afford to pay would be dumping their burden onto younger homeowners struggling to come up with money for their own taxes.

And local government officials had worried it would leave them without enough money to maintain services at current levels, forcing them to increase taxes to make up the difference.

Even though more than 80 percent of voters endorsed the freeze at the polls in November, some Tennessee homeowners remain cool to the idea.

"I don't think it's right,'' said Bucky Qualls, 39, a Donelson homeowner who said he voted against it.

Proposals in the legislature earlier this year had suggested statewide income caps of $50,000 or $60,000. Officials in a number of counties and cities — particularly smaller, more rural ones, where home values aren't as great — had objected to setting the income caps that high.

"We were concerned that all you were really doing was shifting the tax burden from one group to another,'' said Carole Graves, spokeswoman for the Tennessee Municipal League, an organization that lobbies the state legislature on behalf of city and town governments.

The House version of the plan is slated to be discussed Wednesday in a subcommittee.

The Senate version will come up later, when the proposed state budget and other high-dollar bills will come to the floor.

"It is the only compromise we have found that seems to satisfy a sufficient number of people,'' said Norris, a Collierville Republican. "You will always have some local governments who chafe at the notion of providing any tax relief. And for them, I would simply remind them that the program is optional."