Debate over Amendment #6 that voters will weigh in upon this fall illustrates a tax system so riddled with exceptions that the best strategy might be to dispense with property tax on homesteads.
The amendment would build upon the special assessment level now granted constitutionally to individuals 65 or older, as well as to some younger who are disabled or who are widows and widowers of those who once qualified (which includes active duty members of the armed service killed in the line of duty), as long as they remain at that homestead that is not significantly improved and their income doesn’t exceed (starting next year) $150,000. This exemption freezes the assessed value of the property at the last quadrennial round’s amount, almost certainly reducing property taxes that otherwise would be paid.
Each municipality and parish would have a chance to opt into this by popular vote, and if passed all taxing bodies in their jurisdictions would have to abide by the decision. If passed, it would increase the homestead exemption based on age, at the oldest range going far above the current $75,000. School boards in particular have complained that with this they would have no say in what happens to their ability to raise revenues, and it would create confusion and inequity if some municipalities in a district opt in and other out, or the parish does or doesn’t compared to the municipalities within it. For example, while Monroe derives about 8 percent of its total non-business revenues from ad valorem taxation, Monroe City Schools with the same boundaries gets about 16 percent.
About 70 percent of local revenues nationally are collected through property taxation, which policy-makers generally prefer as these provide for a stable base, predictable changes, and usually slowly increase. However, property owners typically have a dimmer view because it uniquely is a tax on wealth and on an asset generally the largest in a household and one not held primarily for investment purposes. It can be especially hard on people with fixed incomes like the elderly, which was the impetus behind the creation of the SAL.
Louisiana, though, is an outlier. Ad valorem taxation comprises on average less than 20 percent in total non-business collections for all local governments, mainly due to the relatively high homestead exemption and differential rates that hit business harder so that sector pays the lion’s share of property taxes (and why such huge individual exemptions, such as with the Hyperion project in Richland Parish, end up implemented in order to compete with other states).
So, abolishing property taxation for a homestead may not have that big of an impact if (except for municipalities) already such taxes are low – in Ouachita Parish, for example, about a quarter of all properties for that reason are fully exempt from nonmunicipal property taxes anyway – when business must pay the vast majority and also with SAL exemptions already in place – using another Ouachita example, of the nearly 85,000 total taxpayers, another more than 7,000 qualify currently for an SAL.
That policy, dropping any homestead from the tax rolls, would produce a more efficient tax regime than handing out a myriad of exemptions and having a high homestead exemption that could go much higher on a sliding scale. Note that non-homesteads still stay taxed, and if really squeamish about potential lost local revenue there could be a $150,000 cap on income, based upon the idea that lower fixed income households suffer disproportionately from ad valorem taxes, to qualify.
This would make for a much different amendment instead of #6 that creates more exceptions and complexity that ever, but one well worth considering in the future.
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