Is the Democrats’ proposed tax cut for Charlestown residents “discriminatory?”

Check the facts
By Will Collette

As you may have read – and will hopefully be reading – the Charlestown Democratic Town Committee (of which I am a proud member) has proposed that Charlestown adopt a “Homestead Tax Credit” that would give people who make Charlestown their permanent home a tax credit of $1000 off their property tax bill.

The proposal is modeled on similar tax credits that Charlestown already offers to veterans, senior citizens, the blind and the disabled. These existing tax credits reduce the tax bills of eligible property owners by a stated amount, just like the Homestead tax proposal.

Some critics have already emerged – Jim Mageau most prominently among them – who say the Democrats’ Homestead Tax Credit discriminates against the rich. If that is true, then Jim will have to turn in his veterans’ tax credit and we will need to revoke the credits we already grant – because the Homestead Tax Credit uses the same format.

Read the facts - the Democratic proposal to give Charlestown residents' a $1000 property tax credit is not unusual, radical, alien or discriminatory. We already offer similar tax breaks to Charlestown residents who are veterans, low-income elderly, blind or disabled. RI General Laws authorize cities and towns to offer homestead tax breaks. And every state in the union, except Delaware, has some form of property tax relief for residents. Please read on.

The effects of the credit will vary from household to household, depending on the value of  the home.

That’s why we have adapted the Progressive Charlestown Magic Tax Calculation that was so accurate in predicting last summer’s new tax bills. It’s now programmed to tell you what the property tax under the proposal. Detailed instructions here.

As we reported when the Democrats first went public with this plan, giving the estimated 2600 households who make Charlestown their home a $1000 tax credit will reduce the amount of taxes the town collects by $2.6 million.

By law, our budget must be balanced, so to give permanent residents a $1000 tax break, we will need to make up for that $2.6 million, most likely by increasing the tax rate. We estimate the rate will need to be adjusted upward by $1.10 per $1,000 of home value.

Yes, I know. Math panic. Mumbo-jumbo. But bear in mind that we already use exactly the same process to give tax breaks to veterans, the blind, disabled and elderly. Their tax credits are paid for by adjustments to the tax rate. If we eliminated those tax breaks, it would drop our tax rate. Show of hands - who wants to do that?

We don’t want to do that because we, as a town, have decided that veterans, the low-income elderly, blind and disabled deserve a break. In the same fashion, the Charlestown Democrats say so do those of us who make Charlestown our permanent home.

Use the Progressive Charlestown Magic Tax  Calculator and you will see what this proposal means to you.

Some examples:

·                     If you own your home, live it at least six months of the year and it is assessed at $100,000, the Homestead Tax Credit will save you $890 next year.

·                     If your assessment is $200,000, you will save $780 next year.

·                     If your assessment is $300,000, you will save $670. And so on.

·                     Even if your home is assessed at $900,000 and you are a resident, you will still save $10.

·                     At a $1 million assessment, a resident homeowner would only pay $100 more.

·                     The house with the highest assessment, owned by a Connecticut family, would not be eligible for the Homestead Tax Credit. Still, their tax bill would only go up $6620.

Yes, the rich would pay more, but only because their homes are assessed at a higher value. That’s not discrimination – it’s just arithmetic.

Non-residents would pay more, too, in the same way that those of us who are not veterans, not blind, not disabled or not low-income elderly pay more to fund the tax credits received by vets and the others eligible for existing town tax credits.

Homestead exemptions are common throughout the United States (see table listing state-by-state homestead policies). There are eight Rhode Island cities and towns with Homestead exemptions in place.

Rhode Island’s Homestead exemptions have passed the test of time. The Charlestown Democrats proposal draws on that tradition.

The Charlestown Tax Credits for veterans, the elderly, blind and disabled have also stood the test of time. Can you remember anyone calling any of those tax credits discriminatory, even though their benefits are focused sharply on a very selective group of residents? The Democrats Homestead Tax Credit proposal uses exactly the same format as these existing tax credits.

Also note that Charlestown’s tax credits for veterans, elderly, blind and disabled are for residents only – non-resident veterans are not eligible.

Finally, Charlestown’s non-resident property owners probably already get a Homestead property tax break in the state where they have their primary residence because just about every state in the union has state law that provides for such tax breaks.

In fact, only Delaware lacks any provision for a tax break for residents. South Carolina, Pennsylvania and New Jersey do not have tax breaks called homestead exemptions, but have other measures in place that have the same practical effect.

Here is a run-down on the state statutes providing Homestead tax exemptions:

• Alabama - Up to $5,000 in value, or up to 160 acres in area. - Code of Alabama, § 6-10-2 

• Alaska - Up to $64,800, no area limitation. - Alaska Statutes, § 09.39.010 

• Arizona - Up to $100,000, no area limitation Arizona Revised Statutes, § 33-1101 

• Arkansas - Up to $2,500 in value, or at least ¼ acre for city homesteads, 80 acres for rural homesteads Arkansas Code, §§ 16- 66- 210 and 218; Arkansas Constitution Article 9 

• California - Up to $50,000 in value. California Code Annotated, §704.730 

• Colorado - Up to $45,000 in value, no area limitation Colorado Revised Statutes Annotated, §38-41-201 

• Connecticut - Connecticut General Statutes Annotated, § 52- 352b 

• Delaware - None - provided Delaware Code Annotated, §4901- 3 

• District of Columbia - D. C. provides an exemption equal to owner's aggregate interest in real property (No monetary or area limitations) District of Columbia Code § 15- 501. DC does not call this a homestead exemption. 

• Florida - Exemption equal to value of property as assessed for tax purposes (No monetary limitations) - area limitations of ½ acre urban land or 160 acres rural land Florida Constitution, Article 10 § 4 

• Georgia - Up to $5,000 in value, no area limitation. Code of Georgia, Annotated, § 44- 13-1 and 44- 13- 100 

• Hawaii - Up to $20,000, but the head of a family and persons 65 years of age or older are allowed up to $30,000, no area limitation Hawaii Revised Statutes, §§ 651- 91, 92 

• Idaho - Up to $50,000 in value, no area limitation Idaho Code § 55- 1003 

• Illinois - Up to $7,500 in value, no area limitation. Where multiple owners, can be increased to $15,000 Illinois Compiled Statutes, Annotated, § 734 5/ 12- 901 

• Indiana - Up to $7,500 for residence, up to $4,000 for additional property, no area limitation. Co-owner, if also a joint debtor, may claim additional $7,500. Annotated Indiana Code, § 34- 55- 10-2 

• Iowa - No monetary limitation, but a minimum value of $500 - area limitations of ½ acre urban land or 40 acres rural land Iowa Code Annotated, §§ 561.2 and 561.16 

• Kansas - No monetary limitation - area limitations of 1 acre urban land or 160 acres rural land Kansas Constitution, Article 15 § 9 and Kansas Statutes, Annotated, § 60-2301 

• Kentucky - Up to $5,000 in value, no area limitation Kentucky Revised Statutes, § 427.060 

• Louisiana - Up to $25,000, but may include entirety of property in cases of catastrophic or terminal illness or injury. Area limitations of 5 acres urban land or 200 acres rural land Louisiana Statutes Annotated, § 20:1 

• Maine - Up to $25,000 in value, but may be up to $60,000 under certain circumstances, no area limitation Main Revised Statutes, Annotated, §4422 

• Maryland - Up to $3,000, but in Title XI bankruptcy proceedings, up to $2,500, no area limitation Annotated Code of Maryland, § 11-504 

• Massachusetts - Up to $300,000 in value, no area limitation Annotated Laws of Massachusetts, § 188- 1 

• Michigan - Up to $3,500 in value - area limitations of 1 acres urban land or 40 acres rural land Michigan Compiled Laws, § 600.6023 

• Minnesota - Up to $200,000 in value, but up to $500,000 if used primarily for agricultural purposes- area limitations of ½ acre urban land or 160 acres rural land Minnesota Statutes, Annotated, §510.02 

• Mississippi - Up to $75,000 in value - area limitation of 160 acres Annotated Mississippi Code, § 85- 3-21 

• Missouri - Up to $8,000 in value, no area limitation Annotated Missouri Statutes, § 513.475 

• Montana - Up to $100,000 in value, no area limitation Montana Code, Annotated, §§ 70- 32-101, 70- 32- 104 and 70- 32- 201 

• Nebraska - Up to $12,500 in value - area limitation of 2 lots, urban land or 160 acres rural land Revised Statutes of Nebraska, § 40-101 

• Nevada - Up to $125,000 in equity, no area limitation Nevada Revised Statutes, § 115- 010 

• New Hampshire - Up to $50,000 in value, no area limitation New Hampshire Revised Statutes, Annotated, § 480:1 

• New Jersey - No homestead exemption is provided, but an exemption for personal property of up to $1,000 is allowed New Jersey Statutes, Annotated, § 2A: 17- 1 and 2A: 17-17 

• New Mexico - Up to $30,000 in value, no area limitation New Mexico Statutes, Annotated, § 2-10-9 

• New York - Up to $10,000 above liens and encumbrances in value, no area limitation Consolidated Laws of New York, Annotated, CPLR § 5206 

• North Carolina - Up to $10,000 in value, no area limitation General Statutes of North Carolina, Annotated, §1C- 1601 and North Carolina Constitution, Article X 

• North Dakota - Up to $80,000 in value, no area limitation North Dakota Century Code, Annotated, § 47- 18- 01 

• Ohio - Up to $5,000 in value, no area limitation Ohio Revised Code, § 2329.66 

• Oklahoma - Unlimited in value - area limitations of 1 acre urban land or 160 acres rural land. However, where using more than 25% of property for business purpose, the value drops to $5,000. Oklahoma Statutes, Annoted, §§1 and 2 

• Oregon - Up to $25,000 in value - area limitations of one city block if within a city or 160 acres rural land Oregon Revised Statutes, § 23.240 

• Pennsylvania - No homestead exemption provided, but a general monetary exemption of $300 exists. Pennsylvania Consolidated Statutes, Annotated, §§ 8121, et. Seq. 

• Rhode Island - Up to $150,000 in value, no area limitation General Laws of Rhode Island, § 9- 26- 4.1 

• South Carolina - Although no homestead exemption is provided, an exemption for personal and real property of up to $10,000 in value may include property claimed as a residence Code of Laws of South Carolina, § 15- 41-30 

• South Dakota - No monetary limitation - area limitation of one dwelling house and contiguous lots used in good faith South Dakota Codified Laws, §§ 43-31-1 and 43-31-4 

• Tennessee - Up to $5,000, but may be up to $7,500 if claimed by two persons as a homestead, no area limitation Tennessee Code, Annotated, § 26-2-301 

• Texas - No monetary limitation - area limitation of 10 acres urban land or 100 acres of rural land if claimed by a single person. A family may claim 200 acres of rural land Texas Property Code, Annotated, §§ 41.001 and 41.002 and Texas Constitution, Article 16 § 51 

• Utah - Up to $20,000 in value, but only $5,000 in value if property is not primary residence - area limitation of 1 acre Utah Code, §78-23-3 

• Vermont - Up to $75,000 in value, no area limitation Vermont Statutes Annotated, Title 27, § 101 

• Virginia - Up to $5,000, but may be increased by $500 for each dependant residing on property, no area limitation Code of Virginia, §34-4 

• Washington - Generally, up to $40,000 in value, but may be unlimited if used against income taxes on retirement plan benefits, no area limitation Revised Code of Washington, Annotated, § 6.13.030 

• West Virginia - Up to $5,000 in value, but an additional $7,500 may be available in cases of "catastrophic illness or injury," no area limitation West Virginia Code, Annotated, §§ 38-9-1 and 38-10-4 

• Wisconsin - Up to $40,000 in value. No area limitation. - Wisconsin Statutes, Annotated, § 815.20 

• Wyoming - Up to $10,000 in value. Each co-owner is entitled to a homestead exemption. Wyoming Statutes § 1-20-101