Property Rights

Property Tax Deferrals: A Solution for Seniors

Ryan Vance is a Policy Research intern with the Libertas Institute, a free-market think tank in Utah. He is currently working on a Master’s degree in Political Psychology through Arizona State University.

Can you imagine your grandparents suddenly losing the home they’ve lived in for 30 years? This is entirely possible. Property taxes are creating an unbearable burden on the elderly. The elderly need reliable relief, and property tax deferrals might just be the answer. 

Since 2019, property taxes have been rapidly rising in Utah counties. Some cities, such as Ogden and Brigham City, saw increases of 25 to 70 percent in 2019. On an even more extreme scale, small towns such as Charleston and Joseph experienced increases of up to 130 percent in that same year. While most towns and cities have seen less egregious increases, the overall pattern has been a grievous burden, especially on those less financially fortunate. 

These increases spell trouble for the vulnerable elderly population, whose passive income won’t rise with the property taxes. This, in turn, creates financial hardship for even the most responsible homeowners who won’t have the funds available to afford these increases, consigning them to potential debt and economic burden.

This is where the concept of a property tax deferral comes in. With such a program in place, homeowners over the age of 75 with an income of less than $65,000 a year can apply to forgo the payment of such taxes until the sale of their home or a transfer of ownership takes place, at which time all deferred taxes will be paid back with three-and-a-half to five percent interest. 

This deferment allows for the homeowner to save and prepare for these increasing payments as opposed to being immediately overwhelmed with rising property taxes and finding themselves unable to afford their home.  

Other states have instituted similar programs with great success. According to information provided by members of the Department of Revenue from Idaho, California, and Minnesota, repayment rates never dipped below 95 percent. This is a fantastic indicator that the people using the program are financially responsible and have the ability to pay back their property taxes at the end of the deferral period. 

Not only are the repayment rates exceptional, the potential for self-sustainment is high. In an interview with David Brimmer, a research agent in Oregon’s department of revenue, informed me that, “In the past two decades it has cost the state essentially nothing… Historically, particularly in the early years of the program, the taxes paid by the deferral program exceeded the repayments received such that the state continually appropriated money to fund the difference, but that hasn’t been needed since 1994-95.”  

In other words, the program no longer needs government funding because the money gained back with the interest rate ensures that, over time, the program pays for itself. A similar story was also told when interviewing a representative from California’s department of revenue as well.  

Even when the programs aren’t at the point of self-sustainment, they don’t take a lot of money from the state. When interviewing members of the department of revenue from both Wyoming and Idaho, they revealed the costs to be quite reasonable. In Wyoming, the total cost per year for the state was $22,184 in 2019. In Idaho it was even lower, with a total yearly cost of $3,000 in 2019. 

Part of the reason the yearly costs are so low is the small amount of money deferred. For instance, in Idaho, people were deferring $685 on average via the state program. 

A tax specialist for Idaho’s Property Tax Reduction Unit, Pamala Waters, stated the reason for the low deferral rates to be that, “These people don’t want to be on the hook to the state for money.” 

This is another great testament to the depth of responsibility felt by those who normally use the program.  

The Utah Legislature has been studying this concept since last year. It was prioritized for last session as a committee bill, but failed to pass on the final night. 

Senator Lincoln Fillmore brought the idea again to the Committee of Revenue and Taxation interim meeting last week and pointed out how fair it was in comparison to other forms of tax relief, such as exemptions. Because exemptions have the potential to remove property tax payments entirely, the burden of the unpaid taxes is borne by everyone else in the community. 

Deferrals fix this problem by implementing a payback system, creating an increase in accountability, and ensuring a net neutral (if not net positive) effect for overall property taxes. The committee has seen potential in the idea and passed a motion to have a bill formally drafted in preparation for next year’s legislative session.

A property tax deferral program for seniors could significantly help the elderly who are struggling financially, and the rest of the community won’t have to pay more in order to provide it.