Senate considers tax-deferral idea

JEFFERSON CITY, Mo. -- As the General Assembly searches for ways to protect homeowners from rising property taxes, one lawmaker has offered a potential solution that is at least drawing high marks for being innovative.

State Sen. Wayne Goode, D-Normandy, is sponsoring legislation that would allow many homeowners age 62 and older to defer paying property taxes on their residences until they die or sell the property.

"This deals with people who are property rich and tax poor, which is the case with a lot of senior citizens," Goode said.

Modeled on an Oregon law, a homeowner who chose to defer property taxes would have a lien placed against his property. At the time ownership of the property changed hands, the lien plus 6 percent annual interest would be paid off from the sale proceeds or, in the case of the death, from the owner's estate.

Senior citizens with annual incomes of $32,000 or less could defer up to 100 percent of their property taxes. Those with household incomes between $32,000 and $64,000 could defer only taxes above what they paid when they turned age 62. For those already over 62, their 2001 property tax bills would serve as the base year.

Cost not yet calculated

The state would reimburse taxing jurisdictions for lost revenue, though the cost of Goode's legislation hasn't yet been calculated. Goode said the state would incur some startup costs to create a revolving fund to reimburse taxing jurisdictions. The fund would eventually become self-supporting as tax liens are paid off and deposited in the fund.

Goode said the deferment system has worked well in Oregon for more than 30 years, though few, if any, other states have followed its lead.

During a hearing before the Senate Ways and Means Committee, representatives of education groups lauded the proposal, which they said would protect elderly homeowners without financially harming local school districts, the primary beneficiaries of property taxes.

State Sen. Michael Gibbons, R-Kirkwood and the committee chairman, said Monday that Goode's bill "is one of the most interesting ideas" he's seen concerning property tax relief. However, he's not yet sold on it.

"My concern about it is that it sort of follows the philosophy of 'let's not pay today, let's pay tomorrow,'" Gibbons said. "I can't come to grips with whether that's a good idea or bad idea."

A dozen reform ideas

Gibbons' committee is considering a dozen property tax reform measures and is expected to adopt a compromise bill within the next week. He said he wasn't sure if Goode proposal would be a part of that.

During last week's hearing, an issue not addressed by any of the bills filed to date came up that could change the direction of property reform efforts. Testimony indicated that mandated property tax rollbacks following reassessment cycles may not be protecting homeowners as intended.

All property in Missouri is reassessed every odd-numbered year. In most counties, property values have steadily increased following reassessments.

Taxing jurisdictions are required to roll back their tax rates so that they don't take in additional revenue, except for adjustments for inflation. However, rollbacks are implemented at the same rate throughout a jurisdiction, meaning some property owners still pay more in taxes while others actually get tax cuts.

This is particularly true for commercial property owners. While homes are assessed at market value, which usually goes up, commercial property is assessed on its earning potential, which changes little. As a result, commercial owners get the biggest breaks from rollbacks.

"I think its been pretty clear across the state there has been a shift in tax burden from commercial and industrial property to residential, and that's because the rollback doesn't work right," Gibbons said.

How to fix the rollback remains a question with no clear answer, Gibbons said.

Goode's bill is SB 902.

mpowers@semissourian

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