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Should tax relief target the elderly? Demographic trends suggest that more people will retire than enter the work force between now and the year 2030.
The impact of this retirement is likely to cause state and local governments to evaluate the elderly population's ability to keep up with rising property taxes, since many seniors living on a fixed income don't have enough left at the end of the month to pay their property tax bill.
This occurs despite the fact that most Social Security and all Supplemental Security Income benefits give seniors a much lower income tax rate than younger households with the same pre-tax income.
However, if seniors remain in their homes when they retire, their property tax typically becomes a much higher proportion of income than during their working years. These taxes tend to be regressive for households with very low incomes.
To assist the elderly with paying their taxes, many states and counties have implemented sales tax rebate programs. The cost of such programs varies greatly, both in terms of total cost and in how those costs are distributed.
In Larimer County, Colo., the Department of Human Development began a Senior Citizens' Property Tax Work Off Program to assist all people over 60, who own and live on their property, to work off their tax bill. The program began in 1981 with $3,000 from the county's general fund allocated to Human Development for general purposes.
In 1996, the program had $19,675 and enough money to assist 78 seniors (based on a yearly average of 55 hours per person). The seniors are placed in various county departments and are paid $4.25 an hour. They can work off up to $250 of the Larimer County portion of their property taxes. The checks that the seniors receive for their work are made out to the Larimer County treasurer so that they can be easily credited to their property tax bills.
In addition to helping seniors pay their property taxes, the program is improving the image of the county. According to Sam Szymanski, who administers the program, "Retirees who work in county departments seem to walk away with a better image of county government and government workers."
In Riverside County, Calif., seniors who participate in the Tax Work Off Program are allowed to work in temporary, part-time jobs for the county in one of 21 departments. Seniors are paid at a rate that equals the federal minimum wage and are allowed to work up to 260 hours per year.
Aiken County, S.C. developed its program to assist the elderly in paying off their tax bills two years ago. "Seniors are forsaking retirement and returning to the work force," says Deborah Williams, administrator of the Senior Citizen Tax Work Off Program. "The county," she said, "enjoys the expertise, flexibility and dependability of these applicants."
The program achieves two things, added County Administrator William Shepherd. "It employs one of Aiken County's special category of resources - experienced senior citizens - and it helps local retirees, many of whom live on fixed incomes, to work off the county portion of their property taxes [excluding school taxes]."
In its first year, the program was a semifinalist in the State and Local Government Awards category of the 1994 Innovations Awards Program, sponsored by the Ford Foundation and the John F. Kennedy School of Government at Harvard University.
It's important to note that seniors participating in these programs are not replacing county employees. They augment services that counties provide.
Although these and other county programs are making great strides to assist the elderly, counties that offer tax breaks are narrowing their tax base and reducing their tax revenues. They also reduce the amount of revenue available for public programs and may increase tax rates on taxpayers that are not eligible for such programs.
Most county officials who have considered property tax work off programs find that despite reductions in tax revenues, the benefits of such programs outweigh the disadvantages.
(Research News was written by Angela M. Sides, research assistant.)