Testimony of Jenny Reed, Policy Director, at the Public Hearing on B20-318: The Senior Citizen Real Property Tax Relief Act of 2013

Chairman Evans and members of the Committee, thank you for the opportunity to testify today.  My name isJenny Reed, and I am the Policy Director of the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents. 

I am here today to testify on Bill 20-318, “The Senior Citizen Real Property Tax Relief Act of 2013.”  The bill would exempt from property tax anyone who is older than 75, has lived in DC for 25 years, and has less than $60,000 in adjusted gross income.

We share the goal of the bill, to provide property tax assistance to low- and moderate-income residents who struggle to keep pace with the rising costs of living in DC.  At the same time, it is important to note that the District already has a number of tax provisions that help low-income seniors, including expansion this year of DC’s Schedule H tax credit.  The Schedule H changes will provide substantial assistance for lower-income residents with high property taxes or high housing costs relative to their income. In addition, the Senior Citizen Real Property Tax Act would eliminate property taxes entirely for some DC residents but provide no tax help to other residents in very similar situations, raising concerns about its structure. 

The District’s tax system has several provisions that assist senior citizens.  The District reduces the property tax rate by 50 percent for senior citizen homeowners 65 or older with adjusted gross income under $100,000 (under $125,000 as of January 1, 2015).[1]  In addition, the District entirely exempts social security income from taxation.  These provisions greatly reduce taxes for a large number of senior citizens.

In addition, the District just funded reforms to its low-income a property tax credit that will help both homeowners and renters with incomes below $50,000, including seniors. Over the past year, the Council passed ‘ and implemented ‘ significant improvements to Schedule H, with leadership from this committee and you Chairman Evans.  These changes will improve both the reach and effectiveness of Schedule H at helping residents deal with rising housing costs.[2]  Schedule H provides property tax relief to low- and moderate-income renters and homeowners in DC.  The program works like a circuit breaker, kicking in with a refundable tax credit, when one’s property taxes become too large a share of their income.  The improvements the Council made included raising the income ceiling from $20,000 to $50,000 by 2016, increasing the maximum credit from $750 to $1,000 and removing onerous rules that made it difficult for residents who shared housing ‘ but didn’t file taxes together ‘ to apply.    

Together, these programs provide significant property tax reductions to senior homeowners and renters.  In fact, estimates from the CFO suggest that up to 15,000 seniors, ages 65 and older, would be eligible for Schedule H tax relief once the improvements are implemented.  Even if participation isn’t 100 percent, as it is with most credits, the improvements to Schedule H would still reach a significant number of low- and moderate-income seniors in DC.

The Senior Citizen Real Property Tax Relief Act of 2013 would exempt anyone who is older than 75, has lived in DC for 25 years, and earns less $60,000 in adjusted gross income from any property tax.  This structure provides complete property tax relief to some households but no assistance to others in very similar situations.   A 74 year old resident would get no help while a 75 year old would pay no property taxes.  A 75 year old resident who has lived in DC for 20 years would get no help while a 75 year old resident who has lived in DC 25 years would qualify for complete tax elimination.  A long-term senior citizen resident would get help if they own their home but no help if they rent, even though a large share of residents are renters. 

Finally, the proposed bill does not include a mechanism to target relief to residents with the greatest challenges paying taxes. For example, it would provide the same relief for someone earning $20,000 in income as it does someone earning $55,000 in income.

For these reasons, we believe that the proper approach is to implement the recently adopted changes to Schedule H and then assess whether there are remaining gaps in tax assistance that need to be addressed.  Schedule H is well targeted, providing the greatest relief to those who face the highest property taxes as a share of their income, and available to both renters and homeowners. 

If there is a concern that residents with incomes between $50,000 and $60,000, those not covered by Schedule H expansions, may also need property tax relief, DCFPI suggests that the Council consider expanding the income eligibility for Schedule H    

Thank you for the opportunity to testify and I am happy to answer any questions.

[1] The reduction also applies to residents who have a disability, regardless of age.

[2] B19-0164, “The Schedule H Property Tax Relief Act of 2012″