Property-tax-deferral plan could give seniors a break
But their heirs would be faced with hefty levies
"People (who) have worked hard to have a home, living on a fixed income, should not be threatened with escalating property taxes," said Sen. Curt Bramble, R-Provo, co-chairman of the Interim Revenue and Taxation Committee.
An automatic property tax increase deferral would come to any homeowner over 65, regardless of their financial situation, should they seek it. They would still owe each year the "base" property tax, they just wouldn't have to pay any property tax hikes for the rest of their lives.
When the house was sold or the homeowner died, the heirs would have to pay the back taxes with 6 percent interest or the federal fund rate, whichever was lower.
Salt Lake County Treasurer Larry Richardson asked if it was wise to give anyone over 65 the same back-tax interest rate as is now given to poor seniors who get property tax abatements under the current Circuit Breaker law.
"Six percent doesn't look bad today" compared to alternative investments, said Richardson. But in recent times it would be rather easy for someone to take their deferred tax and invest it at greater than 6 percent and thus make money on the new program.
But Bramble, who is a certified public accountant, pointed out that under current county practices, a homeowner can choose not to pay their whole property tax — not just an increased value each year — for up to five years. And take that money and invest it.
"They can get a cheaper loan from you guys than from the banks," Bramble said.
Perhaps, said Richardson. But the county now charges the federal funds rate plus 6 percent on back taxes, so it is much harder to make that much in investments than under the new bill's interest rate of 6 percent or the federal fund rate.
Because of rapid home appreciation in southern Utah, some homeowners in Iron County will see their taxes go from $1,200 to $3,000 in one year, legislators were told in meetings held Wednesday.
To make sure that counties, cities and school districts — which levy most of the property taxes — don't lose cash from one year to the next or see great fluctuations in property tax revenues, the bill's sponsors will set up a private market mechanism to establish a financial pool.
Each year, the county will borrow money out of the pool equal to deferred property taxes by senior citizen homeowners, so no government agencies will be harmed financially.
As deferred taxes are paid back to the county (which collects property taxes for all entities), the loans will be paid back to the pool.
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