Yesterday, December 28th, State Senator Ed Kennedy submitted testimony on two bills he filed regarding the effects of property taxes on the cost of living for senior citizens in Massachusetts: Senate Bill 1894, Resolve providing for an investigation and study by a special commission relative to a senior state property tax deferral program and Senate Bill 1895, An Act providing property tax relief for older adults. Community based tax deferral programs have been instituted by the Commonwealth to address this issue, however there are problems with this system.
Under the current system, a homeowner aged 65 or older may sign a tax deferral recovery agreement with their local assessor at a maximum of 8 percent. Once the homeowner passes the interest rate doubles to 16 percent with little opportunity to sell the property and cover the taxes. Senate Bill 1895 provides cities and towns the opportunity to lower the post-death interest rate on tax deferral and recovery agreements, as well as a local option to provide a 1-year grace period before increasing the interest rate following the homeowner’s death. Senate Bill 1894 creates a commission to study the issues raised in S.1895, through the establishment of a 3-year pilot program. The purpose of the pilot program is to learn what percentage of eligible households opts into the program to learn what size a revolving loan fund would be needed to administer a state deferral program.
His full testimony is below:
Dear Chairman Hinds and Chairman Cusack,
I appreciate the Joint Committee on Revenue considering the related matters, Senate Bill 1894, Resolve providing for an investigation and study by a special commission relative to a senior state property tax deferral program and Senate Bill 1895, An Act providing property tax relief for older adults and urge the Committee to support the favorable passage of these two pieces of legislation.
The cost of living in Massachusetts makes it difficult for senior citizens to stay here and in their homes. In order to lessen the blow of increasing property tax bills, the Commonwealth has instituted community-based tax deferral programs. However, there are problems with the current system that need to be addressed in order to make the deferral process fairer to both the homeowners and their heirs.
Currently, homeowners 65 and older may sign a tax deferral recovery agreement with their local assessor; during their lifetime the interest rate in most communities is 1-4 percent, with a maximum of 8 percent. However, once the homeowner dies, the interest rate skyrockets to 16 percent without a reasonable grace period to allow their heirs to sell the property and pay the taxes.
S.1895 would provide a local option, giving cities and towns the opportunity to lower the post-death interest rate on tax deferral and recovery agreements, as well as a local option to provide a 1-year grace period before increasing the interest rate following the homeowner’s death.
Additionally, in an effort to better reflect the realities of senior life, the bill lowers from 10 to 7 the number of consecutive years the homeowner must have resided in the home as their primary residence and allows cities and towns that wish to adopt a higher maximum qualifying income amount (above the $20,000 in the statute) to raise the income eligibility threshold up to $80,000, or the income levels permitted under the Circuit Breaker tax credit, whichever is higher.
The bill also gives assessors more discretion by allowing them to grant hardship waivers to adults with disabilities who are not yet 65-years-old.
Similarly, S.1894 would create a commission to study many of the issues raised in S.1895, through the establishment of a 3-year pilot program. The purpose of the pilot program is to learn
what percentage of eligible households opts into the program to learn what size a revolving loan fund would be needed to administer a state deferral program.
The commission shall consist of the House and Senate chairs of the Joint Committee on Revenue, who shall serve as co-chairs of the special commission; the commissioner of the Massachusetts Department of Revenue or a designee; The House and Senate chairs of the Joint Committee on Elder Affairs; 1 member appointed by the Senate minority leader; 1 member appointed by the House minority leader; 1 representative of the Massachusetts Statewide Independent Living Council; 1 representative of the Massachusetts Association of Councils on Aging; and 1 representative from the Mass Senior Action Association.
The commission shall review and evaluate the 3-year pilot as well as the experiences and policy efforts of other States. Topics of discussion for the commission shall include, but not be limited to: a) The effects that changes to tax laws would have upon the economic security of eligible taxpayers at all income levels; b) The number of individuals residing in the commonwealth who may benefit from potential changes to property tax laws considered by the commission; c) Any expenses for administering such a program; d) Consideration of any eligibility requirements relating to residency; and e) Consideration of the use of a formula to determine the maximum amount an eligible taxpayer may receive in property tax deferrals.
These programs and changes will make an enormous difference in the lives of many families throughout the Commonwealth, providing for a fairer and more equitable taxation system.
I respectfully request that S.1894 and S.1895 each receive a favorable recommendation. Thank you for your time and consideration on this matter.
