Wednesday, February 3, 2010

Property tax impact on the elderly

A study published last month by the University of Wisconsin examines whether high property taxes force senior citizens out of their homes. Their basic conclusion is that total household expenses, of which taxes one factor, are the more statistically significant indicator. The full article is a little dry, but here’s an excerpt from UW’s news release about the findings:
When pushing for limits on property tax increases, politicians and policymakers often use anecdotal evidence to argue that high or rising property taxes force homeowners, especially the elderly, to sell their homes, according to a study by economist Andrew Reschovsky, a professor in UW-Madison's La Follette School of Public Affairs, and state Department of Revenue economists Rebecca Boldt and Bradley Caruth.

But while property taxes can mean economic hardship for some elderly homeowners who want to stay in their homes, taxes aren't driving them out, the research says.

The study found only a small increase in the probability of moving among older elderly homeowners who experienced large increases in property taxes. In younger households, property taxes had even less of an effect on moving.

Across Wisconsin, only 389 homeowners moved in 2005 because their property taxes grew faster than the median change in property taxes during the previous two years, the study found. Of those 389 homeowners who moved, 85 were older than 79.

"Some homeowners in Wisconsin do face high property taxes relative to their incomes," Reschovsky says. "But most taxpayers who are struggling, even among the elderly, are not picking up and moving because of property taxes. Property taxes are only one part of the cost of living."

However, older elderly homeowners can be more sensitive to large increases in property taxes than younger households, the study shows.

Of all homeowners, one in 1,600 chose to move in 2005 because of an above-average increase in property taxes. But one in 300 older elderly households moved because of larger than average property tax increases.

A final note: the researchers say they used a “rich data set” based on Wisconsin tax records. If you look at the full article, they sure do have a lot of figures and graphs to back up their conclusions, although I wonder if the results would be the same for other states.

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