Tax the guy behind the tree
Updated: Sep 27
"Don't tax you, don't tax me, tax that fellow behind the tree!" Senator Russell Long
Taxes are more complicated than anyone can imagine. As a CPA and tax preparer, I've seen my share of unfair tax laws and smart tax laws, and the new Missouri law allowing counties to freeze property taxes for seniors falls into the first category.
To recap, SB 190 allows counties in Missouri to freeze property taxes at levels when they reach age 62, and keep them frozen for decades, since most people reaching that age will live into their 80's. (From the way the law was written, it could be argued that an 82 year old homeowner could have their property taxes reduced to what they were 20 years ago.)
On the surface, this bill seems like a good thing, as senior citizens often are homeowners with fixed incomes. Property taxes have risen recently, and some seniors certainly could use relief.
But the big thing that Missouri legislators missed was including income limitations on this freeze. Many of my clients in Illinois take advantage of the state's senior property tax freeze, which is limited to households below a certain income level (currently $65,000). Illinois residents apply for the freeze annually, and have to report all of their income. Senior citizens who are still working full time, or who live off of generous pensions and large retirement accounts generally don't need any assistance with paying their property taxes, and many of them sit on the most valuable real estate in their areas.
No one knows what kind of financial hit the counties could suffer from this property tax freeze. Services like fire, police, and education would likely face cuts, or else those under 62 will have to shoulder more of the burden. Millennials are currently struggling to even afford houses in the current market, and they could be just as deserving of a tax abatement as seniors. This entire bill stinks of politicians catering to tax cut fever without looking at the repercussions down the line.
Now each county is facing intense pressure to go along with this tax cut, and no one seems to be asking the important questions. How do we pay for all of this? Is this fair to homeowners and renters alike? How much difference will it make?
Tax policy is full of thorny questions. The goal for any governmental body is to collect taxes in the least painful way and disburse that money where it will do the most good for the citizens. Hopefully we can all at least agree that fire, police, schools, parks, libraries, and roads are valuable local resources that deserve to be funded. The tricky question is how, and how to make it fair and the least destructive. Letting rich homeowners off the hook fails that test.
There are plenty of tax questions that need to be looked at these days. Is it fair that drivers of electric cars don't pay any gasoline taxes to maintain the roads that they drive on? Why should St. Louis city and county residents be the only ones paying into the zoo/museum district that the entire region enjoys? Should people who work from home for a St. Louis company be required to pay the 1% earnings tax? Can anyone explain why Missouri has the lowest cigarette tax in the US by far while the data is indisputable on how bad cigarettes are for public health? How is it that investment income, considered passive and unearned by the tax code, gets taxed a lower rate than earned wages, which are the thing that keeps America working?
All of these questions require complicated trade-offs and serious discussion, which is not something I expect anymore from Jefferson City or Washington. We the people need to raise our expectations of our elected leaders and realize that there never has been a free lunch. You get what you pay for and you reap what you sow.
The St. Louis County council was wise to hold off on deciding to go along with this bad idea. But they, and most other counties in the state, will be under a lot of pressure to do it anyway. Nobody wants to see vulnerable seniors lose their homes, but nobody wants to see police or schools cut services either. There has to be some intelligent, thoughtful discussion and planning here, and St. Louis City and County can lead the way for the rest of the state.
* This essay was published in the St. Louis Post Dispatch on September 27,2023, my 21st entry in that publication.