TOM WARD - Yet another tax scheme begins to unravel

TOM WARD - Yet another tax scheme begins to unravel

And so, yet another tax scheme from the past is rearing its ugly head in communities across northern Rhode Island. It seems “senior citizen tax exemptions,” the reductions on property taxes for seniors, are beginning to bite a little too hard in Smithfield, Foster and Glocester. Other communities might begin to ask if these tax cuts were such a bright idea, too.

The truth is these tax breaks make sense in two big ways:

1. They offer relief to folks after retirement, when they can no longer as easily afford tax hikes.

2. Lower property taxes for seniors, it was thought, helps keep them in their homes and stops them from selling to a family which might put three kids in local schools. There is no doubt that this is a big win for the town. Whatever the town might sacrifice in revenue – usually no more than a few hundred dollars per home each year – is likely more than made up for by not having to build classrooms or hire teachers to educate the kids who would occupy the home after a sale.

In short, with these tax breaks for seniors, the school budget is lowered by keeping seniors in their three- and four-bedroom homes for as long as possible.

The uglier truth is that it’s also allowed politicians to buy senior citizen support at the polls by taking more money from younger homeowners. Like all political schemes, it didn’t cost much at the beginning, but over time, it has morphed into an unfair mess that’s difficult to untangle.

Smithfield’s tax deal “really isn’t sustainable,” said new Town Manager (and former Finance Director) Randy Rossi, who assumed his new post last week. Acknowledging the political hot potato, Rossi also said those getting the current breaks would likely be grandfathered in. So the unfairness stays.

While tax exemptions might not cost a community too much revenue, a tax freeze for seniors, as is the case in Smithfield and was the case in Foster, is a particularly generous and bone-headed idea. As reported by Jackie Roman last week, Rossi estimates that as much as “$9 million of tax revenue is held up in tax exemptions” (including the freeze) each year. This level of generosity to seniors is just plain crazy, and passes along larger tax bills to homeowners under age 65 and commercial property owners. For those in apartments, rents likely are higher than they need to be, as owners are burdened with unfairly high taxes.

So how does Smithfield undo its mess? I suggest it looks to nearby Lincoln, or even Woonsocket, for a few ideas. Lincoln offers seniors a $600 tax credit, a flat gift offered to those 65 and older who have lived in town for five years or more. Unlike a freeze, the deal doesn’t grow over time.

In Woonsocket some years ago, former City Council President John Ward (my brother) and his colleagues came up with a plan that allowed seniors to defer tax increases until they pass away, or leave or sell their home. In this case, the tax increases do not have to be paid while a senior is in their home, but the amount is still owed back to the city at a later date. The city holds a lien on the property, and the taxes due pile up as the years go by. When the senior finally leaves, the unpaid taxes come due. This protects the senior from the burden of ever-higher taxes, but also protects the city, as the money eventually comes in to help pay the city’s bills.

As politically difficult as it will be to take back the sweet deal so many Smithfield seniors are enjoying, a compromise might be to keep the deal in place, but let it be known that taxes uncollected from this year forward will be collected when seniors leave their homes. This might at least offer some hope for fairness to younger taxpayers.

Ward is publisher of The Valley Breeze newspapers

Comments

Seniors that are getting Tax Breaks, which results in less funds for the school system.

Back in the 1990's the Town's Republican Party held an kind of Open House at the old Sher le Mon on Mendon Road, across from the High School...the Guest Speaker was the then head of the Cumberland Teacher's Union. (NOTE: I was present!)

The subject of taxes and school costs were, throughout the evening, the primary topic of discussion.

He (Union President) continuously pointed out that once seniors are in a position wherein they cannot any longer continue paying their "Full Responsibility" of their Property Taxes, in order for the School System to have the funds needed to properly educated the community's youth, they should sell their home(s) to a younger couple, with children, that can afford those taxes. They (the seniors) could then move in with their kids or into a subsidized senior high-rise.

This kind of an attitude, directed at a segment of the community's citizens that more then paid their fair share over their working lifetime (40-year + or -) is despicable...this being how the teacher's union president felt the Community's Seniors should be treated.

It also has never ceased to amaze me how, over the years, so many of our schools have been deemed insufficient to teach our children and we need spend millions upon millions to build new ones.

And, what is it that is often recommended a community do with these soon to be vacated older facilities...we turn them into Senior Citizen Housing for those Seniors the School System want to see kicked out of their homes because they can no longer pay their fair Share" of the Community's Property Taxes.

This article needs more information.

First off, it sounds anti-family and anti-child. That's weird. The best communities are built around great school and solid families. That's not even debatable. So to discourage that, is foolish. Smithfield is a prime example of this. It is very desirable for the school district and as such is sought after by young families. Young families bring spending money, which in turns attracts businesses to take that money. Smithfield being right off the highway and surrounded by other rural towns is poised to be the center for activity. I'm not sure, given this situation, you want to artificially keep your seniors in those 3-4 bedroom homes.

Schools. The article makes it seem like by playing with the elderly discount, you will instantly overload the schools. What the heck? Kind of just the opposite. An efficient school system has the max number of students per class, while able to keep the performance. So having 20 students instead of 19, won't break the system. That extra kid actually spreads the cost by 1. Even if you have 5 new students all of a sudden, they all don't go in the same classroom. Different ages and neighborhoods will spread this out. So now you have 5 classrooms with 20 students each. There is new construction and new developments happening all over the place. This is what will put the burden on schools. You get the same neighborhood and similar type families all at the same time. People want to live in Smithfield, if your intent is to keep the elderly in place, the new families have no option but to move to those new homes.

Foster/Glocester is hurt by economy of scale. They are big areas that are sparsely populated. More families would be great for those areas. If they saw 100 more residents, that would bring in that much more revenue and be barely a blip on the expense budget.

The programs in place for senior exemptions are a mess. Some towns use a flat rate, some use a freeze, some do deferment. The deferment method was introduced to RI in the 70s (though I like the John Ward plug). The use in Woonsocket is nuts. First it defines elderly as 65 and as 70, in the same Ordinance Chapter. That's odd. Then it holds different criteria for the different methods. It becomes an administrative nightmare. I've personally seen the exceptions abused on two different occasions. What's stopping someone from putting a family member in a nursing home and taking over their house with the elderly credits still flowing? You end up with an elderly discount AND kids using the schools systems.

I don't like the deferment method. We are paying for these services today. What good is a lien 20 years from now?

I guess an elderly person that's in a nursing home doesn't own the property anymore. Is not entitled to an exemption after paying ever increasing taxes for decades!

Pretzel logic from Tom Keith.

"I guess an elderly person that's in a nursing home doesn't own the property anymore. Is not entitled to an exemption after paying ever increasing taxes for decades!

Pretzel logic from Tom Keith."

When you leave it my original context, the logic is fine. When you pluck what you choose, you can spin it how you like.

A typical scenario is adult children or heirs that boot the elderly owner into a nursing home. Instead of selling the original house, they'll just take it over without transferring the deed. They occupy the house with no real obligation to it. Many times, it turns into a pass through house, where you'll see the adult grandkids occupy the house or even pay rent to another family member.

So the elder is in a nursing home, not occupying the house, while all the bills associated with the property remain in their name...and the house becomes used for other purposes. By contrast, the Homestead exemption requires the owner to provide proof of residency to that property to prevent any kind of abuse.

If Tom Keith runs for office, remember that he wants to take away elderly exemptions just because some of you have been unfortunate enough to land in a nursing home.

Now he thinks it's his business how you run your affairs!

lol. And this is how you add words that aren't really there. I never said the claim that you made and you continue to take my words out of context. Thank you for trying to turn a discussion into a political attack. Bye

Isn't it sad we depend on a tax exemption to fund our schools. Maybe thought should be put into cost savings on education instead of trying to scrape up every dime off of people that have paid for years with no one in the school system or never had children. As far as booting people into nursing homes believe me the nursing home will get their share of any assets left behind . A lot of these people never planed ahead and loose everything.

Perhaps towns need to separate the school tax from town tax.
Seniors would have to pay 100% of the school tax whilst getting their exemption from the town taxes.
The schools would be responsible for their own budget sink or swim!