Another try for school homestead exclusion
Legislation has been introduced in the General Assembly to provide 100 percent elimination of school property taxes for homesteads/farmsteads. The bill would raise the state personal income tax from 3.07 percent to 4.87 percent and deposit the money into the general fund.
Aside from the slight bump in the proposed income tax increase (1.72 percentage points to 1.8 percentage points) there is not much materially different from the proposal that was introduced last session. If the proposal were approved and the income tax increase enacted, school districts would have to pass a resolution enacting a 100 percent homestead exclusion and then would access replacement revenue from an account in the state’s general fund.
As noted in a blog from last month, the 2019-20 current and interim property taxes collected for schools is estimated at $12.4 billion. Of that $8.2 billion is raised from homesteads. That’s $1 billion more than what was reported in fiscal year 2016-17 during a public hearing on the bill was heard last year.
Since most homestead owners also pay the personal income tax, the net savings/net increase will vary. Renters don’t partake of homestead exclusions so they and other non-homestead property, such as businesses, will not see relief and would bear the brunt of future school property tax increases. As we noted last September “In light of all the problems this legislative plan creates, the homestead exclusion as currently proposed should undergo serious alterations in order to avoid creating greater inequities in tax burdens.”