Phoenix Some Arizona seniors could be in line for a big property tax break -- including some that a few lawmakers question whether they deserve it.
The House Ways and Means Committee voted 6-2 Wednesday to grant Class 6 status to the homes of seniors who meet certain income requirements.
What makes that significant is Class 6 properties are assessed for tax purposes at 5 percent of their assessed valuation. So a home worth $200,000 would get an assessed valuation of $10,000.
And if the combined property tax rate is $12 per $100 of assessed valuation, that would put their total property taxes at $1,200.
By contrast, residential property normally is Class 3, assessed at 10 percent of value. So for the same home in the same taxing district, the $20,000 assessed value translates to a $2,400 tax bill.
The dividing line between the two categories is based on age -- the homeowner must be 65 -- and income, a figure based on federal supplemental security income payments. For the current year, that is $35,184 for individuals and $43,980 for couples.
“These are low-income seniors that oftentimes are trying to decide whether they buy medication or they pay their taxes or their mortgage,’’ said former Senate President Russell Pearce. He said those who don’t want the change “would rather have little old folks thrown out of their home because they can’t afford a tax.’’
But Kevin McCarthy, executive director of the Arizona Tax Research Association, said it’s not as simple as that.
As a threshold issue, McCarthy noted that property taxes for many jurisdictions are a zero-sum game: They are permitted to raise a certain amount of money. What that means is that if some property owners pay less, the difference is passed along to the owners of all the other properties.
That’s of particular concern to McCarthy whose organization represents many major taxpayers.
And there’s something else.
McCarthy pointed out that the proposal has no restriction on the value of the property.
He said he found one home, valued at $1.67 million which is owned by a person who would qualify for the tax break. McCarthy also told lawmakers he found “scores of property worth more than the home you’re probably living in.’’
Then there’s the question of equity.
“Somebody making $36,000 a year with the identical home doesn’t qualify for the break while the neighbor making $34,000 a year does,’’ McCarthy said. He said the lack of a cap on the value of eligible homes could mean a senior making $34,000 would end up paying less in property taxes than someone who makes $36,000 who owns a more modest house.
And in all cases, the homeowners would be getting the same services.
McCarthy said his research shows there are more than 13,000 homeowners who qualify in Maricopa County alone. He had no figures for the state’s 14 other counties.
What’s in SB 1268 would be on top of special treatment already afforded to some seniors.
Arizona law spells out that if they qualify, the assessed value of their property is frozen. While that does not necessarily freeze their tax bill -- jurisdictions are free to raise the tax rate -- it is designed to ensure that eligible seniors are protected against higher bills solely because the value of their property has increased.
There are some additional restrictions on what properties would qualify.
In general, someone has to own the property for at least two years and it must be used as the owner’s principal residence. The legislation also says that a person cannot have any legal interest in any other real property other than through an investment like a mutual fund which may have real property in its portfolio.
There also is a limit on the parcel size: It can be no more than 10 acres, though exceptions up to 40 acres are allowed if there are physical restrictions like mountains, washes and roads that limit the usable area.
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