The property tax relief idea would help protect the low- and middle-income taxpayers from an excessive property tax. The main aim behind the need for this policy’s enactment should be to reduce the tax across all income levels, example homestead exclusion. The policy would also seek to exploit failures of the property tax, including payments required by the policy not in line with the taxpayers’ earnings. Therefore, tax relief policy seeks a reduced tax or tax breaks particularly to the low-income and middle-income taxpayers.
The proposed policy on residential property tax relief defines deterioration of the main policy, property taxes. The original policy requires wealthier taxpayers to pay less than low-income taxpayers do. The claim gets support from most economic research institute, giving facts that by 2009, poorest American population contributed to property tax 3.6 percent of their income, in contrast to 2.7 percent from the wealthier citizens. Low-income families experience higher home values compared to the high-income families and this explains the reason behind relapse of property tax. The policy does not consider taxpayer’s inability to pay for the taxes, and entirely focusses on home values found to be higher for the poor.
This proposed policy provides for reduction in tax for low and middle-income earners, and their income should be below a set standard. Provision of tax relief becomes practical when the taxpayer’s property taxes exceed specific percentage of their income. Tax relief concept and conditions vary in different states. Homeowners Tax relief should be provided to both homeowners and rentals. Real estate rental owners share some of their liabilities from property tax with renters in form of hiked rents. Examples in New York, renters receive credit based on the property taxes developed into their rent. Fifty percent of the amount of the property tax would be their credit exceeding 6% of their income. Maximum income level to qualify for the receipt of the credit should also be determined. Many states are biased and only low-income earners as eligible to receiving the credits, leaving out the middle-income earners. This policy focuses the availability of the credit to the elderly and leaves out the youth. The ability of the elderly to pay taxes has reduced. Design this policy, it should provide for the percentage of taxpayer’s income rendered excessive when cut to cover for the property tax. This policy therefore, refunds tax on annual income basis by using property tax bills and income tax returns information. This would help meet the policy’s goal by benefiting low-income earners, receiving more refund tax.
Policy tax relief has the best plan to minimise tax loads imposed by property tax on low-income earners. This policy aims at particular income groups, that is, the low-income taxpayers burdened by the property taxes. Low-income taxpayers benefiting from tax relief, have the upper hand in terms of benefit compared to the wealthier group. They do not document their federal income taxes, while the tax relief to the wealthier taxpayers would lead to hike in federal income tax. The policy involves use of credit cards, the tax relief cards or the credit amounts vary with the taxpayer’s income, introducing criterion of “ability to pay” found in this policy. The policy helps in identification of individual taxpayer burden by property tax and reduces their tax to practical and convenient levels. Ignorance remains the setback for the proper functioning of this policy. Tax relief and circuit breakers given to taxpayers who know of its existence and applies for them. Most taxpayers do not recognize its existence; therefore, there is need for educational and public awareness efforts to notify the each state taxpayer. Availability of options such as claiming of the credit on income tax or tax relief forms.
Recommendations on to how to improve the performance of this program would be by removal any link between property tax cap and property tax relief plan or circuit breaker. The confusion comes where homeowners and renters who are only qualified for tax reliefs according to the property tax cap of the given state. Increase in size of the credits, improves the success of the credit by raising the higher credit amounts, assisting more renters and homeowners. Payment for housing is the leading difficulty faced by renters. Example in New York middle-income earners receive less then half of those who are homeowners.
Revisions to design of credit or tax relief, though, provision of more tax relief would increase expenditure on the program; therefore, the following are considered. Expansion income definition could involve various corrections. The policy uses gross income according to personal income tax definition in determination of the eligibility for credit by a taxpayer and the amount of tax pay-cut. The definition fails to include non-taxable sources of income but contributes to the ability of taxpayer to pay property taxes. Household gross income could function better for the policy, as it would provide for target only to taxpayers in need.
In most states, the policy provides credits to renters and homeowners who have resided in their homes for more than 6 months, eligible to receive tax relief. This could result in residents acquiring more expensive homes than their income and ability to pay for, due to the short residence requirement. Eligibility to receive credit must be connected with extension of residency time as opposed to the latter. Property tax relief is an appealing approach to ensure equitability among the low-income, middle-income earners and the wealthier groups.