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After 40 years, the most important mechanism for helping low-income Illinois seniors and the disabled pay their property tax bills is no more. As of July 1, the Illinois Property Tax Circuit Breaker will no longer be offered despite its relatively inexpensive $24 million price tag. Funding for the credit wasn’t included in the state’s budget.
Policymakers of all stripes understand the importance of ensuring that fixed-income families should never lose their home because they can’t afford property taxes—and that’s exactly what “circuit breaker” tax credits are designed to do. By refunding property taxes that represent an “excessive” share of family income, the circuit breaker targets relief precisely to those seniors for whom property taxes are least affordable. Property tax circuit breakers are one of four key (PDF) anti-poverty tax policies. Without this important credit, low-income Illinois seniors will face the brunt of regressive property taxes that force low-income families to pay more of a share of their income than better off families.
The elimination of this vital credit will have a real and lasting impact on low-income seniors and the disabled, especially those who rent. Renters pay property taxes indirectly, since landlords pass on part of their property tax bills to their tenants in the form of higher rents. But the now-repealed circuit breaker was the only mechanism in Illinois’ tax system that recognized this reality. Beneficiaries of the credit received between $90 and $350 a year, which could mean the difference between foreclosure or eviction and a senior keeping their home.
At a time when Illinoisans are just beginning to get back on their feet after a brutal recession, eliminating programs designed to keep low-income seniors in their homes is cruel and counterproductive.
Adding insult to injury, Illinois will, however, persist in offering a far more expensive property tax credit for homeowners (not renters) of all income levels. The five percent credit for property taxes paid is claimed on state income tax forms, and it functions as a refund through which property taxes already paid are rebated to income taxpayers. This is an inefficient method for offering property tax relief, though, since the credit depends on income tax liability, so it does little to assist low income families who (obviously) have less income tax liability.
This inefficient credit costs over $500 million a year; $500 million could fund the property tax circuit breaker for the next 20 years.