Every tax is a pay cut. Every tax cut is a pay raise.
Citizens for Limited Taxation
|Taxes Driving Some Elderly From Their Homes||April 12, 2003|
|Yilu Zhao||New York Times|
HARVARD, Mass. - St. John Lane, a rural road here lined
with colonial-style houses, is named after the family of
Shirley St. John's husband. But soon, there will be no more
St. Johns in Harvard. Mrs. St. John, 62, a widow, will
move, no longer able to afford the rising property tax.
"It's sad," Mrs. St. John said in the modest Cape Cod that she and her husband, Paul St. John, built 41 years ago as newlyweds. "Paul and I put our souls into the house."
The two-bedroom house in Harvard, a town of 1,200 people about 30 miles northwest of Boston, was assessed at $173,000 in 1996 and $289,000 this year, and the property tax bill grew to $3,500 from $2,200. With an income of only $12,000 a year from Social Security and a pension, Mrs. St. John needed help. Luckily for her, her town offered some: a program that allows elderly people to work $500 off each property tax bill.
Mrs. St. John's task was entering computer data for 75 hours last fall. But this year, Mrs. St. John is giving up. She is afraid of depleting her savings, so she has decided to sell the house this year and move to Iowa, where she was born.
Soaring prices have brought greater values to homes throughout the Northeast. At the same time, states have begun to reassess property more often, so taxes are reflecting the actual value of homes. This has created large, sometimes unbearable, tax burdens for many longtime homeowners like Mrs. St. John.
Several towns in the Northeast have been looking for creative ways to make property taxes less onerous. At least three towns have adopted programs like Harvard's, allowing older people to work off part of their taxes. Some towns have increased tax exemptions for the elderly. Others have allowed older people to postpone paying part of their taxes until they sell their property.
But many other cities, facing diminishing aid from state governments, say they cannot afford such programs. State aid to towns has decreased as much as 30 percent since 2001, according to the National Association of Towns and Townships.
In better times, towns could lower tax rates when houses rose in value and still have enough revenue. In recent years, though, tax rates have remained relatively constant in many Northeastern towns while budget demands have not.
"For the older people, their homes are rising in values, but their income is not rising," said Amy Crews Cutts, an economist for Freddie Mac, a federally chartered company that is one of the main buyers on the nation's secondary mortgage market. "But you cannot eat your house."
The problem of fast-rising property taxes has been especially acute in the Northeast, one of the two hottest real estate markets in the nation, said economists who study housing. The other strong market is in California, but that state's Proposition 13 strictly limits increases in property taxes.
Nicholas P. Retsinas, the director of the Joint Center for Housing Studies at Harvard University, said, "Our study finds a large number of elderly people who pay over half of their income on housing-related costs, even though they have paid off the loans on their homes."
Those costs are mainly property taxes and maintenance. Mr. Retsinas said about two million Americans, old and young, were in this situation, but the average person was white, retired and living in the Northeast.
The average house price has risen by 76.5 percent in New England since 1995, the highest increase in the nation, according to Freddie Mac. The Pacific region, including California, Oregon and Washington, is second, with a 64.1 percent increase. The national average is 49.1 percent.
The assessed value of the house owned by Donald Dextradeur, 74, and his wife, Josephine, 76, in Branford, Conn., on Long Island Sound, jumped to $380,000 last fall from $200,000 in 1995. The property tax bill will be $5,100 this year, a 22 percent increase from 2002. The Dextradeurs, who say they receive $18,000 annually in Social Security and other retirement income, have pleaded with town tax appeals board to freeze their property tax at the 2002 level.
"I worked hard for this house," said Mrs. Dextradeur, who was a nurse and said she sometimes worked double shifts before she retired at 67. "Now I think I should be able to enjoy the house and stay here until the end."
Officials of the Town of Harvard say the town values its elderly residents. But Harvard's budget allowed only 12 families to pay part of their taxes by working. The future does not look rosy, said Evan Katz, the town's finance director. In January, more than halfway into the fiscal year, the State Legislature cut $215,000 from its aid to Harvard, and the state is expected to reduce aid 10 percent more in the next fiscal year.
Harvard's spending, on the other hand, has grown, Mr. Katz said. The state, for instance, used to pay for special education. Now the town pays.
Older residents here are angry at the state and federal governments, which they say are too quick to spend.
"It all trickles down and falls into our laps," Jeanne Traphagan, 66, said.
Mrs. St. John has struggled to pay her tax bills by taking odd jobs, like running a flavored-ice machine by the town's pond in the summer and collecting tickets at basketball games in the winter. Moving to Iowa will be a relief financially, but it will hard emotionally.
"My husband and I put on the wallpaper," Mrs. St. John said, trying to hold back tears. She met Mr. St. John when they were in the Navy and moved East with him when they were discharged.
"We designed the cupboards; he made the coffee table; we built the whole place." A few towns with bigger cash cushions are doing more to help the elderly. In Cumberland, R.I., a town of 30,000 near Boston, for instance, residents older than 72 are allowed to pay property taxes at the 2002 level and pay the excess when their houses change ownership.
Narragansett, R.I., where housing prices have soared because of an influx of people from New York and Boston looking for summer houses, has granted exemptions of up to $1,500 to people 65 or older with incomes less than $30,000 a year.
Some tax experts applaud the efforts to provide tax relief but warn against following California. That state's Proposition 13, passed in 1978, limits property tax increases to 2 percent until the property changes hands. Scholars say the measure has lowered California's ranking in educational spending per student. California consistently ranked in the top 10 before Proposition 13 passed. It ranked 27 in 2000, according to the Department of Education.
Options exist for the elderly who want to remain in their homes. One is a reverse mortgage. The bank pays the borrower a certain amount of money periodically, and the borrower pays the bank back when the property is sold. But many older people are reluctant to encumber their houses, said Ms. Cutts, the economist at Freddie Mac.
Mrs. Dextradeur said: "I went through the Depression as a child. I saw my parents struggle. I cannot afford more loans, and I am not going to take out a loan unless it's absolutely necessary."
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