SUMMARY:

The original bill made technical corrections to align the language in several code sections with changes made to the tax code in the last few years.  The Senate Finance Committee amended the bill to include a phased-in increase to the state homestead exemption. This summary is for version LC 18 8389S which passed out of Senate Finance 3/26/2009.

REQUIREMENTS:

The $2,000 homestead exemption in current law shall be increased to the following amounts:

• Effective January 1, 2011, the exemption is $3,000.
• Effective January 1, 2012, the exemption is $4,000.
• Effective January 1, 2013, the exemption is $5,000.
• Effective January 1, 2014, the exemption is $6,000.
• Effective January 1, 2015, the exemption is $7,000.
• Effective January 1, 2016, the exemption is $8,000.
• Effective January 1, 2017, the exemption is $9,000.
• Effective all taxable years beginning on or after January 1, 2018, the exemption is $10,000.

This exemption is granted in addition to and not in lieu of any other homestead exemption regardless of any local Act to the contrary.

The above provision requires a referendum vote which will be on the November 2010 ballot.  The question is:  Shall the Act be approved which increases the state-wide $2,000 homestead exemption to $10,000 after an eight-year phase-in period?

POINTS TO CONSIDER:

• Many communities have already created generous homestead exemptions for their residents through local legislation.  
• School systems levying close to their millage cap might not be able to make up the revenue difference which would force them to cut more services and personnel.  For instance, a county with a $4,000 exemption currently would have the exemption doubled by 2012 and tripled by 2016 to $12,000.
• Home owners may want a higher homestead exemption but they might not want the service level they will receive with granting of this level of exemption.
• It would be difficult to impossible to reduce any existing exemption to balance it with this additional one.
• Once again, rather than focus on comprehensive tax reform including requiring a state tax expenditure report, the state is focusing on taxation that mostly affects local governments.
• Statewide votes override the desire of communities to handle things differently.  One area might prefer to pay more taxes to make sure they can have the libraries, parks, police and fire protection, and school programs that they want while other areas may want lower taxes no matter what the cost to them in quality of life.  That is the purpose of local governments -- so each community can decide for itself how it wishes to be governed and live.

EFFECTIVE DATE:

If the referendum passes, section 1 as described above becomes effective January 1, 2011.  Section 3 related to tax executions becomes effective July 1, 2009.  The remainder becomes effective upon approval by the Governor or upon its becoming law without his approval.