In 2022, we saw the worst inflation in nearly 40 years. Inflation, rising property taxes and rising rents are leaving many of our neighbors, particularly seniors and individuals with disabilities, on the brink of ruin. The economic uncertainties following 2020 have made it more likely for the costs of day-to-day living to exceed the income capability of our most vulnerable family members and neighbors. This is especially true upon retirement when incomes generally decrease and become fixed (think social security, savings, or pension benefits).
Property taxes are based on property values. Values can and most often do go up regardless of the homeowner’s ability to pay. Several studies over the years indicate housing costs are seniors’ largest expense – more than double what is spent on healthcare. These rising costs, combined with the rising cost of daily living, create a high level of risk of losing one’s home to tax sale foreclosures. This can happen even if a person has fully paid for their home, especially in neighborhoods with rapidly rising property values. Alleviating that burden and threat from our lowest income seniors and folks living with a disability is absolutely the right thing to do and should be an imperative for our policy makers at the Capitol.
“Circuit breaker tax credits” are a tool jurisdictions utilize to help low income seniors and individuals with disabilities stay stably housed by crediting back a certain amount of property tax or rent cost. The basic idea behind them is quite simple: property tax circuit breakers, like the electrical devices that shut off electric power to prevent circuits from overloading, prevent property taxes from “overloading” a family’s budget by “shutting off” property taxes once they exceed a certain share of the family’s income. Currently, 31 states provide some type of circuit breaker tax credit, 22 of which extend the credit to renters in recognition that property owners pass on the cost of property taxes to tenants through rent increases – Missouri is one of those states.
Missouri’s circuit breaker tax credit (also known as the Missouri Property Tax Credit Claim) was established in 1973 and hasn’t been adjusted in 15 years (since 2008). The maximum credit amount is $750 per year for renters and $1,100 for homeowners, and is available only to very low income households making $14,300 or less. Eligible households making more than $14,300 but less than $27,500 (renters) and $30,000 (homeowners) still qualify for credits but at incremental, reduced rates until completely phasing out at those maximum income levels.
The program as originally written did not account for future inflation. As a result, fewer and fewer people have been able to qualify for the credit over the decades. Those who do still qualify tend to fall higher on the phase-out scale – meaning they qualify to receive a smaller credit now than they did in prior years. While the tax credit has been and continues to be a lifeline for many older adults and people living with disabilities, $750 and $1,100 simply doesn’t go as far now as it did 15 years ago and may not be enough to keep many of our senior and disabled neighbors in their homes.
Proposed legislation, such as SB 15, would make some long overdue updates to Missouri’s circuit tax breaker credit to reflect today’s realities. It would expand eligibility by adjusting the maximum income upper eligibility limit from $27,500 to $35,000 for renters and from $30,000 to $38,000 for homeowners. It would also build in adjustments for inflation to ensure the impact of the policy in the long term.
It is extremely important for advocates and decision makers to remember the long term impact today’s policies have, and consider the magnitude of those decisions. Population considerations are a huge factor when we think of those impacts. We should look at the changing demographics of our state – of the populations that were and are intended to find relief with the Circuit Breaker Tax Credit.
9.5 out of 10 Missouri seniors are living below the poverty level. Missouri’s Master Plan on Aging suggests that “older adults will outnumber minors for the first time by 2030 and older adults will greatly outnumber minors by 2060.” Over 71,000 Missouri veterans have service-related disabilities. And over 1,480,000 adults in MO live with a disability that creates serious difficulty with things like walking, cognitive functioning, and other general tasks associated with daily, independent living (CDC data). The senior and disabled population is growing. There is no denying that policy supports like this one are needed and will be growing in importance and impact.
Empower Missouri and our Affordable Housing Coalition members work to ensure that every Missourian has access to safe, affordable, stable housing. We are excited about the positive impact these changes can have for hundreds and thousands of Missourians across the state. Supporting the Circuit Breaker Tax Credit and making long overdue updates to the Missouri Tax Credit program will make sure the benefits ensure more Missouri households stay stably housed.
We’ll be learning more about the circuit breaker tax credit, and advocating for SB 15, at our upcoming Week of Action. Join us on Wednesday, April 5th, in person at the Capitol for Advocacy Day, or on Thursday, April 6th, at 12PM on Zoom for our virtual session focused on this issue. Learn more and register at www.empowermissouri.org/woa2023/.