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This page contains a single entry by Westley Annis published on September 20, 2009 6:02 PM.

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Why the Homestead Exemption Must Go

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The Louisiana Homestead Exemption is an antiquated piece of legislation that hinders the ability of Louisiana to attract new businesses and fund government services.

Created back in the days of the Great Depression, the Homestead Exemption has helped make parish assessors some of the strongest government officials within their local parish. Since property taxes were based on the value of someones home, assessors could raise or lower a persons assessed value based on political patronage. Before todays world of instant database searches into previous and current home sales, assessors could do so with almost pure impunity.

Under state law, all homes are to be reassessed every four years. Once the assessor has released the new assessed value, local governments are suppose to reduce their property tax millages so that they collect the same amount of monies as they did before homes were reassessed. The idea is that homeowners should not have to pay more in property taxes just because of an increase in property values.

The reality is much different. State law allows local taxing bodies to roll forward their property tax millages up to the amount that was approved with the original millage was voted on by residents. Although the monies collected in this manner are usually dedicated, the local taxing bodies often roll the millage forward, creating, in effect, a tax increase without a vote of the people.

This is one of the methods used to skirt around the homestead exemption.

Another method used is to collect fees from residents, often by attaching them to the water bill, and usually as a flat fee. Most local governments run their own water department, so they found the easiest way to collect money from residents is to attach a fee to the water bill.

There are several problems with this method.

Depending upon your perspective, it may or may not seem as an equitable way to collects monies from the people who may be utilizing the service. As an example, a garbage fee.

With a flat fee, a water &ldqui;customer&rdwuo; in a single-family residence, will pay the flat fee. However, a landlord with a fourplex, is still small enough to continue using parish garbage, and he includes water in the rent he charges his tenants, so he gets one water bill for the four families living in his fourplex.

Let's pretend the garbage fee is $10. That means the family in the single-family residence is paying $10 a month for garbage pickup, but the families in the fourplex or only paying $2.50 a month for their garbage pickup. On average, I think we can assume that a family in the fourplex will generate just as much trash as the family in the single-residence, but only has to pay one-fourth to receive the same service.

If the fee was done based on the amount of water usage, it would more accurately reflect the usage, or the amount of services being required. Four families should use more water than one family and generate more garbage.

If the garbage fee was based on property values rather than water usage, it means every property owner would pay towards garbage services, including the guy that just owns an empty lot. Although the lot is empty, he still needs to cut the grass and dispose of the clipped grass, utilizing the garbage pick-up service.

This would also clean up the water bill so residents can look at their water bill and the only thing on that bill is their water usage.

Another advantage is that property taxes are deductible on your Federal Income tax returns. Granted, not everyone exceeds the standard deduction to be able to take advantage of it, but that is not a reason to discount it.

Another advantage is that all property owners, whether private or business, would pay their fair share in funding government services. With the homestead exemption, businesses have to pay property taxes on the full value of their property, while residents get a break on the first $75,000 on the value of their property. This means property taxes have to be higher to get businesses on the hook for the taxes that would be collected from citizens if the homestead exemption did not exist. This also means that businesses will charge more for their goods and services to make up this difference.

It is almost cliché, but some people do not realize it. Businesses do not pay taxes. They are simply a conduit for government to collect taxes while placing the blame on someone else.

You can see this clearly with sales taxes, it's a little harder with property taxes since the business has to “hide” the property tax inside the retail price of their goods or services. That is part of the overhead figure businesses use when calculating how much to charge.

I cannot think of one good reason to continue to hold on the homestead exemption. I only hope that someday, we will elect politicians to our state offices that start taking steps to eliminate it.

Public Affairs Research Council of Louisiana captured a great article from about the recent attempts to increase the Homestead Exemption.


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