Town seeks to increase tax breaks for the elderly and disabled
Published 10:10 am, Monday, March 17, 2014
Town officials are seeking to increase participation in New Canaan's Tax Relief for the Elderly or Disabled program through bigger tax breaks and a relaxation of requirements.
The boards of Finance and Selectmen approved last week three major changes to the program: raising the asset limits; expanding the income categories from three to five and increasing most of the tax credit amounts.
With the proposed changes, eligible homeowners who make less than $50,000 a year would see an increase in their property tax credit. Couples who make less than $20,000, for instance, would see a 50 percent increase -- from $2,000 to $3,000.
The town currently uses three income categories, broken down by $20,000 blocks from $0 to $60,000, to distribute an equivalent tax break. The subcommittee is proposing that the categories above $20,000 be broken down by $10,000 instead, which would create two additional categories.
Penny Young, chairman of the Town Council's tax relief subcommittee, said the new categories would help increase the number of participants, which has decreased over the past few years.
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"The goal of the program is to get the maximum benefit to those income brackets that can benefit the most from the credits," Young said at the Feb. 26 Town Council meeting. "By expanding the categories from the current three to five, that would bring the credits to more people within those $10,000 increments."
Participants with an income lower than $20,000 this fiscal year have an average gross tax bill of $6,562. Therefore, a $2,500 tax credit would mean an approximate 38 percent reduction. All other income categories would see a tax break of $2,000 or less.
The third change would increase the limit on financial assets an applicant may have from $200,000 for single residents and $250,000 for couples to $350,000 and $450,000, respectively. Financial assets include cash, stocks, bonds, commodities and ownership interests. The value of the residence for which tax relief is being sought is not included.
After the last thorough review of the program, which was conducted in 2009, the town instituted a cap on allowable assets of $200,000 for singles and $250,000 for couples. Since then, there has been a decline in the number of qualified individuals over the past few years, according to Young, because many applicants had assets with higher values.
The subcommittee also believes that some potential applicants feel it is an invasion of privacy and have refused to submit the supporting financial documents, which has led to their disqualification, according to a memo the subcommittee wrote to the town governing bodies.
"There was a significant drop because it seems that people don't want to provide that kind of background information, even though we're giving them a tax credit," Young said.
In 2008, for instance, 137 applicants were qualified. In 2009, the number dropped to 84 and has continued going down over the years. In 2013, 62 applicants were qualified for the program. According to the subcommittee's memo, numerous deaths also contributed to the decline.
"We're feeling that the asset requirement that we instituted was a little too low, and that it disqualified a number of people who really should be in the program," Young told the Board of Finance March 4.
Program applicants must be at least 65 years of age by Dec. 31 of the previous year or totally disabled.
The tax credit program is funded by the difference between what the Board of Finance projects taxes to be collected and the amount that is actually collected. Every year, the town projects tax collection rates that are lower than actual rates to minimize the potential of total revenues falling significantly short of budget. The town has agreed to use some of the balance, which is usually kept as reserve funds, to pay for the tax-relief program.
If the program applied the proposed changes to the 2012-13 fiscal year applicants, it would cost the town $136,600, which is about $37,000 more than what was actually spent, according to Town Assessor Sebastian Caldarella. Back in 2008, the program cost the town about $163,000.
Councilman John Engel said the changes would only minimize the "real impact" of potential tax hikes that New Canaan residents are about to see. He noted that because the town's grand list has decreased nearly 3 percent and the town's budget is expected to see an increase, the elderly or disabled residents who are applying for the program might see a tax hike of at least $1,500, an amount he considers close to the proposed tax relief changes.
"It doesn't seem like we're decreasing their taxes, we're just keeping up with the changes they're going to experience this year," Engel said at the Feb. 26 Town Council meeting.
Councilman Sven Englund agreed with Engel, but said the subcommittee will look into implementing additional changes later this year.
"It seems to me that we can do better in the future, but we have to do this (now)," he said.
The Town Council will conduct a public hearing before it votes on the changes. Young said a more thorough evaluation and review of the program will be conducted after the 2014-15 budget is adopted.
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