The Tribune 04.28.05

Government policy has traditionally rewarded the American Dream of homeownership. The Western Frontier was settled by families squatting on free federal land; millions of post-war (WWII) families bought homes with FHA loans; and mortgage deductions have been a reliable haven from income taxes for homeowners. But Virginia’s present tax policies penalize, rather than reward, homeownership.

Local governments must rely upon real estate taxes to fund the schools, police and fire departments, public works, parks, and other services that keep our communities safe and livable. Many expensive mandates dictated but not funded by the state are ultimately paid for by homeowners. When rising assessments resulting from hot housing markets cause tax bills to rise, local governments can reduce the burden by lowering the tax rate, but the benefits go primarily to owners of large, commercial properties, rather than to homeowners.

While the word “homestead” may bring to mind “Little House on the Prairie,” Article X of the Virginia Constitution allows cities, towns and counties to give “homestead exemptions” from real estate taxes to specific classes of homeowners. Charlottesville uses the law to give breaks to seniors and the disabled, and to reward homeowners who substantially improve their property.

Now, gubernatorial candidate Tim Kaine has proposed amending Article X so that local governments can target general tax relief to all homeowners. Kaine would give localities the authority to exempt taxes on up to 20% of a home’s assessed value. Under the plan, a Charlottesville home assessed at $100,000, for example, could be eligible for up to $210 in tax relief ($20,000 in exempted value at the rate of $1.05).

Kaine would leave it to the councils and boards of supervisors to adopt the exemption and to adjust the percentage allowed according to changing local needs. Specific conditions might be added by a locality, for example, requiring that a home be continuously occupied for a period of years before qualifying, or restricting the exemption to certain neighborhoods where assessments have spiked.

But providing local tax relief is only half a plan, and only one candidate for Governor supplies the other half. As a former Mayor, Tim Kaine knows that you can’t simply shut off revenue to local governments without giving them the means to continue to pay for public services. At the top of Kaine’s platform is his pledge to fully fund the state’s obligations to K-12 public education, and to veto any additional unfunded mandates from the General Assembly.

For decades, Virginia has failed to pay its share for public education, leaving localities to make up for the state’s unpaid share with local (read “homeowner’s”) taxes. Governor Warner succeeded in getting new money for public schools, and Tim Kaine will keep this as his top priority. Although the tax assessor may see every man’s home as a castle, local governments need a tool for giving tax relief to homeowners without sacrificing the quality of their children’s education in the process.