No change in state’s homestead exemption

Six weeks ago, it was a hot topic in the halls of the Capitol: give lots of homeowners a huge break on their local property taxes.

Today, the idea is all but dead. Lawmakers couldn’t get those bills through committee hearings, as suspicion grew that the tax break wasn’t really as simple as it appeared.

The proposal was to increase the current “homestead exemption,” the $75,000 of a property’s value that’s exempt from local property taxes imposed by school boards, fire districts and other government bodies. Some lawmakers wanted to double the exemption to $150,000, which would make a property tax-free, or nearly so, if it’s worth less than that amount.

A number of factors made the idea appealing to legislators, particularly those who represent the suburbs of New Orleans – where home prices had jumped after Hurricane Katrina in 2005, and whose constituents complained of sudden tax increases.

“Housing prices had artificially spiked after Katrina, then the economy tanks, goes into free fall in the latter part of ’08,” said Rep. Tim Burns, R-Mandeville. “Then people get hit hard on property taxes. Some of them tripled, going from $800 to $3,000.”

Lawmakers cast about for a solution, and sponsored bills to increase the homestead exemption. Several backed a proposal to increase the exemption periodically, according to the rate of inflation – an idea that Gov. Bobby Jindal said he would support.

Burns and others said they’ve recognized that property taxes are more complicated than the homestead exemption.

For one thing, homeowners aren’t the only ones paying property taxes. Business owners do not get the equivalent of a $75,000 tax-free zone on their properties. The Public Affairs Research Council of Louisiana, a nonprofit research group that analyzes the state’s tax system, said businesses pay unusually high property taxes compared to other states.

“The homestead exemption is a throwback to the state’s populist political culture and increasing it would inhibit economic progress,” said Jim Brandt, PAR’s president.

Louisiana Tax Commission data shows that businesses already pay 80 percent of property taxes in the state – a figure that would rise with any increase in the homestead exemption.

The state’s most powerful pro-business lobbying group issued a horrified statement after the governor said he would support gradually increasing the exemption. The Louisiana Association of Business and Industry argued that the move would scare off employers thinking of moving here, and cancel out business tax breaks that Jindal backed in 2008.

“Unfortunately, if the homestead exemption increase (the governor) supports becomes law, in short order the increase in business property taxes will far exceed the tax savings from the tax changes enacted last year,” LABI president Dan Juneau said.

At its current level, about 46 percent of Louisiana homeowners pay no local property tax, because their homes are worth less than $75,000. And most research on the subject shows that Louisiana’s exemption is far higher than exemptions in other states.

Sen. John Alario, D-Westwego, has been keen on raising the homestead exemption for years, and has sponsored such bills for at least a decade. Alario, the Legislature’s most senior lawmaker, argued that the $75,000 figure has been flat since the 1980s, which means homeowners’ tax bills have been rising because of inflation.

This year he has a measure that would double the exemption to $150,000. But the veteran lawmaker’s bill is stuck in committee, just like all the others, as time runs out in the legislative session.

“Our exemption is already so much higher than other states, I really think it’s just going to stay where it is,” said Rep. Joel Robideaux, I-Lafayette, a member of the House’s tax committee. “And if Alario can’t get it raised for all those years, what makes anybody else think they can get it raised?”

EDITOR’S NOTE: Doug Simpson covers the Capitol for the Associated Press.