Calls to consider means testing before granting veteran and senior housing tax breaks shocked a legislative committee last month.
Delaware’s secretary of finance doesn’t think an income-based means test for property tax breaks is likely.
Even so, Rick Geisenberger did say that a means test based on property values not only could happen, but should.
“Seniors get a lot of benefits under the Delaware income tax law,” Geisenberger said. “They get to take an extra personal credit, which is worth an extra $110 deduction in income taxes. They don’t get taxed on their Social Security. They get to deduct up to $12,500 of their pension when they turn 60. And when you get to the age of 65, you get an extra standard deduction worth $2,500.”
What is a means test?
Means tests usually involve setting limits on whether someone is granted a tax break by looking at income, savings and other factors.
Think food stamps, which is now called SNAP or the Supplemental Nutrition Assistance Program.
In Delaware a single person can receive a maximum of $281 a month. That number is $516 for a household of two, $740 for a household of three, $939 for a household of four, and the number continues to rise with each additional person.
To be eligible for food stamps, an individual or household must make below a certain income.
In a House Education Committee meeting last month, several representatives brought up the idea of means testing for the 100% disabled veteran tax break. It’s an uncapped credit for disabled veterans who live in Delaware for three years.
The discussion was prompted by House Bill 30, which would remove the three-year residency requirement.
RELATED STORY: Disabled veteran tax bill passed to House amid concerns
Expanding the tax credit would cost the state between $248,887 and $518,514 in Fiscal Year 2024, according to the bill’s fiscal note. It would rise about $40,000 to $70,000 in coming years, the fiscal note said.
The average veteran tax credit is $1,500, with a range from $633 to $4,632.
Now, 710 disabled veterans benefit from the credit.
With more than three months left to apply for the break, the Finance Department expects a total of 923 beneficiaries this year.
“I understand that it’s not always easy to means test, because then you’re also talking about hiring staff to process everything,” said Rep. Eric Morrison, D-Glasgow said at the meeting. “I do hope that we will continue to have conversations about the best way to give relief to people who need it and give the maximum amount to those who need it.”
He referenced his 13 years working in Medicaid and other health programs, and said he has concerns about there not being a means test for the senior school property tax credit.
Delaware currently caps this credit at $500 for seniors 65 years and older who have lived in the state for at least 10 years.
Rep. Sean Lynn, D-Dover, called for a means test during January’s meeting as well to make sure those who don’t need the tax cuts are not taking advantage of the state.
Although property taxes help fund schools, districts don’t lose a penny when seniors get a tax break.
“Whatever the lost revenue is to the school districts is then fully reimbursed 100% by the state,” Geisenberger said.
Delaware was on the hook for $28,789,300 for the senior tax credit and $2.5 million for the disabled veterans one in Fiscal Year 2023, according to the budget bill.
Property taxes are a local, county-designated tax and counties do not have individual income tax information at their disposal, Geisenberger pointed out.
Geisenberger believes that the senior tax credit should be means tested, in part because retirees with thousands or even millions saved up in the bank or retirement funds probably don’t need the $500 in savings.
Because counties don’t have that information on a person, Geisenberger thinks the most viable option for a means test on the senior or veteran tax cut would be based on a resident’s property value.
“Looking at the property value can tell you a lot about what a person’s needs are,” he said.
Means testing is not a new idea.
House Bill 268 was passed by the General Assembly in June 2018 and would require means testing for senior property taxes.
It was vetoed by Gov. John Carney in September 2018.
House Minority Leader Mike Ramone, R-Pike Creek South, would like to see the senior tax credit means tested, but doesn’t mind the hit to the state’s budget for the disabled veteran tax.
“I don’t care if you’re a millionaire or destitute, if you went and served for our country and you came back to be classified as 100% disabled … I don’t know that the tax credit would be a byproduct of needing the money, but I think it’s respectful,” he said. “It’s a thank you for your service and giving you all you have given us all in serving our country.”
Ramone is currently working on a bill that would means test for senior property tax credits based on the property of a home.
Although still in the works, Ramone provided an example to explain what his bill is intended to do:
“If your home is worth zero to $500,000, you would get a $1,000 tax credit,” he said. “If your home is worth $500,000 to $1 million, you’d get a $500 tax credit and anyone’s homes that are worth $1 million or more wouldn’t get any tax credit.”
Geisenberger said this basic model would be the easiest way to means test for a local property tax.
He pointed out that statewide property reassessments are taking place and won’t be done for another year or two.
There would have to be some sort of system in place to update property values on a consistent basis.
Many of the First State’s seniors get plenty of accommodations, he said, so a means test shouldn’t be out of the question when the state could use the district reimbursement money in more beneficial ways.
It’s one of the reasons he thinks the 3-year residency requirement for disabled veterans looking to get a tax break should stay.
Many seniors in surrounding states, especially New Jersey, he said, come to Delaware because our property tax not only is fundamentally less, but they then get a $500 gift on top.
Ramone said that’s why it’s important seniors moving to Delaware have some skin in the game first with the 10-year residency requirement.
“They aren’t moving here to get the tax credit,” he said. “They’re moving here because our traditional taxes are so much lower than everywhere else.”
Raised in Doylestown, Pennsylvania, Jarek earned a B.A. in journalism and a B.A. in political science from Temple University in 2021. After running CNN’s Michael Smerconish’s YouTube channel, Jarek became a reporter for the Bucks County Herald before joining Delaware LIVE News.
Jarek can be reached by email at [email protected] or by phone at (215) 450-9982. Follow him on Twitter @jarekrutz
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