A Taxing Debate

by Jeremy Alford

As the governor reverses his stance on the homestead exemption and lawmakers tackle substantive millage issues, property taxes are finally creating high drama at the state Capitol. Every year, a small group of lawmakers pushes legislation to alter Louisiana’s homestead exemption. And every year before the regular session begins, lobbyists and pundits correctly predict that the proposals will go nowhere fast. This year’s session hasn’t been much different, except that the homestead exemption and other property tax issues have just recently emerged from the fray with a real momentum that points to change in either coming weeks or future years.

One of the main reasons the 19-year-old homestead exemption is facing alterations has to do with an online petition. During the past five months, the number of individuals signing the Internet appeal to raise Louisiana’s homestead exemption has practically tripled to nearly 60,000 names. In mid-January, the tally was less than 22,000.

Presently, Louisiana residents are not taxed on the first $75,000 of a home’s value. In Terrebonne and Lafourche parishes, that exemption amounts to at least $240 million each year in property taxes that don’t have to be paid. But is the $75,000 threshold still relevant? Joshua Kahler, a New Orleans Realtor, doesn’t think so.

He initiated the online petition — — to boost the figure because he says the benefits of the homestead exemption and the need to increase it for inflation have never been more important. “Homeowner taxes continue to increase as property values increase while the amount of the exemption remains fixed at 1982 property value levels,” Kahler says. “If adjusted for inflation alone the homestead exemption today would be over $160,000.”

Another possible catalyst for the renewed debate over the homestead exemption is your 2008 property tax bills. Since it was a reassessment year, many Louisiana homeowners likely  noticed that their property taxes went up, and the figures are finally high enough to hold the average person’s attention. Adding to the interest is the fact that Louisiana’s $75,000 homestead exemption is already one of the highest in the country.

The biggest factor, however, was Gov. Bobby Jindal’s recent announcement that he supports an increase in the homestead exemption — a different stance than voters heard on the campaign trail in 2007. Few were more surprised than Dan Juneau, president of the Louisiana Association of Business & Industry. He says increasing the homestead exemption would essentially force renters, businesses and other homeowners to pick up the tab for the tax savings given to some homeowners. In Louisiana, almost 50 percent of the residents pay no property tax at the parish level, Juneau says, which results in business and commercial interests paying approximately 80 percent of the property tax burden. If the legislation the governor says he supports becomes law, that percentage will increase exponentially, he adds.

But Juneau is even more mystified by how stealthy Jindal’s support has been. “Gov. Jindal offered no reasons for supporting efforts to increase the homestead exemption,” he says. “I would hope that he does not suggest that an increase in the homestead exemption will result in a reduction of property taxes. It will not. Instead, it will transfer property taxes from some taxpayers to others who are already paying more than their fair share.”

Another sign that property taxes will receive solid once-overs in the session and future gatherings can likewise be seen in the number of bills addressing how local taxing bodies “roll forward” millages. When property values increase following the normal four-year reappraisals, Louisiana law requires local bodies to automatically roll back their millages to produce the exact same amount of money. But the law also allows these local entities to roll forward millages with a two-thirds vote.

Northshore Sen. Jack Donahue suggests the millage issue, particularly rolling forward, is at the heart of the homestead exemption debate, since it’s the real reason property taxes remain high. In other words, homeowners are suffering because local taxing bodies often use their discretionary power to roll forward millages after property is reappraised. That’s why he’s filed a constitutional amendment that would allow only elected bodies, like the school board, to roll forward or increase a millage — basically a property tax — after it has been approved by voters. Unelected bodies would be the ones prohibited.

Other lawmakers have similar bills, and while their fates are unknown, Donahue says more people are becoming aware of how the system really works. “If enough money does come in, millages are rolled forward even past what the voters voted on,” he says. “If voters had voted on 10 mills and it takes 15 mills to make the same amount of money, then the millage is rolled forward to 15 mills. Most people don’t know that.”