JFO lays out preliminary models showing how changes to property tax credit could shift bills for low‑income homeowners

Julia Richter, Joint Fiscal Office, told the House Ways & Means Committee that JFO ran preliminary, iterative models to illustrate how changes to the property tax credit's income sensitivity would change taxpayer liabilities.

Richter said the work is not a policy proposal but an exercise to "explain results and intuition of changes to the property tax credit." She described assumptions that shape the modeling: the analyses look only at filers who may have qualified for the credit in fiscal year 2025 (household income at or below $115,000), assume the credit earned in FY 2025 applies to FY 2025 bills (ignoring the actual statutory lag), and hold other factors equal while varying only the credit mechanics.

The nut graf: the property tax credit that reduces education property tax liabilities is a sizable tax expenditure (JFO used a working figure of about $153,000,000 earned in FY 2025) and changing how it is targeted or converted into an exemption would redistribute tax burdens across income and property‑value groups. Richter's limited data set (households that reported income on homestead declarations) constrains conclusions about higher‑income payers because many above the $115,000 threshold do not submit household income on the homestead form.

Key assumptions and limits

Richter emphasized several data limits that shape what the models can and cannot show. "We're only looking at the filers who qualified for, or who may have qualified for a property tax credit in fiscal year 2025," she said, and she noted the homestead declaration file she used contains roughly 170,000 entries but includes duplicates and other inconsistencies. Because households above $115,000 often do not report household income on the homestead declaration, JFO did not attempt to impute a full crosswalk for those taxpayers without a separate data request to the Department of Taxes.

Scenarios tested and illustrative results

1) No income sensitivity: Richter ran a bound case that removed income sensitivity entirely and reallocated the roughly $153 million credit to reduce tax rates uniformly (homestead and nonhomestead). Under that scenario, many low‑income households that previously received large credits would see their average bills rise; JFO highlighted a hypothetical cell in the model where a household in the lowest income bucket and a modest house‑site value would see an average increase of about $2,760 "all things being equal." Richter called that example a way to "get a sense of scale and intuition" rather than a final forecast.

2) Homestead‑only reallocation: When JFO applied the $153 million solely to lower homestead rates, more homestead taxpayers saw decreases in liability compared with the uniform lowering of both tax bases.

3) Preserve circuit breaker up to $47,000: Richter tested keeping full income sensitivity (the circuit breaker) for households with incomes up to $47,000. JFO estimated that protection accounts for roughly $70,000,000 of the total credit, leaving about $83,000,000 available to lower rates elsewhere. In that iteration JFO stopped after one pass of re‑rating to illustrate the directional effect; Richter cautioned the exercise is iterative because lowering rates changes the size of the credit, which would in turn change rates again.

4) Flat dollar exemption bound: As a simplicity test, JFO computed a uniform dollar exemption (rather than a percentage of value) that would hold average liabilities roughly constant up to a selected income cutoff. Richter said a crude calculation suggests a flat exemption on the order of $300,000 of house‑site value would be needed to avoid average increases for households up to about $90,000 of income — a result that would fully exempt many lower‑value house sites under that construct.

Committee discussion and next steps

Committee members pressed Richter on data gaps and the practical work required to extend the models to households above $115,000. Richter pointed members toward the prior Income Based Education Tax Study Committee crosswalk that matched AGI to household income as an example of a fuller data effort; she said reconstructing such a crosswalk is labor intensive for the Department of Taxes and would require a formal request.

Richter summarized the overarching policy trade‑offs: the modeling shows the property tax credit and any replacement exemption interact with tax rates in a circular, iterative way ("you push it here, it comes out over here"). She recommended further iterations and a data request to the Department of Taxes to model impacts for filers above the $115,000 threshold.

Ending

Richter and committee members said the modeling is a work in progress and that JFO will refine the analysis with additional data and iterations if the committee requests it. Members asked for follow‑up tables showing percentage changes and average liabilities for illustrative households; Richter said she could supply additional comparisons and noted the administration and tax department would also provide models and testimony in upcoming sessions.