Bill Caption

Relating to the applicability of the law governing the provision of state aid to certain local governments disproportionately affected by the granting of ad valorem tax relief to disabled veterans.

Bill Analysis

In past sessions, the legislature has created property tax exemptions for 100% disabled veterans and their surviving spouses. As is the case with all well-intentioned preferential tax exemptions, these policies created unintended consequences. Local governments with significant populations of people eligible for the exemptions, mainly counties with military bases, saw their tax base crater and struggled to fulfill their obligations. To address this, the legislature provided veterans assistance payments for these local governments. This essentially requires the rest of the state to subsidize local budgets to make up for the shortfall created by the preferential tax exemptions.

HB 634 would increase the radius from a United States military installation for which local governments are eligible for veterans assistance payments. 

Vote Recommendation Notes

This situation perfectly illustrates why we oppose special tax treatment for preferred classes of people. It always results in unintended consequences that end up costing the people who do not benefit from the special treatment more money and makes it less likely that the shrinking tax base will be able to get the tax relief they need. In order to avoid situations like this, taxes should be low-rate, broad-based, and equitable to all. 

Because HB 634 does not create or expand a special tax exemption, we remain neutral. We do, however, encourage legislators to consider overhauling the property tax system in a way that meets the low-rate, broad-based, and equitable for all criteria.