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GRACRE LEGISLATIVE ALERT

January 23, 2009

GRACRE LEGISLATIVE ALERT

CONSTITUTIONAL AMENDMENT PROPOSED TO ESTABLISH
HOMESTEAD EXEMPTION FROM PROPERTY TAXES

Two joint resolutions have been introduced to the Virginia General Assembly that propose to amend the Constitution of Virginia to establish a “Homestead Exemption” from local real estate taxes. Senate Joint Resolution No. 333, introduced by Senator Mary Margaret Whipple (D-Arlington), and House Joint Resolution No. 686, introduced by Delegate Robert H. Brink (D-Arlington), were referred to the respective Committees on Privileges and Elections of the Senate and House of Delegates on January 13, 2009. The resolutions provide for a constitutional amendment that would authorize the General Assembly to enact legislation to empower localities by ordinance to exempt from local property taxes up to 20 percent of the assessed value of each residential property or residential portion of farm property that is occupied as the primary dwelling of the individual owners and is designed to be lived in continuously.


Some concerns raised by opponents of the proposed constitutional amendment include the following:

• The amendment offers false hope of property tax reductions to homeowners. While assessed values may go down, base tax rates will likely increase to offset any lost revenues, and when the next wave of rising values sweeps the market, homeowners will be just as unhappy.

• Taxpayers will be disappointed because many localities are too heavily residential to implement the Homestead Exemption without cutting their budgets. Now that residential property values are flat or even declining, granting the full exemption would lead to a real cut in local tax revenues unless the base rate is dramatically increased.

• Localities will most likely make up for lost revenues by raising rates or imposing higher taxes on business, rental property and agricultural land. Increasing taxes on business in the current economic climate will only stifle economic recovery. Furthermore, the Homestead Exemption would provide no relief to renters even though a large portion of property taxes on rental property is shifted to such renters.

• Differential taxation of property not covered by the Homestead Exemption may convey an unwanted message about the tax friendliness of Virginia’s local tax system, especially if implementation of special surtaxes on commercial and industrial property spreads. Adoption of the amendment may make Virginia a less attractive place to do business.

• The proposed exemption would give the largest tax break to the wealthiest homeowners, while representing a potentially open-ended drain on local tax revenues.

For more information on these joint resolutions, please click on the following links: http://leg1.state.va.us/cgi-bin/legp504.exe?091+sum+SJ333 and http://leg1.state.va.us/cgi-bin/legp504.exe?091+sum+HJ686.

To identify and contact your legislators in the General Assembly regarding this proposed amendment or any other proposed legislation, you can use the following link: Who's My Legislator. During the 2009 Legislative Session, the GRACRE Legislative Committee will provide its members with Legislative Alerts with respect to proposed measures that impact the real estate industry.

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