By Cynthia McCormick Hibbert
Homestead exemptions help residents, but many states use them as a way to shift a higher percentage of the property-tax burden onto seasonal owners.
BOSTON – During a memorable scene in the season five opener of “Yellowstone,” rancher turned governor John Dutton (Kevin Costner) vows in his inaugural address to soak out-of-towners purchasing vacation homes in Montana by doubling their property taxes.
The episode seen by more than 12 million viewers tapped into populist angst about whether long-time homeowners, from Big Sky Country to Cape Cod, can afford to hang onto their primary residences in the face of rising property appraisals and taxes.
It also raised the question of whether a real-life governor can do what Dutton proposes.
As it turns out, many states and localities across the U.S. already shift some of the property tax burden to part-time residents in the form of homestead and other tax exemptions for year-round residents. The trend of charging seasonal residents more for property taxes is non-partisan and growing.
“The property values have increased, but people’s ability to pay property taxes hasn’t always increased,” says Timothy Rupert, professor of accounting at Northeastern’s D’Amore-McKim School of Business.
“I think that’s where you see some of these strategies come in,” he says.
The shift increasingly is creating rifts between “townies” and part-timers who come to town to enjoy the beach, lake house or ski slopes.
“It’s driven to some extent by members of the community who’ve been there for a while, who are angry” at the rising cost of property taxes caused by inflated home values, especially in hot real estate markets, says Blaine Saito, an expert in taxation at Northeastern’s School of Law.
“It’s created this division of neighbor against neighbor,” says Patricia Miller, president of the Provincetown Part-Time Resident Taxpayers Association in Massachusetts.
Blue or red, many states make seasonal residents pay more
Blue state Vermont and Florida might not seem to have much in common but they are both popular vacation and seasonal home destinations and both have homestead exemptions to protect full-time residents from billowing property appraisals, the basis of evaluations for property taxes.
The exemptions typically work by reducing an exemptee’s home value “in the eyes of the tax assessor,” according to Lending Tree. “If you qualify for a $50,000 exemption and your home is worth $200,000, then you will be taxed as if your home is worth only $150,000.”
Texas is one of a number of states with homestead exemptions. Last year it saved brand-new homeowners thousands of dollars by allowing them to file for an exemption the year they purchased the property as a principal residence, rather than having to wait a year.
“Even though red and blue states probably have really different philosophies about taxes, they’re both willing to take advantage of this (opportunity) to push taxes to someone else,” Rupert says.
While Massachusetts doesn’t have a homestead exemption in the sense of reducing the burden on full-time residents statewide, it does allow individual towns to set a residential tax exemption of up to 35%.
‘This is a two-tiered system’
Both Provincetown and Truro on vacation-favorite Cape Cod have residential tax exemptions of 25%, Truro making the jump from 20% in August of 2021, according to the Provincetown Independent.
The residential taxpayer exemption became an issue in Provincetown in 2011, which is when her organization came into existence, says Miller, a government attorney in New York who owns property in the municipality at the tip of the Cape.
“People were like, ‘Are you kidding? This is a two-tiered tax system,’” Miller says. “You’re paying more than a [full-time] resident. That creates a lot of friction,” she says. “The assumption is that if you are a part-time resident property owner, you are crazy wealthy. You can absorb a few bucks.”
The most popular scripted TV show of the season, “Yellowstone” plays up this trope.
“Right now we are seen as the rich man’s plaything,” Dutton tells his constituents as he is being sworn in. “We are New York’s novelty and California’s toy. Not anymore.”
Saito is from Hawaii, where he’s seen many properties gobbled up for vacation or investment homes. The trend has only increased as remote work makes it possible for seasonal homeowners to spend more time at their part-time residences, he says.
“Values of property have gone up, assessments have gone up significantly, too. That increases property taxes, which can be a boon for the government but really hard for some people,” Saito says.
He says shifting more of the property tax burden to seasonal homeowners is a “backlash” against this trend while also continuing to fund local services such as schools, roads and sewers.
Seasonal residents don’t vote
Creating tax exemptions for full-time residents makes sense politically because part-time residents don’t vote in local elections and town meetings, Rupert says.
“Stuff often passes when they’re not even in town, maybe during the winter, for example,” he says. “They come back and it’s like, ‘Guess what, you’re paying more in taxes.’”
“I saw this quote a long time ago, ‘Don’t tax you, don’t tax me. Tax the man behind the tree,’” Rupert says. “Tax a person we don’t know.”
In Provincetown, most of the resident households, 3,422, are occupied by part-timers as opposed to 712 full-time resident households, according to the Provincetown Part-Time Resident Taxpayers Association.
The Provincetown Independent says Provincetown’s property tax rate for fiscal year 2021 of $7.08 per thousand dollars of assessed value would have dropped to $6.77 if the residential tax exemption were not in place.
Saito says the two-tiered property tax system is also an attempt by jurisdictions to circumvent the tax revolt of the 1970s, when, as now, inflation and high property values left homeowners fuming.
The result in California was Proposition 13, which restricted the growth in property assessments but also starved localities of funds, Saito says.
Officials “want to avoid something like that” this time around, he says.
Is the solution more housing?
Long-term solutions could include increasing the supply of housing, Saito says.
Infrastructure costs may increase, but “property values will then stabilize,” and so will property tax bills, he says.
Of course that is a solution that might not sit well with the fictional John Dutton, who is famously against development.
As displeased as Miller is with a larger share of the property tax burden in Provincetown as a part-time owner, she sees an end in sight.
That will be the day she gives up her rental in New York and retires full-time to the Cape.
© 2023 States News Service
