Income-Based Property Tax Relief

This paper provides a guide to the policy analysis of income-based property tax relief programs. Income-based property tax relief mechanisms are often called circuit breakers in the tax policy world, as they provide tax relief when the taxpayer is overloaded. The concept of a circuit breaker draws on the electrical breaker analogy—to provide property tax relief to households who are overburdened by their property tax bill. In this paper we examine various circuit breaker mechanisms that provide property tax relief directly tied to the homeowner or renter property tax bill as a share of household income. The paper then illustrates policy analysis of the circuit breaker mechanism, including measurement and analysis of the foregone revenue involved. The purpose of this illustration is to assist policy analysts as they conduct tax expenditure studies. A specific case study is presented using data from the State of Idaho Property Tax Reduction Program.