Property Tax Circuit Breakers in 2007

This paper provides an overview of the nature, development, extent, and effect of residential property tax relief programs in the United States. Its major focus is on circuit breakers, which target aid to low-income taxpayers. Circuit breakers are unique in providing property tax reductions that vary inversely with income, enabling more precise targeting of needy recipients than other approaches. Compared to assessment or tax caps and general homestead exemptions, circuit breakers can provide more meaningful property tax relief to those most in need at lower total cost while preserving the ad valorem tax base.

Although circuit breakers have been in existence over 40 years and are found in a majority of states, there is little comparative data on their operation and effect. There are major differences among state programs, and researchers differ even in the definition of a circuit breaker itself. This paper provides more detailed information on circuit breakers than has previous been available in a single report. It summarizes the major features of circuit breaker programs in effect as of mid-2007, including common elements, variations in their design, and the impact of income and benefit limits on their delivery of tax relief.