PROPERTY TAX POST: EXODUS TO CANADA COULD MEAN INCREASED PROPERTY TAX REVENUE IN THE U.S.

 

Canada

On Nov. 8, 2016, President-elect Donald J. Trump and his running mate, Vice President-elect Mike Pence, pulled off what some have described as a major upset in the race for the U.S. presidency. According to The New York Times, election exit polls unmasked a “starkly divided nation,” and leading up to the election, some Americans joked about moving to Canada should they view the outcome as unfavorable. A coincidental crash of Canada’s Citizenship and Immigration website as the U.S. election results rolled in had some speculating that a lot of U.S. citizens might have been looking for an alternative permanent residence.

As it turns out, CBC News has since reported that that “visitors from the U.S. made up half the traffic on its website when it ‘started to experience difficulties.’”  The news source also reported that at the time of the crash 200,000 users were on site compared to 17,000 the week prior which facilitated the crash of the site when coupled with “technical difficulties.” But the incident does raise an intriguing question: what if a major exodus from the U.S. were to occur as a result of the 2016 presidential election?

It might be surprising to find out that there could be beneficial, unintended consequences for property tax revenues in various U.S. states. How, you ask? The answer is that property owners who relocate outside of the U.S. may lose their homestead exemption if they relocate without selling their homes. After all, a president can serve in office for only two terms. Those making a move may consider their relocation a temporary retreat.

Mississippi, for example, provides a limited homestead exemption on a dwelling, essential outbuildings and improvements. The eligible property must be actually occupied as the primary residence of a family group and owned by the head of the family who is a Mississippi resident.

New Jersey also provides a homestead exemption for certain residents who have owned and occupied a principal residence in the State as of Oct. 1, 2014. Residents are allowed a homestead property tax credit equal to the amount of property taxes paid on the applicant’s homestead. The credit is determined as a percentage of property taxes worth up to $10,000 paid on the claimant’s home. The percentage of property tax credit to be received by the claimant is then determined by the claimant’s income. 

In most cases, to qualify for a homestead exemption, the owner of the property must also occupy the property in order to benefit for the exemption. In short, if the owner no longer occupies the property, its tax base is likely to increase generating more tax revenue for the state.

Despite the crashing of Canada’s immigration website, the speculated American interest immediately after the election in relocating to Canada was probably nothing more than a knee-jerk reaction to the seemingly endless election hysteria. But if large numbers of U.S. residents turn out to be serious about fleeing north, there just might be a property tax revenue silver lining in the dust cloud they leave behind.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should states and localities limit homestead exemptions to homeowners who live in the qualified residence? Are there policy reasons to expand the homestead eligibility to non-resident homeowners?

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