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Property Tax Exemptions for Disabled and Retired Veterans

January 24, 2022
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WRITTEN BY Dr. Brittany Whitley and Dr. Jill Barnas

Residential property tax exemptions are commonly used to reduce the tax burden for specific populations, often based on age, disability, income and/or military service. All states offer personal property tax exemptions to a subset of disabled and retired veterans, who often rely on a fixed income and tend to have higher age- and/or disability-related healthcare costs. Missouri currently provides full personal property tax exemptions for former prisoners of war who have a “total service-connected disability”. The fiscal impact of extending property tax benefits to more disabled and/or retired veterans in Missouri depends on several factors, including exemption criteria, participation rates, and the geographic distribution of these veterans.

Highlights 

  • If every disabled and retired veteran in Missouri were exempt from personal property taxes, up to 160,000 Missouri veterans might benefit from the exemption. Fewer than 27,099 Missouri veterans are 100% disabled.
  • The total fiscal burden of these programs varies based on who the policy targets (e.g., level of disability, income, age) and how much tax relief is provided (e.g., full exemption, income-based, across-the-board limits).
  • For individuals who have high property costs relative to their income and other expenditures, tax breaks can more closely link costs to ability to pay. Loss of local revenue from personal property taxes, however, can decrease school and public safety spending unless accompanied by other local tax increases (e.g., business property taxes). 

Limitations

  • It is difficult to accurately approximate the number of individuals impacted by this type of tax waiver. For example, there is likely overlap between veterans who are retired and disabled. Additionally, it is not clear what effect these benefits would have on disabled and/or retired veterans choosing to buy property in Missouri.
  • It is not possible to directly match eligible individuals to their exact personal property tax rates, which makes it difficult to calculate the tax revenue shortfall of this program and how it might differentially affect specific regions of the state. 

 

This Note has been updated. See the previous version (published February 2021) here.

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