Senior Tax Deferrals

There is an op-ed in today's O that demonstrates the difference between a government program and private insurance.  The state of Oregon has long had a property tax deferral program to help seniors stay in their homes.  Taxes are deferred until a home is sold, with annual interest charges accruing.  The program is equivalent to a reverse mortgage with the annual payment fixed at the property tax level.  The state acts as the insurer, fronting the deferred taxes to counties and taking risk on the level of repayments.

Unsurprisingly, the program has gotten screwed up because of the recession.  Tax repayments are no longer adequate to front the money to counties, and the state has to either find a way to reduce fronted expenses or get into the business of subsidizing senior property taxes.

The legislature opted for the former (emphasis mine),

The Revenue Committee's response to this temporary downturn was to eliminate 5,000 people from program rolls -- by capping enrollment, raising interest rates, changing eligibility rules and excluding anyone with a reverse mortgage. The cruelest response was to apply these changes retroactively to existing program participants.

The result was to disqualify nearly half of the 10,500 families in the program, including many lower-income homeowners -- the very people it was designed to help. Most participants had assumed that once certified for assistance, they could be reasonably secure in their retirement years and safe from the threat of tax defaults.

 I don't fault the legislature for refusing to create a subsidy, that money doesn't come out of the air.  It comes out of budgets for other priorities like education, healthcare, and social services which have already been slashed.  Prioritizing public spending, deciding what should be paid for and what should not is pretty much the legislature's job.

And that shows the difference between public and private insurance:  A public insurance program has no guaranty, it exists at the whim of lawmakers.  As a program it necessarily competes with other public spending for priority and its benefits and costs can be changed unilaterally with the stroke of a pen.  In contrast, private insurance is spelled out by contract and can be changed only with mutual consent.  People who buy private insurance don't have to justify its benefit against money for schools or Medicaid or whatever the public thinks is more important.

As participants in the tax deferral program are discovering, that is no small thing.