Members of the City Council,
Thank you for the opportunity to testify today about property tax circuit breakers. My name is Brakeyshia Samms, and I am a senior analyst with the Institute on Taxation and Economic Policy, a nonprofit and nonpartisan research organization that focuses on local, state, and federal tax policy issues with an emphasis on revenue sustainability and tax equity. My testimony explains how property tax circuit breakers improve housing affordability, how they work, how programs are structured across the country, and key considerations for policymakers.
Circuit breaker credits are the most effective way to address property tax affordability. They prevent “property tax overload” by rebating taxes that exceed a set share of a household’s income, ensuring families can still afford essentials like groceries, utilities, and transportation.
State and local governments rely on a range of property tax reductions, such as homestead exemptions, tax rate caps, and limits on assessed value growth, but none target affordability as precisely as circuit breakers. For that reason, I am encouraged that Evanston is considering adopting a circuit breaker program based on a proposal from Councilwoman Clare Kelly.
Compared to circuit breakers, other approaches fall short on equity and affordability. Homestead exemptions, which exclude a portion of home value from taxation, generally benefit all homeowners regardless of financial need. When structured as a flat-dollar exemption, a $400,000 home receives the same tax break as a $4 million home. Percentage-based exemptions are even less equitable, delivering the largest benefits to the highest-value properties.
Capping growth in assessed value misses the mark by an even wider margin. These policies tend to favor wealthier people living in high-value homes that are appreciating quickly in value.
Unlike caps or exemptions, circuit breakers directly measure affordability by comparing property taxes to a household’s ability to pay. Because property taxes are based on property values rather than income, they are often disconnected from families’ financial realities. When someone loses a job or experiences a drop in income, their property tax bill does not adjust accordingly. Circuit breakers correct that mismatch.
This is particularly important in gentrifying neighborhoods, where rising home values – and rising property tax bills – can outpace residents’ incomes. Black and Hispanic homeowners are disproportionately affected in these areas, making targeted affordability protections especially critical. Circuit breakers can help.
Most circuit breakers are structured as “threshold” programs. Under this model, households receive a credit for some or all property taxes that exceed a designated percentage of income. The majority of states – 29 plus the District of Columbia – offer some type of circuit breaker, though programs vary widely in design and generosity. Slightly more than half of states withcircuit breakers target property tax cuts exclusively to seniors, on the theory that older taxpayers may have more difficulty affording the property taxes on a home they bought during their prime earning years.
Illinois is an outlier in not offering a broad statewide circuit breaker. Nearby states like Minnesota and Michigan have programs. Michigan’s program is available to households making under $67,300 with property values of $154,400 or less. The maximum credit is $1,700. In Minnesota’s program, households are ineligible after income exceeds $142,490. The maximum refund is $3,310. The size of the average credit in Minnesota was $1,129 in 2021, which was the latest data available.
Another clear benefit of Minnesota’s policy is that it transforms what would have been a steeply regressive residential property tax into a tax that’s somewhat closer to being flat throughout much of the income scale. This helps contribute to Minnesota ranking among the least regressive overall tax codes, according to our flagship Who Pays? report.
Illinois, by contrast, has an upside-down tax code in which lower-income households pay a larger share of their income in state and local taxes than higher-income households. In our most recent study, Illinois ranked as the eighth most regressive state in the nation. A well-designed local circuit breaker would be an efficient, targeted way to reduce property tax burdens for working-class residents and move toward a fairer overall tax system.
A property tax circuit breaker is a straightforward, evidence-based tool that helps families remain in their homes by ensuring taxes are set at levels that families can afford. For a community like Evanston – home to residents of color, low-income households, and families with limited wealth – a circuit breaker offers a focused solution to ongoing affordability challenges.
I am happy to answer any questions and can provide additional materials, including our full report on property tax circuit breakers. Thank you for your time and consideration.
