Wednesday, November 07, 2007

Residential vs. Commercial Taxes in Boston

Shirley Kressel, of the Alliance of Boston Neighborhoods, has written a nice blog posting about the competing proposals by Governor Deval Patrick and Mayor Thomas Menino to address the relative burdens shared by commercial and residential property taxpayers in Boston.

The 2004 state law temporarily raised commercial property taxes a bit by raising the commercial tax cap from 175% to 200%, thereby allowing residential property taxes to increase at a slower rate. The temporary increase is currently slowly decreasing back to its original level. As I understood it, Mayor Menino's proposal (HD 2717; see also PDF linked here) is to return the commercial tax rate back to 175%, while Governor Patrick's proposal has a two-year freeze at 183%; the Mayor's proposal results in higher residential property taxes, while the Governor's proposal results in lower residential property taxes.

Kressel uncovers all the layers of the mess, however, noting the hidden secrets of the 2004 law and Mayor Menino's proposal to repeal it. She finds some "dirty tricks":
Menino’s bill would help residents in one way: it would repeal two harmful “dirty tricks” slipped into the 2004 legislation by business interests after the original “deal” was set. The first trick drops the commercial tax rate down to 170% in 2009 – lower than the pre-existing 175% -- permanently shifting more of the city’s tax burden from businesses to residents. The second, and far more devastating to residents, permanently prevents the mandatory residential portion of the tax burden from ever going back down from its highest level, no matter how low housing prices go or how high commercial values go. This portion used to be 30% of the total levy; it is already up at 42%.
My understanding then is too simplistic: Mayor Menino's bill would lower residential property taxes in the long-term by repealing the 2004 law's reduction of the previous 175% rate to 170%, but would keep residential property taxes high in the long-term by fixing the 42% residential property tax burden (rather than letting it lower back to 30%). Here's a case where we need some solid guidance from an independent analyst, like the Massachusetts Taxpayers Foundation's Michael Widmer, projecting the future costs of these various competing elements of the Mayor's and Governor's proposals, and the 2004 law left unchanged.

Tax law is usually pretty boring stuff. But when so many people throughout Boston keep asking for property tax relief, understanding in detail the issues involved can be more interesting than you might expect. And it could tell you something about your elected officials' prioirities.

Where are these different proposals in the process? The State Legislature just passed Mayor Menino's bill, so it awaits Governor Patrick's signature. This would be a good time to contact the Governor to tell him if you approve or disapprove of the bill.

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