CITIZENS Barbara's Column The Salem Evening News Once upon a time there was no Proposition 2½. Property taxes in what was then known as "Taxachusetts"
were 81 percent above the national average and went up 5-6 percent,
and once even 12 percent, a year. Politicians had long ago instituted a state
income tax to replace some of the property tax burden. Then they
said that if the taxpayers would allow a sales tax, they could cut
the property tax. Then they instituted a state lottery to reduce the
property tax, so by 1980 we had an income tax, a 5 percent sales
tax, a state lottery, and the third highest property taxes in the
nation. Finally the voters took matters into their own
hands, putting Prop 2½ on the 1980 ballot and passing it by
59-41-percent margin. The auto excise rate was cut by almost
two-thirds, a rental deduction was created, and two state mandates
were repealed while future unfunded mandates were forbidden. These
reforms went into effect almost immediately. The following July 1, the beginning of all
communities' fiscal year, the levy limit went into effect. Property
taxes in communities whose rate was higher than 2.5 percent of fair
market value were cut 15 percent a year until they reached that
maximum-allowable rate. If you were around back then, you probably recall
the ballot battle and the months of public employee marches, bitter
state budget debate, and attempted repeal measures that followed.
But in the end, the Legislature came up with new local aid to lessen
the impact on municipalities, and local officials went to work on
implementation. Many of them started with the education budget,
which had never been subject to city council or town meeting
belt-tightening because of a state mandate called "school
committee fiscal autonomy" -- whatever budget amount the school
committee demanded, it had to be granted. During years of declining
enrollments, the school budgets grew; then Prop 2½ repealed the
state mandate and education budgets were temporarily brought back
into line. The Citizens Economic Research Foundation, a
research arm of Citizens for Limited Taxation, the chief proponent
of the ballot question, recently commissioned a report
on the 20-year impact of Proposition 2½. Lane & Company,
which compiles a municipal database for use by the financial
community in credit analyses, provided the following data presented
here in constant per capita dollars from fiscal year 1982 through FY
2000: The total property tax levy increased just
18.8 percent over inflation. Yet; Local appropriations are 42.2 percent higher
than could be accounted for by inflation alone. Local receipts
including auto excise revenues, fees, and non-enterprise water
and sewer charges, have increased 76 percent. State aid has
increased 45.2 percent. The residential levy dropped 1.6 percent. The
commercial levy increased 287.5 percent, and the industrial
levy, 114.2 percent. This was initially the result of
voter-passed tax classification law that was being implemented
during the same time period Prop 2½ went into effect. Despite claims that "education was
devastated" by Prop 2½, per-student education expenditures
increased 74.4 percent over inflation between FY '82 and FY
1999. Proposition 2½ contains an override provision
that allows local voters to raise their community's taxes more than
the levy limit provides. This is good for democracy, but hard on
taxpayers who can't afford the extra increases. National data that showed our per capita property
tax burden to be third highest in the country in 1981 dropped us as
far back as 12th later that decade. But we were back up to seventh
in 1996. Our property tax burden relative to personal
income was fourth highest in the nation in 1981, 22nd in 1991, then
up to 15th in 1996. Some of the increase comes from overrides and
debt exclusions, but most of it is due to the "new growth"
provision, that lets the local levy rise to cover new construction
and major improvements. One of CLT's long-term goals is to remove school
budgets from the property tax altogether by funding public education
with existing, broad-based state taxes while retaining local control
through parental choice and vouchers. Property taxes are still too high in
Massachusetts. But they are not as high as they were, and certainly
not as high as they were heading before the implementation of the
initiative petition known as Proposition 2½ 20 years ago this week. Barbara Anderson is executive director of Citizens for Limited
Taxation. Her syndicated columns appear weekly in the Salem Evening News and the Lowell Sun;
bi-weekly in the Tinytown Gazette; and occasionally in other newspapers. |