and the
Citizens Economic Research Foundation

Barbara's Column
January #1

After 25 years, job still unfinished
for advocates of property tax limits
by Barbara Anderson

The Salem News
Friday, January 7, 2005

Twenty-five years ago, Citizens for Limited Taxation was in the process of placing Proposition 2 on the November 1980 ballot, so voters themselves could decide whether to limit their property taxes.

If you lived here and were among the Massachusetts citizens paying the highest property taxes in the world, you probably remember the intensity of the debate. Prop 2 required that a community's property tax levy be no more than 2.5 percent of the total value of all property within its borders, and that taxes be cut 15 percent a year until that goal was reached.

At first it looked as if almost every community would have to cut taxes. But as the campaign wore on, research showed that most communities were not assessing at the constitutionally required "full and fair market value" and that when they did, roughly half of them would see an increase in property values that would show their true rate to already be 2.5 percent or less of that value.

Proposition 2 passed with 59 percent of the vote, and roughly half of Massachusetts' communities began cutting back. The rest were limited to a 2.5 percent levy increase a year. 

But the political pressure from the voter mandate encouraged the state to begin sharing more of its own revenues with the cities and towns. By the second year the "new growth" provision would allow the tax rate to be applied to new construction, and communities that wanted more money could ask local voters for an override or debt exclusion.

Twenty-five years later, Prop 2 continues to limit property taxes. It brought the per-capita property tax burden down to 11th in the nation by 1991. But that burden is now climbing again relative to other states, partly because voters in many Massachusetts communities have passed overrides that get added to the tax bills.

Many people probably do not remember the passionate 1980 debate and now take Prop 2 for granted. Yet taxpayers can often be heard wondering why their own property taxes go up more than 2.5 percent a year. They tend to blame their increased property values.

Assessors are required by the state Constitution to keep values current, and we are in a hot housing market. This does not directly affect our property tax the levy (the total amount collected in property taxes) can increase only 2.5 percent a year (plus new growth and overrides), no matter how much a community's property values appreciate. If the value of all property in a given town were to double, the tax rate would automatically be cut in half before the allowed annual increases were taken.

Since Prop 2 is not parcel-specific, however, some properties bear the burden of the allowed annual increase more than others. In communities that tax commercial/industrial property at higher rates than residential, there are economy-related shifts. (In the current market, residential property values are escalating, while the value of industrial and commercial properties have been on the decline.) Even within the residential class, some neighborhoods or types of homes appreciate faster than others.

But aside from that, some of us pay more because communities increase spending regardless of available revenues from either property taxes or state aid. Many local officials don't think very far ahead when negotiating contracts with their unions and committing to new building projects. When they get in fiscal trouble, they ask for overrides and sometimes voters go along. (I'm not sure why they do this, since the property tax is still a harsh bill that can have little relation to a homeowner's ability to pay.)

Just to use an example I'm familiar with:

My own property taxes are increasing 10.8 percent this year, on the five-room Marblehead cottage that I bought for $34,000 in 1975. In the past five years, my taxes have gone up 54 percent to $3,110 per year, though my income is roughly the same. Retired people see their income drop, and their taxes still increase.

Sometimes things are just bizarre. In communities that have trailer parks, property taxes are kept artificially low by rent control that has been abolished for apartments, but is still in place for allegedly mobile homes. Though this relatively affordable housing is attached to the land and often sells for more than $100,000, the taxes are negligible the park owner pays property taxes that reflect the controlled rents, which at Red Hill Estates in Peabody, for instance, are only $198 a month.

So the total property tax bill on those 25 homes is $5,240, though some Peabody taxpayers are paying that much on their one dwelling. The value of the mobile home park is further depressed by the incredible fact that mobile home park owners are not allowed to sell their property unless they find new homes for their tenants!

The owners' property rights are violated, while all other property owners in Peabody make up the lost taxes no matter the income of the tenants, or how many kids the tenants send to local schools or the amount of city services they use.

I wish we could have abolished the property tax altogether for nonproperty-related expenditures like education. Perhaps during this anniversary year, with a court case requiring fresh discussion of school funding in Massachusetts, we can toss property tax cuts back into the debate.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem News and Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the Providence Journal and other newspapers.