and the
Citizens Economic Research Foundation

Barbara's Column
February #5

Don't expect local taxes to go down
by Barbara Anderson

The Salem News
Wednesday, February 28, 2007

After years as a taxpayer activist, I am rarely surprised by the strange things government does.

Voters still surprise me, though; being one myself, I relate and have certain expectations. Most recently, I am surprised to learn that many people voted for Deval Patrick because they thought he was going to cut their property taxes.

They didn't notice that he merely used the phrase "property tax relief" with no detail on how this was going to happen? True, he promised more local aid to the cities and towns, but there was no explanation on how this equates with lower taxes instead of just higher spending.

The details we are beginning to see still don't equate with "property tax relief" for very many people. He is offering 25 percent of the proceeds from his proposed new local option meals tax for an additional abatement to certain lower-income senior citizens over 70. But these are the seniors who already have tax relief that's not available to anyone else, through their ability to defer their taxes until they're paid by their estate.

He also proposes expanding the senior "circuit breaker" to some younger, lower-income homeowners - but this is an income tax credit, and their property taxes will not go down. Of course, they can apply their income tax cut to their property taxes; but if the income tax rollback passed by voters in 2000 were honored, we could all apply that tax cut to our property taxes, too.

His first budget does contain more local aid, but I can't imagine how a corresponding property tax cut would be implemented. The phrase "relieve upward pressure on the property tax" is generally meaningless. Under the voter-passed Proposition 2 each community's property tax levy is allowed to increase only 2 percent a year, plus new growth, unless voters approve an override - which is another thing voters do that amazes me. Then some of them complain about high property taxes, as if experiencing a disconnect between cause and effect.

The natural concern about high property taxes makes the situation with Red Hill Estates in Peabody a mystery to me. I've been reading accounts of Peabody budget problems and, recently, an assessment challenge from Brooksby Village that could cost the city a huge abatement. Of course, the city could just raise the property tax rate enough to cover this loss, so other Peabody taxpayers would make it up.

But if the owner of Red Hill Estates mobile home park was allowed to sell his property to retail developers, the city would pick up the new value as new tax revenue. Tenants there pay just $173.15 a month in rent, which is artificially low by order of the Peabody Rent Control Board. So the entire property pays artificially low property taxes, based on controlled value -- $4,957 a year on 3 acres of land! If the property were taxed on its true market value, there would be tens of thousands of "found money" to the city, every year.

The owner, Ed Quinn, is a longtime personal friend of mine. When he first told me about his quest to sell his own property as he reached retirement age, I found it hard to believe. Last time I looked, Peabody is still in America, whose entire economy is based on freedom and property rights that are not supposed to be superseded by someone's need for a governmental favor.

But the Rent Control Board says someone who owns property isn't allowed to sell it unless he finds someplace else affordable for his tenants to live?

If society, as a whole, wants to provide "affordable housing," then all of society chips in to pay for this. How can one person be held responsible for providing it at his own expense? Landlords shouldn't be forced to provide "affordable housing" any more than grocery store owners should be forced to provide "affordable food," automobile dealers to provide "affordable cars," and handymen to provide "affordable carpentry and plumbing repairs" against their will.

It is now clear to me why there isn't more affordable rental housing in Massachusetts: People who would be willing to provide it are probably afraid that they'll be subsequently trapped in a web of tenants' needs, waiting to be devoured by local bureaucrats.

While waiting for someone to offer "property tax relief," it's important to do what we can to limit our own taxes. We can vote against overrides. We can encourage government policies that are good for business; in communities like Peabody that use higher tax rates for commercial-industrial property, a prosperous business community carries more of a share of the tax burden. The downside of this, of course, is that in a slow economy, that tax burden gets shifted, often dramatically, to residential property. This has been happening over the past few years, surprising homeowners.

We should also support Gov. Patrick's proposed legislation to address local "fixed costs" like health insurance and pensions and hope he proposes even more. These reform initiatives won't lower property taxes but can help sustain local services and prevent override attempts.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her column appears weekly in the Salem News and Eagle Tribune, and often in the Newburyport Times, Gloucester Times, and Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the Providence (RI) Journal and other newspapers.