A bronze
bust of Howard Jarvis, Father of the American Tax Revolt, sits on
the top of my bookcase, looking spiffy this time of year in his red
Santa cap.
In 1978,
he created California’s Proposition 13, the first national property
tax limit. Two years later, voters in Massachusetts passed our own
version called Proposition 2½.
The
Howard Jarvis Taxpayers Association gave me the bust a few years ago
at a National Taxpayers Union dinner; it’s not only a conversation
piece but a piece at which to direct conversation now and then.
Since I
became a senior citizen like he was in ‘78, I appreciate his
leadership even more than I did then. Property tax limits are really
important when one is on a fixed income. Thank you, sir, and Merry
Christmas.
Fresh
from his own victory, Howard advised Citizens for Limited Taxation
(CLT) as it was drafting its own initiative petition. For instance,
he warned us not to freeze assessments, as he had done, because this
provision was being challenged in California courts.
We
couldn’t have frozen assessments anyhow because the Massachusetts
constitution requires that all property be assessed at its full and
fair market value. Prop 2½, unlike Prop 13, is a statute, not a
constitutional amendment; in California it is relatively easy to
amend the state constitution but in Massachusetts this requires
co-operation from the Legislature which we knew we couldn’t get.
So
property values, then as now, are set by the constitutional
requirement for true market value, and our limit was drafted to fit
within that requirement. Prop 2½ says that a community’s property
taxes cannot exceed 2.5% of the community’s value, which is
determined as of January 1 of the calendar year in which the taxes
will be paid. Even with values dropping during 2007-08, the tax
rates in this area are well below that 2.5% limit. But I know it
seems strange that home values should be dropping but property taxes
on those homes increasing.
I was
CLT’s office secretary when the initiative petition was being
drafted. The idea came from Marblehead-based economic writer Warren
Brookes, who analyzed Proposition 13 and determined that a similar
limit here should have a maximum tax rate of of 2.5%. In the summer
of ‘79, a lawyer had been hired to do the actual draft and on the
eve of the deadline to file the initiative petition with the
Secretary of State in preparation for the petition drive, volunteer
activists were going over the final language.
One of
them wondered aloud: if tax revenues depended on home values,
wouldn’t local assessors be pressured by local politicians and
unions to, maybe, nudge those values up a little higher than they
should be? The activists decided to do assessors a favor and protect
them from that potential political pressure. It added a provision
that said, regardless of the latest assessed values, the property
tax levy from year to year could increase only 2½% – in effect,
creating two limits. The tax rate couldn’t be more than 2.5% of
value, and no matter how much that community’s value increased, the
tax levy could increase just 2½ over the previous year’s levy.
So if a
community’s value doubled, the tax rate would be cut in half, before
the allowed 2½% increase was applied. Later a provision to allow the
levy to increase by new construction was added, and an override
provision was available for emergencies.
The
limit doesn’t apply to individual parcels, but to all property in a
community: some parts of town, some kinds of home, might appreciate
faster, and therefore carry a larger share of the burden, and there
might be different rates for residential and business property. But
overall: 2.5% of total value, 2½% a year increase plus new growth
plus overrides.
Of
course, if a community’s value drops, the tax rate will increase to
allow the same 2½% increase – but no one back in 1979 was concerned
about values dropping.
The
actual tax reductions required in communities whose tax rate was
greater than 2.5% of value took place in the next few years, then
all Massachusetts cities and towns were living under the second
limit: the 2½% annual levy increase. The economy took off and there
was plenty of “new growth” revenue added – and after the 59-41 vote
for Prop 2½ in 1980, the state began to share local aid with the
cities and towns.
To CLT’s
surprise and dismay, some local voters began passing overrides, not
just for emergencies, but for operating expenses, including pay
raises and public employee benefit levels. Much local aid was also
spent this way, So now when taxpayers’ own revenues are limited,
frozen or reduced, and their homes lose value, the so-called “fixed
costs” of local government increase each year, forever.
With the
coming state fiscal crisis, local aid will be reduced and pressure
will mount for overrides; CLT is filing legislation to allow them
only on the biennial statewide election ballot. Once again, it is
time for taxpayers to assert themselves and defend their homes.
Somewhere, Howard Jarvis wishes us taxpayers well.
