Friday, March 2, 2007

Menino Local Option/Tax Cut: Permanent, or temporary?

Before seeing the details of the Menino proposal to cut Boston property taxes by the revenue collected from the new meals tax and telecommunication taxes, CLT would alert you to the following:

Any community can collect less in property taxes than Prop 2½ allows.  But that amount accrues, and can be fully assessed later.

Without supporting local option meals taxes or a telecommunications tax, we’d point out that there is one technically legitimate way that Boston property taxes could be cut by the amount of the new proposed taxing powers.  The money would have to be permanently removed from the Proposition 2½ allowed revenues.

The first year, property tax bills could be printed as planned, with a line at the end subtracting the "new local option tax bonus":  an actual, bottom line tax cut.

Next, the Prop 2½ allowed levy would be permanently reset at the new, lower amount, so that next year’s allowed increase would be built on that lower amount.  And each year, if more revenues than expected come in from the new local option taxes and telecommunication tax, the City of Boston should cut the property tax again with another line at the bottom of the bills, and another permanent reduction in the property tax base.

There are other, not so legitimate ways the property tax cut could happen:

1.  The city could still levy the total amount that Prop 2½ allows, the annual 2½ percent increase, but give the local option bonus only to residential property, shifting it onto the commercial/industrial base, or;

2.  The city could cut property taxes the first year, i.e., not levy the total Prop 2½ allowed amount the first year, but accrue it on paper and then raise it later.

So we need to know if this is a one-time or temporary tax cut that homeowners will have to make up later, after the local option taxes are securely in place, or if it is a permanent decrease in the amount to be levied by the city.

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