The Buffalo News
Sunday, February 6, 2011
Massachusetts offers less-taxing lifestyle
Limit on increases envied in New York
By Tom Precious
NEWS ALBANY BUREAU
Massachusetts offers less-taxing lifestyle
Limit on increases envied in New York
WEST STOCKBRIDGE, Mass. -- Something happens as the green "Welcome
to New York" sign fades in the rearview mirror when you cross into
Massachusetts: Taxes go down.
They are lower on clothing purchases. On
gasoline, on furniture, on alcohol and on a range of goods and
services. On businesses. And personal income is taxed at a lower
But, most noticeably, property taxes are lower.
As a result of a 30-year-old law limiting their
annual growth -- the kind of plan under debate in the New York State
Capitol -- sharply rising property taxes no longer dominate kitchen
table discussions in Massachusetts.
"I can't remember the last time I talked about
anyone's property taxes," said Carl Bradford, a retired financial
planner whose large colonial home sits a couple miles from the New
York border. His property tax bill is at least a third less than
that of a comparable home across the border.
Unequal tax burdens
Homeowners in Massachusetts pay far less in
than their neighbors in New York
West Stockbridge, Mass. $318,800
Copake, N.Y. $276,000
West Stockbridge, Mass. $336,800
Hillsdale, N.Y. $330,000
Egremont, Mass. $326,000
Canaan, N.Y. $313,000
Bradford looked a bit confused when asked if
property taxes ever made him think about retiring elsewhere.
"It's never occurred to me," Bradford said as he
cleaned snow off a neighbor's car one recent day.
His house in western Massachusetts -- a mostly
rural area but a cultural mecca, especially in the summertime -- is
worth nearly $600,000. His tax bill is about $4,500.
Just 45 minutes away, in the Albany suburbs, the
owner of a house worth half as much is likely to pay nearly twice as
much in property taxes.
"I think of leaving because of the cold, but not
because of real estate taxes," he said.
Welcome to the state once known as Taxachusetts.
For advocates of limiting property tax increases
in New York, Massachusetts is the example of a high-tax state that
tried to right its ways.
The commonwealth, like New York, has budget
problems and is by no means a tax haven. But, as homebuyers and any
real estate agent will tell you, crossing over the border can save
thousands of dollars a year in property taxes.
"We would wish our brother and sister taxpayers
in New York the same benefits that we have," said Barbara
Anderson, executive director of the Boston area-based
Citizens for Limited Taxation.
Anderson was a leader in the 1980 voter
referendum that led to Proposition 2½, which capped the increase in
the property tax levy by localities at 2.5 percent annually.
Controlling property taxes is all the buzz in
Albany today. Gov. Andrew M. Cuomo wants to limit increases. The
Senate passed such a bill. And Assembly Speaker Sheldon Silver,
whose legislative house has blocked previously proposed limits, is
cozying up to the idea.
But substantive talks have yet to begin, and
considerable pushback has arisen from interests that rely on
property taxes for everything from social programs to teacher
In Massachusetts, supporters of Proposition 2½
could bypass the Legislature and go directly to voters with a
statewide ballot initiative, which New York State does not permit.
The Massachusetts law does not mean the annual
increase in a homeowner's property tax bill is capped at 2.5
percent. The figure is the ceiling on additional real estate tax
revenue that a locality can raise each year.
Exemptions to the limit include revenues
resulting from new housing developments, which were considerable in
boom years, or expenses for debt and capital programs, like a new
Voters can override the limit and have done so
more than 3,000 times since 1980, something the original backers
said they never imagined would happen so often.
Overrides are more common in wealthier towns or
those with a large number of students in public schools. In the past
decade, overrides averaged 38 per year. But during the economic
downturn, that figure has been cut nearly in half, according to the
Massachusetts Department of Revenue.
The exemptions and overrides mean tax rates can
vary widely, even within counties, and tax bills still can soar.
A new tax reputation
Massachusetts had the nation's highest property
taxes when Proposition 2½ was adopted.
In recent years, it has hovered between eighth
and 12th place, based on different measures. The total amount of
property taxes localities collected has risen about 5.5 percent
annually since 2000, according to the Massachusetts Tax Foundation.
In New York State, according to data from State
Comptroller Thomas P. DiNapoli, property taxes are up 6.6 percent
annually since 2000, excluding New York City, where property taxes
are low and exempt from any state measures.
But consider this: Since the limit took effect,
per capita residential and commercial real estate taxes, adjusted
for inflation, have risen by 23 percent in Massachusetts.
That compares with 53 percent in New York State,
according to a run of the data compiled by the Tax Policy Center, a
joint venture of the Urban Institute and the Brookings Institution.
Measured against income levels, property taxes
have dropped in Massachusetts but remained flat in New York.
Homeowners living on the border hear that
"Realtors in Massachusetts do use the taxes as a
selling point," said Martha Piper, a broker associate with Stone
House Properties in West Stockbridge.
"The difference in taxes is almost double between
the border," said Ed Hoe, president of Kinderhook Real Estate Co.,
an agency based in Columbia County, N.Y., that does business on both
sides of the border. Homebuyers use the tax difference to try to
work better deals for houses on the New York side, he said.
"What it ends up doing is having an adverse
effect on value or what people are willing to pay in New York
State," he said.
In 2009, property owners in Massachusetts'
Berkshire County, where the median home value was $208,500, paid a
median of $2,386 in property taxes. As a percentage of home value,
that ranked the county 296th in the nation, according to the
Washington-based Tax Foundation, which uses U.S. Census data.
In New York's nearby Rensselaer County, the
median property tax bill was $3,749, ranking the county 43rd in the
percentage of home value. Across the state in Erie County, the
median tax was lower -- $3,119 -- but the median home value was
$119,900, making the county the sixth highest in the nation for
taxes as a percentage of value.
The nation's highest average property tax bill:
$9,000 a year in Westchester County.
In Massachusetts, Middlesex County, outside
Boston, had that state's highest average property tax bill in 2009
-- $4,400, Tax Foundation reports.
Change in attitude
Proposition 2½ has prompted several changes in
Critics say it reduced services, especially in
the early years, in such areas as public education before the state
stepped in during the early 1990s with more money for school
But Massachusetts also has undergone a tax
Soon after the limit was imposed, more fire
agencies and schools merged. Some villages got rid of their local
police departments. By the end of the 1990s, county governments --
which cannot impose their own separate sales tax -- were all but
abolished, except for providing a few services such as running
jails. Unlike New York, where property owners can receive separate
bills for county, municipal and school taxes, Massachusetts
residents receive a single bill.
The limit has affected other taxation.
In 1980, Massachusetts had the nation's second
highest state and local tax burden, only slightly behind New York.
By 2008, Massachusetts was number 23 -- at $3,600
By comparison, New York, at $4,850 per capita,
ranked second and was waging a pitched battle against New Jersey for
first place, according to U.S. Census data compiled by the Tax
New York has the sixth highest sales taxes, while
Massachusetts is number 31.
"I can't even imagine what it would have been
like here without the cap," said Anderson. Her group worked with
then-Gov. Eliot L. Spitzer several years ago when he tried, and
lost, to get a limit in New York.
She warns New Yorkers not to be lulled into
thinking a limit will come close to cutting property taxes.
Massachusetts voters have been "reasonable" in approving overrides
if localities can justify the higher levies, she said.
"After the cap, there was the sudden realization
by local officials that we were their employers," Anderson said.
"Before, parents were treated with utter disdain by districts. Now
they know they need parents in order to be able to sell overrides."
Since the limit, property taxes as a percentage
of income for Massachusetts residents have fallen from 76 percent
above the national average to 13 percent higher than the average,
according to the Center on Budget and Policy Priorities in
The group warned that state aid for localities
has been on a roller coaster over the years and that the limit
arbitrarily ignores the true costs of government, such as rising
heating costs for agencies or paying for mandated special-education
programs. It also finds greater disparity between services in rich
and poor communities because the wealthy can better override the
limit to hire more teachers or build new parks.
Inflation last year ran at about 1.5 percent. But
when the 1980 measure was approved, prices were rising at double
digit levels, making a 2.5 percent cap a jolt at the time.
"There were extreme disruptions to local systems
in the beginning," said Paul Toner, president of the 107,000-member
Massachusetts Teachers Association union. In New York, teachers
unions are among the loudest critics of a tax increase limit.
Source of conflicts
The limit has not always promoted neighborly
ways, Toner said.
"Overrides become very divisive in communities.
Supporters feel resentful that others are unwilling to support
services, so parents with kids get mad at seniors who don't want to
pay for more school aid," he said.
In some communities, zoning barriers are erected
to prevent affordable housing projects because residents don't want
to fund higher school costs for more children moving in.
Schools were especially squeezed by Proposition
2½, critics have said.
But if standardized test scores are a measure,
Massachusetts' student performance has only improved. Today,
Massachusetts scores higher than New York in nearly every fourth-
and eighth-grade reading, math and writing test. In fact,
Massachusetts is ranked number one in the nation in fourth- and
eighth-grade math and reading, while New York students place from
16th to 32nd overall in the nation, federal numbers show.
Yet, New York spent the second most -- $16,794,
per pupil in 2008, compared with $13,667 in Massachusetts, which
ranks ninth, according to the U.S. Department of Education.
Toner agrees Massachusetts students rank high
even against global standards, but says demographics -- such as
higher income levels -- are a factor. He also points to major
achievement gaps between suburban students and low-income urban
Has Proposition 2½ been a failure?
"I can't say that it's been a failure," Toner
responded. "However, it has certainly had its shortcomings."
Massachusetts residents say tax limits cannot
live in a vacuum.
"The state embarked on a very ambitious local aid
program that supplemented property tax revenues. Without that local
aid from the state, the municipalities would have collapsed," said
Andrew Bagley, research director at the Massachusetts Taxpayers
Association, a nonpartisan policy group. "Yes, you can control
property taxes. It just means the money has to come from somewhere
else -- unless you want to eliminate services," he said.
Last year, according to Bagley's group, total
property tax revenue, reflecting the impact of such factors as
exemptions and overrides, grew 4.1 percent statewide, compared with
the average annual increase of 5.5 percent over the last decade.
Lower tax burden
Proposition 2½ has had many effects beyond
It has made localities work harder to convince
voters to pay more in taxes, backers say.
For businesses, which pay property taxes, the
limit was among the factors that last month ranked Massachusetts
32nd in the nation in business tax burden, according to the
nonpartisan Tax Foundation. At number 50, or worst in the nation, is
"It has lowered the overall tax burden that
individuals in Massachusetts have had to pay. It was a success in
that," said Kail Padgitt, staff economist at the Tax Foundation.
In New York, localities say they can't deal
simultaneously with a limit on tax increases and cuts in state aid
-- unless the state seriously reforms outlays for public workers'
pensions or various unfunded mandates requiring certain services.
"You have to do both," Cuomo recently said of a
tax increase limit and mandate relief.
But while Cuomo has talked of a need to reduce
taxes quickly, his recent bill would not take effect until next
year. Some fiscal conservatives worry that localities and schools
will take advantage of the delay by sharply increasing taxes this
Back in Massachusetts, Proposition 2½ has become
the third rail for even the most liberal-leaning lawmakers. To dare
suggest getting rid of it would end a politician's career, even its
"Voters see Proposition 2½ as something that is
theirs, and nobody is going to take it away from them," said
Anderson, the early tax cap proponent.