Sunday, December 6, 2009

Property Tax Crisis

This latest looming crisis underscores the need to greatly reduce reliance on property taxes to fund city services.

(See Nick's column: http://www.telegram.com/article/20091206/COLUMN27/912060415)

Property taxes are the most arbitrary and regressive way of raising revenue. How property is valued often has only a loose relationship to people's ability to pay - witness the agony of retired workers who can no longer pay the taxes on their homes. Entire towns or regions which become unaffordable to the families who have lived in them for generations, because of "gentrification" leading to rising property values driving up taxes. For example, the families that had lived on Nantucket since the Vikings are largely gone now, driven out by the taxes.

And this crisis reminds us of how very unstable property values can be, and the chaos that can happen as assessors scramble to keep up with fluctuations - and owners struggle to cope with the unanticipated revaluations.

Studies over the years of who ultimately pays a tax indicate that landlords are able to (and must) pass along the entire burden of property taxes to their tenants, so that people in Green Island, who may pay half their income in rent, effectively pay a much larger portion of their income on taxes than people living in trophy homes in Princeton. This is invisible to them, but it is very real. Yet the inequity in the absolute amount of revenue per person between Worcester and Princeton means that the schools in the "hill towns" are much-better funded.

Revenue for schools in particular - the biggest local expense and the greatest source of social inequity - should rest reliably and securely on the state income tax, the fairest and most stable source. The use of property is a kind of income and probably should not be tax-free. But we need to get away from these periodic struggles to save our city services by squeezing more blood from the property-owners, which every few years produces a new disaster.
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