Increase the Gas Tax in Public Transit Regions to Help Fund Transit

I would not be opposed to a regional tax, though I do imagine that Boston's economy feeds the state's coffers, and it doesn't do anyone in the entire state any good if Boston can't get to work. - promoted by charley-on-the-mta

The legislature could increase the gas tax by a few cents in public transit territory cities and towns, and uses it to pay for public transit capital expenses. More below the fold.

First, some quick and dirty math:

1. Statewide, each penny in gas tax brings in about $33M per year. [chart on page 2 of t4ma.org shows $100M per 3 cents]

2. 4.8M people live in the MBTA’s service territory [2010 census, source] out of 6.5M in the Commonwealth [source]. 74% of Massachusetts citizens live in MBTA territory.

3. Putting (1) and (2) together, every $0.01 of gas tax in the MBTA region generates about $24M, if every person in the Commonwealth consumes the same amount of gasoline per year.

4. The condition on (3) is probably not right. I couldn’t find gasoline consumption per capita per county for MA. It might be possible to back this information out using DOR data. If someone can find it, please post it. Thing is, even if non-MBTA region consumed twice the gasoline per capita, it would only reduce that $24M/penny/yr to $19M/penny/yr. So until somebody finds better numbers, I’ll assume $20M/penny/yr.

5. The MBTA budgets about $1.25B per year for capital projects [page 3 of MBTA CIP FY15-19 (pdf)].

 

Now, here’s my proposal:

A. The legislature approve a gas tax increase of X cents/gallon, to be assessed only in MBTA communities, with the revenue going toward MBTA capital projects. I would think an X of 3 would be small enough to ensure that border community gas stations don’t get whacked by people driving out of the region to buy gas. I mean, some people might drive to save 3 cents, but most won’t, and it’s not like gas prices are the exact same at differing stations anyway.

B. The legislature approve a gas tax increase of X cents/gallon, to be assessed only in non-MBTA communities with their own local transit agencies, with the revenue going toward those local transit agencies capital projects. The MBTA ain’t the only game in the Commonwealth, and the citizens in other transit agencies would also benefit from the cash infusion.

 

Here’s why I like it:

I. The transit agencies need the revenue. We know they have backlogged capital expenditures, and we know that spending capital money will result in improved schedule adherence, fewer accidents, more comfortable vehicles, and the ability to expand service routes and frequency of service on existing routes.

II. The transit agencies benefit from multiple funding sources that vary for different reasons at different times, because it means that their total annual revenue stays a bit more constant, allowing for better planning and budgets closer to balance.

III. It’s good politics. You MBTA people want a better T? Fine. You should help pay for it. The good folks (few in number, but all good) in the rural parts of Massachusetts wouldn’t have to contribute more to a system from which they perceive deriving little benefit.

IV. It’s good public policy. The people who live in the MBTA region have, to more or less extent, more transportation options. Therefore, they both (a) have an easier time avoiding the tax, and (b) benefit more from a better operating transit agency, whether they drive or ride transit.

V. It’s a measured and appropriate response to the results of Question 1, which was a vote against an automatic increase in the gas tax, but not in fact a vote against an increase of the gas tax itself. As a side note, Boston and inner suburbs opposed Q1, whereas the 495 communities favored it [source].

VI. To be clear, an additional $60M on a $1250M annual capital budget isn’t going to be a game changer. This isn’t going to turn the MBTA experience into that of Disney World. But, it is enough to pay for 100% of the signal upgrades and station upgrades envisioned over the next five years, for example. It’s real money, and it would really help create a future with a steadily improving MBTA.

 

So, there it is. Raise the gas tax a few pennies in cities and towns with public transit service, and use the tens of millions of dollars per year to fund capital improvements for the public transit agencies across the Commonwealth. It’s not a panacea, but it will have measurable benefits without asking more from the public-transit-less communities and without asking very much from the communities who benefit from public transit.

 

<i>P.S.</i> I’m not sure I did “the fold” correctly. Could an editor kindly (i) ensure that most of this post is below the fold (before the “quick and dirty math”), and then (ii) delete this portion of the post, since it will no longer be applicable?



Discuss

37 Comments . Leave a comment below.
  1. It sounds like this includes communities served by commuter rail?

    Given how far gas prices have dipped I’m inclined to complain less, but if the logic is raise taxes on communities served by the T because they are in a position to use it that only works if you happen to be going to Boston, which plenty of us aren’t. A t4ma organizer was present at a DTC meeting I attended last night and there was a lot of discussion about needing routes that were not just spokes of a wheel.

    • Tax, build, and expand

      In my view, the most likely way to get the service you desire is to raise taxes, invest the resulting revenue in expanding the system, and use the resulting increase in political capital to create the additional routes you suggest.

    • Public transit benefits drivers, too

      The more people there are on buses and trains, the fewer cars there are competing for space on the road. The added cost to drivers is trivial, regardless of the price of fuel. If we assume the average fuel tank holds 15 gallons (which I think may be high), the increased cost of filling a tank from empty is less than 50 cents. I would happily pay that to reduce traffic.

      • Removing trucks from our highways

        Building a separate right-of-way to be used by commuter rail, so that commuter rail does not compete with freight rail, removes trucks from our highways.

        Currently, CSX trains compete with commuter rail for moving freight into Boston. Allowing CSX to move more freight by rail into Boston means fewer trucks on our highways. A single multi-modal flat car, on a train, carries two containers — two trucks. A double-stack car carries four containers — four trucks. A single additional train with (picking an arbitrary number) 50 double-stack cars removes TWO HUNDRED trucks from our highways.

        Trucks are far more damaging to the road surface than cars. Trucks are a significant factor in creating traffic jams. A truck emits FAR more carbon than the same tonnage carried by rail.

        The economic case for increasing commuter rail capacity is compelling for everyone, whether or not they ride a train to work and whether or not their community is (directly) served by commuter rail.

  2. As I wrote

    we know that spending capital money will result in … the ability to expand service routes and frequency of service on existing routes.

  3. Gas tax should be raised annually

    The voters – egged on by Charlie Baker – said that they were opposed to an “automatic” increase in the gas tax. OK, we get that. However the small increase that was passed (3 cents!) was done so with the expectation that the gas tax would rise appropriately each year.

    Without the automatic mechanism, the legislature needs to vote to raise this each and every year. That is the only way it will keep up with inflation. You either over-raise it once every so often, or you raise it correctly every year.

    Now is the time to get into the habit of making the gas tax adjustable annually. It is especially good to do it when gas is $1+ cheaper per gallon than it was last year. Another 3 cents is noise in the pricing, and is sorely needed.

  4. Why not a real estate transfer fee?

    That’s how the land banks down on Cape & Islands get their money. The MBTA is jacking up property values everywhere it goes, so take a cut (from residential, commercial and non-profit real estate sales) to fund the capital costs of running the service. Make it 1-2% in MBTA core communities and something like 0.5% for Commuter Rail communities. We’re all in a world of hurt without a well-maintained and extensive public transit system.

    I’m not opposed to paying a bit more for gas where I live either (on top of an annual statewide gas tax increase), but I think from a policy perspective we need to start tying MBTA funding (at least many of its capital costs like rolling stock, tracks and station upgrades) to the widespread property value it enhances. That’s the idea behind land banks: since all this pristine beauty is increasing your property value, then some of that value should be funneled back to preserve the area’s pristine beauty. In this case it’s transportation that’s laying the golden eggs.

    • Not any longer.

      All but 2 towns -Ptown and Chatham – have switched over to the Community Preservation Act which is a property tac surcharge, although those towns charge CPA and Land Bank charges. BTW the land bank has a sunset so in 2 years it ceases to exist anyway.

    • Not a fan of your differential

      Most folks who ride commuter rail also ride bus or subway. Most folks who ride bus or subway do not ride commuter rail. Furthermore, the farther away you live from where you’re heading, the more you as a driver benefit from the reduction in congestion.

      So why is it that commuter rail “properties” only pay 1/2 to 1/4 of what core communities “properties” pay?

      It’s one thing to distinguish between an MBTA community and a non-MBTA community — but if you want to deep six the proposal, it seems to me that the surest way is to pit commuter rail folks against subway and bus folks, as you propose.

  5. $60m a drop in the bucket

    Stomv, respectfully, I think we would not be being honest with ourselves if we asserted that a $60 million increase in the MBTA’s existing annual capital budget of $1.25 billion was going to make a noticeable different in efforts to bring the current system up to a state of good repair. For context, the below Globe article from just ten days ago states that according to the MBTA’s own estimate, it would take roughly $6.7 billion to bring the existing system up to a state of good repair – and we haven’t even begun discussing the important (and expensive) expansion needs for the system.

    It appears to me that, from a practical standpoint, a gas tax increase, even one that would be levied statewide, is not likely to secure sufficient revenue to A) bring the entire system up to a state of good repair in a relatively timely manner, and B) fund the various legally-mandaded and otherwise-anticipated system expansions.

    Now I’m no public finance or taxation expert, but it seems like the only mechanisms likely to bring in revenue on the scale needed to really save the T at this late hour would be 1) increasing the sales tax rate, 2) increasing the personal income tax rate, or 3) some combination of the above, either statewide or in the 74% of Massachusetts that falls within the MBTA’s service area.

    To provide a sense of context for that $6.7 billion number, the ENTIRE proposed budget for the Commonwealth of Massachusetts for this fiscal year (as proposed by Gov. Baker) is approximately $38 billion.

    I guess what I’m saying is, if we’re going to try to fix the MBTA (and we should!), let’s use what political capital we have on solutions that will address all, most, or at least a serious chunk of the need, rather than 0.89 percent of it ($60 million out of $6.7 billion just to fix the current system).

  6. TL; DR?

    VI. To be clear, an additional $60M on a $1250M annual capital budget isn’t going to be a game changer. This isn’t going to turn the MBTA experience into that of Disney World. But, it is enough to pay for 100% of the signal upgrades and station upgrades envisioned over the next five years, for example. It’s real money, and it would really help create a future with a steadily improving MBTA.

    • And P.S.

      It’s $60M/yr, not $60M one time. And it could be borrowed against. With $60M every year for 30 years, you could borrow about $1B plus or minus.

      Is a billion bucks enough to make you take notice? Is a billion bucks a serious chunk?

      • Sure, a billion bucks in one-time money is great.

        You know what I think would be much, much better though? Increasing the statewide sales tax from 6.25% to 7.25% and dedicating the additional revenue collected to the T. Today, the T receives the funding from 1% of the current 6.25% statewide sales tax, which is projected to raise approximately $810 million in FY2015, or about 40% of the T’s overall annual budget. Think how much good could be accomplished by doubling that allotment to $1.62 billion/year in sales tax money for the T by increasing the agency’s forward-funding allocation from 1% of the statewide sales tax to 2%?

        Or, if you like, just levy the additional 1% over the 74% of the state within the MBTA service area. That would raise an additional $600 million/year for the T if population density and economic activity were spread evenly geographically across the Commonwealth, which as we know they are not. Given the extent to which population density and economic activity concentrated into the MBTA’s region of the state, I would think that $700 million/year from this mechanism would be a conservative estimate.

        And all these ramblings and back-of-the-napkin numbers are just for a sales tax increase. We could raise exponentially more by increasing the personal income tax rate and dedicating the increase to the MBTA, as the State of New York has done for the New York Metropolitan Transit Authority.

        • Nyet to increasing the sales tax

          We should be raising taxes on the wealthy. Increasing the sales tax does just the opposite.

          An increase in the personal income tax rate, if accompanied by a corresponding increase in personal exemptions, is better but still probably too broad. Reversing the January REDUCTION in the personal income tax rate should be a no-brainer. Note that income is NOT synonymous with wealth.

          The best way to tax the wealthy is to dramatically increase the capital gains tax (again with a corresponding increase in personal exemptions to protect the 99%).

          • Ideally I would like to see MA's personal income tax system look a lot more like New York's or California's,

            Where the top income brackets pay 9+% and 13+%, respectively, while those in the middle class and below pay far below MA’s current 5.15% rate. For example- I’m presently a CA resident, took in roughly $55k or so last year, and my state income tax rate worked out to about 2% when all was said and done. I believe CA’s highest bracket is for those making more than $1 million/year, at 13.3%.

            Jim Braude has an interesting piece in today’s Globe about the last attempt to exact a progressive income tax in MA at the ballot box in 1994 as well as the prospects of doing so now.

            All that said, Tom, since you are one of the most outspoken voices on this board in favor of a progressive income tax here in MA, one of the things I think we should be thinking about and discussing as supporters of that policy (and I’m obviously one as well) is how to mitigate the cyclical nature of income and capital gains tax collections from the very wealthy. The fact is, as you’ve rightly pointed out, nearly all the 1%-ers get their income from capital gains, dividends, and similar sources, which exponentially grow in a bull market and shrink similarly in a bear market.

            At least in California, where two-thirds of the $150 billion annual state budget is raised from personal income taxes, and the vast majority of that comes from Californians who make more than $100k/year, the result has been catastrophic state budget deficits as a result of reduced personal income and capital gains tax collections during the last two recessions (2000-2001 and 2007-2009)

            I guess what I’m saying is that, like you, I’m no fan of the regressive nature of sales taxes. But I also think that if MA is successful in shifting to a progressive personal income tax/capital gains tax structure, we need to consider other, more stable mechanisms for raising revenue at the same time to prevent the sort of hollowing-out of core public services experienced by California during the recessions of the last 15 years.

            • I believe what Tom is trying to do...

              …is avoid the constitutional pitfalls that your proposal for different rates for different brackets is likely to face in MA.

            • We need to walk before we run

              I agree that a graduated tax system would be a huge win. I don’t see it happening any time soon.

              I want to emphasize that the most important group of under-taxed individuals — the very wealthy — are essentially immune to any changes in the personal income tax rate. There are countless ways to structure portfolios so that “income”, as measured and taxed by the state and feds, is as low or high as the individual desires. This is why I keep harping on the difference between “income” and “wealth”.

              At the end of the day, “generational transfer taxes” — estate and gift taxes — are most effective way to claw back wealth, however it was gained. That’s why the GOP is so passionate about killing the “death tax”.

              We need dramatic increases in the capital gains tax rate and the estate/gift tax rate at both the state and federal level.

              • Why not...

                We need dramatic increases in the capital gains tax rate and the estate/gift tax rate at both the state and federal level.

                … declare an upper end of income as a “maximum wage” and tax everything above that as capital gains?? We have a “minimum wage” so why not a “maximum wage”? Speaking for myself only, nobody has yet convinced me that a single individual can ever ‘earn’ more than, say, $250,000 per year. Nobody is that productive. I’m not wedded to that particular number, but I am liking the idea of a “maximum wage” so that we can, at least honestly, start to talk about issues as they are.

                • The howls would be deafening...

                  regarding disincentivizing further innovation and punishing success, though creating new brackets might be more palatable. Minimum wage is to make sure people have enough, though that needs to be increased. There is no flip side of the coin justifying a maximum wage. I prefer to regulate the ratio of highest paid to lowest paid person within the same company.

                  • Clarification

                    I think that petr is refering to a “maximum wage” for tax purposes only, above which income would be assessed under the existing capital gains rates rather than income tax rates- i.e., higher rates. I do not think he is referring to setting a statuary maximum for compensating anyone for their work.

                • variations on the maximum wage

                  have been floating around for more than a decade. One of the more common ones is to end the deductibility for tax purposes of any compensation paid by a business that either exceeds a set dollar amount of a multiple of the minimum wage, or even the lowest wage paid within that entity. Businesses are currently paying taxes on their profits, which exclude all employment costs, including what is generally called “executive excess” in compensation.

                  These proposals would not raise huge amounts of money, unlike petr’s, but would raise the cost to businesses that pay mega-money to their elite employees. For example Eversource (formerly NStar and Northeast Utilities) this week announced a $1.2 million pay bump to $9 million in 2014 for its CEO, Tom May.

                  • An illuminating example

                    The compensation package awarded Mr. May, as reported in the Globe, is an illuminating example of what I mean. From the story (emphasis mine):

                    May’s 2014 compensation included a base salary of $1.2 million and a bonus of $2.25 million, which increased only modestly from 2013. The real increase came in the form of stock awards: $5.3 million last year versus $4.3 million the prior year.

                    May’s stock awards break down into two types: shares in Eversource that vest automatically over the course of three years if May stays with the company, and shares that vest over a similar time frame based on whether the company hits certain financial goals.

                    [May] reaped $11.6 million from exercising options that were awarded to him in 2007, 2008, and 2009. And he received $3.9 million in stock that vested last year, through awards handed to him in previous years.

                    You’ll note that the report does not disclose the terms of these options, the vesting period, the exercise price, and similar details. We don’t know if these are “qualified” or not. Such details determine the tax treatment of these options, including things like when they become taxable (At grant time? At vesting time? At exercise? At sale?), whether they are taxable as long- or short-term capital gains, what restrictions are imposed on them, and so on).

                    The only part of Mr. May’s package that would be affected by a change in the state’s personal income tax rate is his $3.45 M cash compensation. We don’t know how much of that is Massachusetts income. Such packages are generally negotiated, and I’m certain that Mr. May had competent financial and legal advice during those negotiations.

                    My point here is that focusing on “income” distracts attention from the real picture of what’s going on here. We don’t know the personal net worth of Mr. May, but I’m confident that (a) it greatly exceeds his $3.45 M annual cash compensation (b) the GROWTH in it likely exceeds that compensation and, most importantly, (c) Mr. May almost surely pays a significantly smaller share of the annual increase in his net worth in taxes than any of us participating in this conversation.

                    That final observation is, in my view, where we should be starting our conversation about who should pay newly increased taxes.

                    • So is there reason...

                      …we can’t or don’t just classify the entire package as income and tax it accordingly? It’s still not progressive in MA, but at least we can get the 5.8% or whatever it is these days out of the entire thing.

                    • Stock is not cash

                      There absolutely IS a reason — equity is different from cash.

                      Income is cash. Equity must be turned into cash in order to be spent (except, of course, if it is traded for other equity). My family owns a two-family in Somerville. We bought it in 2012. It’s worth a lot more today than it was when we bought it. Our equity has skyrocketed. Since we have neither sold nor borrowed against the property, we’ve taken no cash out of it.

                      Even I would not suggest taxing the increase in real estate values — yet your proposal is the same thing for stock. Remember that in Mr. May’s case, he hasn’t been given stock — he has, instead, been given an option to purchase stock at a certain price (probably the price of the stock at the time the option was granted).

                      It’s hard to see how to even measure, never mind tax, the gain in the value of a stock option that can’t even be exercised (which only acquires the stock — the stock must be sold for profit in order for a cash gain to occur) until 4-5 years from now. And yet, it is obvious from inspection that Mr. May has received a very lucrative compensation package.

                      Meanwhile, lest you inadvertently perpetuate a perception that taxes are already high in Massachusetts, the personal income tax rate for Massachusetts, as of January 1, 2015, is 5.15%.

                    • Although 5.85 still exists

                      In the form of the voluntary tax rate which I am sure good progressives pay to demonstrate their symbolic committment to badly needed additional revenue.

                      I hear it’s into three figures now for those paying it.

                    • Taxes are not voluntary

                      We are diluting the meaning of “volunteer” and “voluntary”. “To volunteer” means to offer something, free of charge. A volunteer chef at a soup kitchen is not paid.

                      When an individual enlists in the military, that individual is not a “volunteer”. We abuse the language to describe our soldiers in Afghanistan or Iraq as “volunteers” or today’s military as a “volunteer” military. While we no longer have a draft, a more accurate term for today’s military is, I think, “mercenary military”.

                      Similarly, a tax is compulsory. Anybody who wants to can make a contribution to the Commonwealth of MA in any amount. That is a voluntary contribution. It is NOT a tax. The “voluntary tax rate” is a canard offered by the right wing for use in derailing conversations like this.

                      The current personal income tax rate in Massachusetts is 5.15%.

                    • Two definitions of volunteer

                      One is to do something for free. The other is to do something without being compelled. The military without a draft fits the second definition but not the first. As for tax, Porcupine was probably referring to the option that at least existed at one point to use the 5.8 rather than 5.3 scale.

                    • Meaningless and misleading

                      Yes, I understand the definition you mean for military service.

                      In my view, it is meaningless and misleading. Nobody compels me to do my job every day. Would it be anything other than misleading for me to describe myself as a “volunteer programmer”? What would we say about my employer if that entity proudly promoted its “Volunteer Developer Organization” in promotional literature?

                      I am a professional. My peers are professionals. A “professional” is someone who is paid to do a skilled job. I’d be ok with describing our military as a “professional military” (though I think “mercenary” is synonymous in a military context).

                      In my view, our government’s use of the phrase “volunteer military” is an example of Orwellian double-speak used to distort reality in order to advance a specific government agenda.

                    • You applied for the job.

                      You went to the interview; you accepted the job. Even the Constitution in the 13th amendment suggests the other direction: “Neither slavery nor INVOLUNTARY servitude shall exist…” Certainly your job does not constitute involuntary in that sense, and there is such a thing as service that people render willingly. As long as you can quit your job without the threat of being dragged back to it by force it is in that sense voluntary. Dictionary.com appears to agree with me:
                      Voluntary
                      Volunteer

                    • Still and option to volunteer

                      The DOR calls it two things – Voluntary and Optional

                      “Recent legislation has also given taxpayers the opportunity to elect to voluntarily pay tax at a rate of 5.85 percent on taxable income which would otherwise be taxed at 5.2 percent. This option is not applicable to short term gains and gains on collectibles.”

                      or –

                      “Optional Tax Rate of 5.85%
                      Taxpayers have the option to pay a higher tax rate on certain types of income. Taxpayers may pay 5.85% as opposed to 5.2% on the following types of income:

                      Form 1 or 1-NR/PY income after exemptions – Form 1, Line 19 or 1-NR/PY, Line 23;
                      Schedule B interest and dividend income – Form 1, Line 20 or 1-NR/PY, Line 24;
                      Schedule D net long-term capital gains – Schedule D, Line 20
                      The election to pay tax at the rate of 5.85% does not apply to items of income taxed at 12% (short-term capital gains and gains on collectibles and pre-1996 installment sales.)”

                      Apparently the state has not checked with Tom as to how it should be defined.

                    • What part of ...

                      What part of “The “voluntary tax rate” is a canard offered by the right wing for use in derailing conversations like this” is hard to understand?

                      I, of course, do not dispute that this option exists. It’s a red herring, usually used just like porcupine did above to attack those who advocate raising taxes.

                    • So when do we tax it?

                      Is the current policy to tax it in the year it is turned into cash? I guess I figured that if a CEO’s annual compensation is $5mil salary plus another $5mil in stocks, then we should calculate it the same as if he earned $10mil in salary. I didn’t realize we were back down to 5.15% (haven’t done my own taxes yet this year), but I did not mean to suggest that taxes were too high. In fact I’ve long thought our tax system is a bargain and have never understood how we got the Taxachusetts reputation.

                    • For stock, a very complex question

                      The “$5 M in stocks” is not cash. What Mr. May received is probably an opportunity to purchase five million dollars worth of stock, using the price of the stock when the agreement was executed. Perhaps it is an outright grant of stock, that happens too, but since it is “vested”, then the stock doesn’t actually become his until the vesting period has elapsed.

                      One issue is that the stock price might go down. Suppose it was a grant, and Mr. May were taxed at today’s value of the grant (# shares times price per share). Since that stock is not vested, he is unable to sell it. Suppose the stock decreases in value during the vesting period — then Mr. Mays will have been taxed on “income” he had no ability to realize.

                      In my field, “Incentive Stock Options” are commonly awarded as part of a compensation package. The most common form sets the option price to be the value of the stock when the option is awarded. The options may then be exercised when vested. If the stock has increased in value, then the person can exercise the option, buy the stock, and immediately resell it — the difference between the sell price and the option price is a short-term capital gain (and is usually taxed like regular income). With some plans (our attorneys will have to help me out here), a “tax event” has occurred when the option becomes exercisable — the person must pay taxes on the difference between the sale price and option price when the option becomes exercisable. This sometimes forces employees to sell enough stock to pay those taxes. The person can, however, hold the option without exercising it. I believe (though I’m not sure) that the clock starts running on a long-term capital gain when the option becomes exercisable. That might not be true, though. In any case, the person can exercise the option, buy the stock, and then hold it. If the person holds it long enough, then when the stock is sold the person pays a “long term capital gain” on the difference between the sale price and price paid.

                      I think the key distinction here is that “wealth” is not “income”. Equity is not cash. Don’t forget that there are many ways to control wealth without owning the assets that the wealth springs from.

                      An individual with a $500 M portfolio (number chosen randomly) can take a margin loan of $5M on that portfolio and use it as a 20% down payment on a $25M piece of real estate. If that real estate appreciates 4% (easy to accomplish in a healthy market), then the individual has earned a $5M gain from the real estate appreciation. He can refinance the mortgage, and use the $5M to pay off the margin loan.

                      That person just expanded their portfolio by $25M, and no taxable event occurred.

                      The fundamental issue, therefore, with your premise that “we should calculate it the same as if he earned $10M in salary” is that your premise attempts to treat wealth and income identically. The wealthy conduct these kinds of transactions all the time — “income tax” is completely irrelevant to them.

                      A fish is not a bicycle. Income is not wealth.

                    • tax increase

                      Don’t your property taxes go up with the increased value of your house?

                    • only to the extent prop 2.5 allows

                      n/t

                    • um, no?

                      Property taxes are capped. The cap can grow by no more than 2.5% per year, normally.

                      There are two ways the value of your individual property can increase your property taxes. (1) If it appreciates more than the average in your city or town. (2) if you build something new on it.

                      Your property can appreciate in value and your taxes can decline, if other properties appreciate more.

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