Home values only affect the distribution of the property tax burden among homeowners – if your home is worth more than your neighbor’s, then you’ll pay more in property tax. But if everyone’s home values in a particular city go up at the same rate, and the city budget doesn’t increase, their property taxes will stay exactly the same. Well, unless, that is, the state cuts back on local aid.
An overly simplistic but mostly correct outline of how property taxes work is this:
1. The city comes up with a budget, which sets out how much money they need to raise from property taxes. That amount is called the levy.
2. City assesors tell the city how much each property in the city is worth, and the sum total of all those assessments (with some adjustments, for example for properties that aren’t taxed) is the tax base.
3. They calculate a tax rate to complete the equation:
tax base x tax rate = levy
If property values go up but the levy stays the same, the tax rate goes down to adjust for the higher tax base. If property values stay the same but the levy goes up, the tax rate goes up to allow the city to raise the higher levy. And so on.
This is why Cambridge can boast of having the lowest tax rate in the state! It doesn’t mean we don’t have a problem, it just means we have an astronomically high tax base.
[ Edit: NoPolitician points out that, as with most municipal policy in Massachusetts, the budget process is strongly guided by state rules. They govern, among other things, how much the levy rises by default each year. Cities and towns can alter this, working within state rules. ]
The driving factor of the past few years’ property tax increases has been reduced local aid from the state. Cities and towns can either cut services, or raise the levy, to make up for it. Most have done some of each.
We can stop the growth of property taxes, or even allow some cities and towns to lower them, by bringing local aid back to its levels in the 1990s. That is, we should fund local services by a higher ratio of income tax to property tax. This would go a long way towards making housing, especially rental housing, more affordable.
That’s the core of my argument about income taxes: We need to present voters with the choice, “Would you prefer to roll back the income tax if it means property taxes keep growing or you have to slash local services; or would you prefer raising local aid funded by the income tax to allow your city or town to keep its services without raising property taxes?” Most tax-conscious voters who in principle want to cut taxes, when presented with this choice, would vote for the latter. Property taxes hurt them more, and property taxes are less fair.
Remember, income taxes, by definition, fall on those who are able to pay (unless the lower brackets get too high). Property taxes don’t. Property taxes force homeowners to raise the rent, or sell and move out.
Even though Blue Mass Group isn’t representative of those tax-conscious voters in general, here’s a poll anyway 🙂