The centerpiece of the Mihos campaign is what the candidate calls “Prop. 1:” a plan he says he will propose to the legislature in his first budget, and take to the people by referendum if it is not approved. These are the elements:
“1. Set Aside 40 Percent of State Annual Tax Revenues for Local Aid: Over the past few years, elected politicians on Beacon Hill have been able to balance the budget by cutting local aid, which is money that the state gives back to communities for schools, cops, and other local services. Thats why less than 30 percent of todays tax receipts go to support localities. By increasing that support to 40 percent a plan proposed by the Massachusetts Taxpayers Foundation we can have a profound impact on municipal finances.
“2. Stabilize Property Taxes: Under Proposition 1, property values will be capped at the time of purchase until the property is sold. Thus, the system will provide more certainty to homeowners since they will not face any overwhelming jumps in property taxes from reassessment.
“3. Remove All Academic and Activity Fees From Public Schools: Theres no excuse for such fees, and localities shouldnt be in a position where they feel as if they have to penalize their own children for being active and involved. By increasing local aid to 40 percent, localities will no longer be in that position.”
David criticized this plan in February because (1) it offers no details as to the tax increases or spending cuts that will be required to boost local aid to 40% of state revenues, and (2) it requires new arrivals in cities and towns to subsidize longer-term residents with relatively higher tax bills. Those sound like pretty solid criticisms to me, and in fact, I’d suggest, go a long way toward reinforcing the perception that Mihos is not a serious candidate. Adam Reilly called the plan “irresponsible” in March. RightMiddleLeft, an earlier commenter here, defended the plan but apparently couldn’t sustain the argument. Can anyone make a viable case for this proposal, or should we consider the entire Mihos campaign a complicated marketing effort for a chain of 12 convenience stores on the Cape?
but 3 is pretty good, at least in concept. Kids shouldn’t be shut out of sports or other after school activities at school because of price. In fact, allowing more kids to stay after school gratis just might result in the reduction of latchkey kids — and maybe a reduction in behavior that leads to crime, pregnancy, drugs, or just accidents. What costs the town/state more in the long run — a few hundred more bucks a year per kid for afterschool programs, or cyclical poverty, substance abuse, and prison terms? I don’t know the answer, but I’ve got a hunch that in this case that an ounce of prevention is worth a pound of cure.
Once again, we precisely disagree. 😉
But not 3.
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Give local gov’t the proportion of state revenue they deserve. We still haven’t been made whole from the cuts of 02.
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But don’t tell local gov’t what to do. If the state is going to assume the costs of sports, they can do so, but don’t tell my school committee that they have to lay off a chemistry and math teacher to buy football pads because they can’t assess user fees.
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I do agree that they’re a shame, but user fees are usually instituted as the only alternative to teacher layoffs.
If a town figures they can’t afford enough equipment for a football team without laying off a chemistry teacher, right now, they can do both and require kids on the team to pay a fee. Under a Mihos-like proposal, they wouldn’t be able to do that, but that doesn’t mean being forced to lose a teacher. It means finding some other way to deal: They could just not have the football team they can’t afford (and some local league could be organized by parents), or they could ask for voluntary contributions to fund it, so those parents who can afford to put some money in. Either way, the effect is that everything at the public school is equal-access, regardless of the finances of each child’s family. However schools choose to deal with it, it’s a very good restriction and I fully support it.
I can’t support handcuffing localities even further. That doesn’t mean I like these fees, but I’m against the state dictating this.
Imagine, if you will, that I partition my lot into two identical .04 acre condos. I sell one this year and live in the other one until 2010. The new buyer will end up paying much higher taxes on his unit than the person who bought the identical unit in 2006. What could possibly justify this?
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This is a tax on people moving into a locality. If you want Massachusetts to turn into a ghost town, then Prop 1 is for you.
Proposition 13
First of all, California has the seventh largest economy in the world on its own. Massachusetts is down at 31 if you believe the IMF numbers via Wikipedia.
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California’s property taxes are also assessed by the County. That means that each locality in CA has a larger pool of residents to make up their tax base than Massachusetts does.
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But forget all of that, do you honestly think that raising taxes on newcomers is a good way to stem population loss in Massachusetts?
Not raising taxes on newcomer. The newcomer simply pays tax on the purchase, while the old yankees enjoy his old tax bill. The price the old yankee will receive upon ultimate sale will reflect the anticipated new assessment. That is, if you’re a newcomer, and you forecast your new property tax, and it’s too high, you’ll offer less for the house — economics 101.
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To the progressive side of the argument, the neighbor in the identical house who bought 10 years ago will, if he continues to live there pay the same and will continue to pay the same so long as he lives. A fair progressive tax to the elderly, right?
Are you telling me that what you save in taxes you lose in equity?
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This is all just shifting the problem around. The problem is that we rely too much on the property tax to fund our municipalities in general and schools in particular.
Precisely! What you save in taxes you will ultimately pay back by a loss in equity. Excellent wording. I’ll definitely claim that as my own. 🙂 It’s almost like a reverse mortgage.
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There are many problems that are being addressed with this proposal, but isn’t one of the problems that’s being discussed the problem of the elderly not being able to afford their real estate tax? Prop 1 addresses this problem. The elderly saves taxes while he lives there but the perceived value is reduced if there will be a tax increase upon transfer.
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Problem 2. We rely too much on property tax to fund municipalities. Spot on. Property tax is a terrible tax base. Prop 1 significantly replaces the tax base with a guaranteed 40%. At the same time, it eliminates the need for appraisal litigation and tax assess valuations. There’s big number there, in every town.
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You say you’re against Prop 1? It’s sounding like you’re coming around.
I bought a house in the last few years. I can afford the property taxes. I can’t afford ending up with negative equity if the market softens and Gov. Mihos decides that my house should be worth less so the next guy can pay more to the town.
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I understand that property taxes are hard on the elderly, but I’d rather work on ways to lower them for everybody, rather than shift the burden to new home buyers and young couples deciding where to settle.
The real estate tax burden should drop or remain more flat, because the Town’s principal income source will shift away from real estate tax to income tax.
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Your house equity won’t go negative, or rather it won’t go negative because of Prop 1.
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An you say, you can afford the property tax. Of course! You buy what you can afford. You can afford the maintenance, mortgage, insurance, etc…AND, you can afford the taxes because they won’t go up.
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Newcomer enters town, looks at the real taxes. They’re higher than you pay. So what? You probably also paid less for your house than him.
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The point is that Prop 1 takes the pressure off real estate tax and guarantees that income tax will be returned.
This “reverse mortgage” stuff — that you’ll pay less for the house because taxes in the future will be higher — simply is not what has happened in CA.
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In CA, Prop 13 has acted as a strong disincentive to sell your house. Move to a different house and double your property tax? No thank you!
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So instead, folks are much more reluctant to sell, which has a strong effect on supply and actually drives prices up. It is far cheaper to rent than it is to buy in many areas in CA.
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Lucky for us Mihos doesn’t stand a chance, and the Leg would never approve section (2) of “Prop 1” anyway.
True that folks are more reluctant to sell, but, because they don’t move, they’re also relectant to buy. Seems to be neutral to supply/demand analysis.
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Agree that 1) Mihos doesn’t have chance and 2) Leg wouldn’t agree to section 2.
What happens if there’s an inflationary spike, oh, I dunno, over the next couple years like every single economist thinks.
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Everyone still pays the same tax assessment while it costs 120% as much to provide services?
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1) Cut taxes
2) Continue services
3) …
Whether there’s inflation or not, real estate will continue to turn. Every year, people will buy or inherit real estate and tax values will change for new buyers. There’ll be some savings from the elimination of the Boards of Assessors and that nasty Tax Board litigation that plagues towns from time to time.
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And, even if inflation spikes, so too do income tax revenues! That 40% just became 40% of a larger number.
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California’s Prop 13 allowed for a 2 1/2 annual valuation increase–maybe Mihos envisions that too. I do agree that there would have to be some provision for annual capped increase, not to deal with a ‘spike’ but rather to adjust for annual historical inflation in the 2 – 3 range.
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Prop 13 passed in California in the 1970s and is still very popular.
It’s over 4% right now and the overwhelming consensus is that further devaluation is coming, especially when you look at our budget deficit, trade deficits, and the artificially high yuan’s effects on the latter.
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What inflation means is that the 5 bucks you’re holding onto today is still nominally 5 bucks tomorrow, but you can only buy 4 bucks of stuff with it. Individual goods go up and down but in the aggregate, it all averages out.
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So when your municipal government is getting, say, 10% more money from the state but everything costs 10% more that’s not really putting them in any better position. When the other half of their revenue that comes from local receipts goes up by 2.5% under prop 2 1/2 and healthcare prices go up by 10%, wages go up by ~~3% and county retirement system payments go up by more than 2.5% as the situation is now, local government is getting squeezed.
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Mihos’ proposal would make this squeeze even worse, by making sure that local receipts go up by less than 2.5% in the aggregate since 90% of them in a given year will stay the same.
Look, you and I agree about inflation. In fact, I’d go one further to say that inflation will end the year at 5.6% with the possibility of a recession in the 4th quarter because of inflation.
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But, under the current system if inflation is out-of-control, Prop 2 1/2 hamstrings the town. It’s a potential problem in inflationary times.
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Under the Prop 1, it’s less of a problem, because property tax become a smaller component of the revenue source, and income tax is self adjusting because with inflationary income comes inflated tax collections.
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I think there is some reason to give the federal reserve credit as an inflation fighter, but even so, Prop 2 1/2 is more exposed to inflation than Prop 1.
His plan removes user fees?! Who better to pay for use, than the user. What? We should also remove the toll from the Mass Pike? Deed recording fees? Cost of a fishing license? I have no issue paying for public education, but if a kid wants to play sports or ride the bus, then the parent should pay.
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That said, and I’m no big fan of property tax as a tax base, but Mihos is saying that in the case of two neighbors, each with an identical home, one should pay less just because he’s lived there longer? What does he think this is, California?!
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California’s Prop 13 was great, and the purchase price cap works: no unanticipated tax increases; no valuation challenges; predictable annual revenues; turns out to be a somewhat ‘progressive’ tax system. The Mihos plan differs slightly from Prop 13. His plan does not (from the posted description) allow for an annual (capped) inflation increase to purchase valuation so I’m cautious if his plan threatens Prop 2 1/2 limitations (the single best tax reform in the history of Massachusetts).
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40% back to the towns and cities. Interesting. To David’s criticism (“where do the cuts come from?”), I’m cofident that can profitably manage 12 convenience stores at the cape can deftly reduce state spending by 10%. (half sarcasm/half not so much).
Is a quotation from his website, just for the record.
should have read: “I’m confident that anyone who can profitably manage 12 convenience stores at the Cape can also deftly reduce state spending by 10%.”
You can’t only compare property taxes to California. You need to look at the big picture.
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California residents have a graduated income tax, with the top bracket at 9.3% if you make over $40.4k. I don’t know how the exemptions compare. We have a 5.3% flat rate in Massachusetts.
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California residents pay 7.25% sales tax, with 1% of that going to a city/county, and the potential for a city/county to add up to another 1.5% in sales taxes. I don’t know what is exempted from the taxes either. We have a 5% rate in Massachusetts.
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There are probably other differences between taxation in California and Massachusetts — excise tax, use tax (and how agressively it is enforced), etc.
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In addition, it has been theorized that in response to the property tax limits, communities have forced only the more expensive development because they don’t want to take on new residents that are “more expensive” than the money received in the taxes from them. Therefore there is a lack of affordable housing in CA. So I wouldn’t exactly call their implentation an overwhelming success.
I only chose California, because I knew that California adopted Prop 13 in the 1970s. Prop 13 has similarities to Mr. Mihos’s Prop 1.
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Yeah, it’s hard to compare total taxes, Calif v. Mass. Their income tax allows all sorts of deductions: interest, charitable, etc…
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My central point is that California, despite Prop 13 or because of it, succeeds. A Field Poll in 1999 found that Californians supported it by a 53% – 30% margin. California’s property values are high.
High property values are really only good if you already own property, or if you want to practice a little economic segregation. I’d say that high cost of housing probably hinders economic development far, far more than taxes, because its a essentially very large “tax” on someone’s income (my mortgage is, by far, my largest monthly expense). This also drives up business expenses in the form of salaries for employees, salaries that are just paid to a bank in the form of a mortgage.
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And I don’t know how you’re claiming that it has “succeeded”, unless your definition of “success” is simply that there are lower taxes in California. The article you linked to mentions “increased local dependence on fees and sales taxes, large cuts in infrastructure spending and large tax disparities between identical properties depending upon when they were purchased.”
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Also, this:
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It also talks about “ever-increasing meddling of the Legislature in local budgeting and land-use decisions”.
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And everyone knows about the lack of affordable housing in California, to the point where people have to drive long distances to get to work. Surely so many people spending hours a day in a car is negative in terms of society. Think about what that time could be used for instead.
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California residents probably support this law because as residents, they’re already “in”. I suspect that the 55-30 poll was superficial, at best. It probably didn’t ask the respondants about the effects that the law potentially caused.
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I’d argue that high property values are neither good nor bad. They simply are a cost to pay for living somewhere, working somewhere. It’s the good business, high wages, high standard of living and scarcity of land that makes property high around here. Negatively impact any variable and prices will fall.
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My measure of Californian success is broad: high per capita incomes; land values, etc…broad measures. It’s a rich state, and Prop 13 hasn’t hindered its success.
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But, the differences in taxation between identical properties doesn’t bother me. I don’t see economic harm to anyone. (although I can imagine some new residents stewing about their elderly neighbor’s low tax bill)
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I got nothing on the cuts in infrastructure, but I’ve driven the CA roads. They got lots of them. But re: dependence on fees and sales tax. I like user fees. Very fair. Use the service; pay for the service. Very rational. Which is why I don’t care for Mr. Mihos user fee cut proposal.
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Today is the first time I was aware of Prop 1. At first glance it’s a better alternative to Mr. Patrick’s plan to push more aid to Towns. Mr. Patrick says he will give the Town more state aid and the Town will be able to reduce Real Estate tax. I believe the Town will take Mr. Patrick’s increased aid and keep raising the real estate tax by 2 1/2 percent per year.
i think all three elements are good ideas, if coupled of course with reasonable income tax increases to enable there to be more state revenue to do this with, and a system of local/state cooperation and accountability on what is administered where.
I was initially intrigued by #2 as a novel way to effectively end property tax increases on homeowners; but thinking about it for any length of time reveals its arbitrary unfairness and unequalness.
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1 is very interesting because it really just illustrates the need to tax and spend on a more local level. The difference is that the state can tax income, sales, etc and the towns tend to only tax property. Why not just allow the towns to tax and spend their own 40% somehow, cut out the fat middleman, and drop the income tax by 60%? Now that would be progress!
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3 is senseless; if a school can only have a given activity if a fee is charged, outlawing fees will simply end the availability of the activity.
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The problem with letting each town fund itself was that poorer towns created poorer schools–a perpetuating system of poverty. Sometime in the mid 1980s, even Texas developed a centralized redistribution system to spread the wealth a bit.
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Distasteful, I know, to a strick Libertarian, but some form of equitable re-distribution is pretty much a model even in New Hampshire and Florida (non-income tax states). The key is to re-distribute while minimizing the State’s redistribution costs.
You make a decent argument, but the notion turns my stomach.
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If I might rant a minute, it seems like everything liberals ever do is wealth redistribution (I know this isnt strictly true) but so much of the platform, so much of their proposals are in some way or another market twisting transfers of goods and wealth: min wage, unions, universal health care, free medicine, free food, every benefit conceivable turing into a right – all on TOP of the new deal, welfare (mercifully reformed), social security, medicare, program after program after program, oh my god when will it ever end? When we get communism?
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Will liberals ever be satisfied that enough wealth redistribution is occurring?
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OK I’m probably going to take some heat for that one huh.
The struggle over which is more important–equality or individual freedom.
My next entry, when I get to it, will discuss the meaning(s) of equality in depth.
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In short, the government can either treat everyone equally, or try to make everyone equal. I think the founders envisioned supported the former, as do I. Liberals envision the latter, at least in terms of creating equal opportunity but often much more (i.e. wealth redist.).
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Trouble is, the two are mutually exclusive. You can’t treat all people equally at the same time as you are treating some people advantageously.
Do one in some cases, and another in other cases, with a case-by-case adjustment of observed results to goals.
A bit of wealth redistribution helps the whole society function more efficiently and achieve more; too much concentration and lack of regulation can produce disasters (cf: Great Depression). The issue isn’t equality versus individual freedom, or liberals versus conservatives, but ideologues versus pragmatists. The greatest good for the greatest number, with protection of a core group of rights and freedoms for everyone, should be our goal, not equality or freedom or any other per se abstractions.
I really couldnt disagree more –
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Granted that there are usually two windows with which you can look on an idea:
– is it effective or profitable?
– is it right?
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So, if all I care about is what benefits the most people possible, I could for exmple enslave some people, or kill off some real undesirables, or just take all your money and give it to a new business that I am certain will really invent something nifty.
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Another way to look at it is this: if there were a benign dicatator whose decisions we might not like and who might curtail our freedom to a great extent, BUT he was a mastermind at maximum societal benefit and lets just say there’s no way a free society could compete with him, would we make him emperor?
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Its sort of the communist ideal there, isnt it?
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Never mind that its actually less efficient 99% of the time for the government to meddle and arbitrarily treat people unequally, but even if it was profitable, would it be right???
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???