Today our debate on taxes is stuck in mud because it requires agreement at the legislature to either cut services, increase taxes or authorize local government to tax. In the absence of a resolution, our local cities and towns are forced to use a regressive property tax, and in many communities overrides to just stay even. A major concern of those opposed to increasing state taxation is the loss of local control over the revenue, a perception that the funds will be misused or wasted at the Statehouse and a concern that the funds will be diverted to other communities. The result is that our less fortunate residents are forced to pay more in property tax (as a percentage of income) than their neighbors with higher incomes. Many seniors for example, now pay 20% of their fixed income in local property tax in our community to stay in their hard earned homes, while we debate a 1.25% increase in the income tax. Their wealthier neighbors pay under 3% of their income in local property tax. It is no wonder there is resistance and consternation at the annual increases in property taxes.
One way to address this problem that has not been discussed is to have the legislature authorize local communities to adopt a local income tax election. Each community could be authorized to collect up to 2% of the community’s income, as reported on the state income tax returns in that community, and to apply the revenue towards its local tax receipts. The state would merely act as a collection agent, and the collection process would be cost free since it would involve adding a line to each tax return applying the communities’ chosen rate. In our community, based on reported income, a 2% income tax would raise approximately half of the current amount raised in local property taxes. It would re-allocate in a far more progressive manner the cost of operating our Town based on what folks could afford. As long as the new income tax revenue was put within the proposition 2.5 levy limit, it would force a community to reduce property taxes by the amount of income tax raised. A community could still choose to approve an override, but it would now fall more on those who could afford it and a local community could actually find a way to cover a greater share of its expenses, thus reducing the burden of local aid to the state as a whole.
The virtue of this approach is that it would still allow the State to provide Chapter 70 aid to communities with less financial resources for their schools, but would otherwise make it possible to use an income tax, to finance many of our local cities and towns. Seniors and those with less income would be able to pay their fair share and stay in their communities, allowing for economic diversity and reducing the discriminatory effect of property taxation.
Bruce Leicher
