Property Tax vs. Income Tax

The comments section has spent some time debating Deval Patrick's view on Prop 2 1/2, and it's clear taxes -- whether Kerry Healey's demand the income tax drop or Patrick's vague property tax help idea -- will play a role in the governor's election (and should in our local House race).

Save Fitchburg, if you haven't noticed, is fairly liberal in its views, but we favor the income tax rollback. As much as we loooove to see government spend money (some sarcasm there, just so you know), we loooove the will of the voters more. We actually voted against the rollback way back, but the majority rules around here. Lower the income tax.

The property tax situation is a lot tougher to figure out here. Certainly, Proposition 2 1/2 is outdated. Yes, it's a strong control on tax growth, but expense growth is generally more than 2.5 percent a year. Health coverage, for example, seems to go up 10 percent or so a year. Inflation is generally more than 2.5 percent. In short, 2.5 percent increases (plus new growth) don't match the increased cost in "level services" each year.

So, what to do? Patrick wants to lower the property tax burden by offering more state aid to cities and towns. A noble idea that our checkbook likes. But...

The income tax cut would generate about $200 per family. That's roughly 7.5 percent of the annual property tax on the Save Fitchburg plantation. So let's say the city's entire tax levy limit of $31 million (according to DOR) is cut by 7.5 percent. That means the state would need to fill in $2.3 million. Multiply statewide... whew.

So, based on that above example (probably pretty flawed, but here comes my point), we get the same discount on taxes that we would under the income tax rollback. The state is spending millions (hundreds of millions? likely) more on local aid (where is that going to come from), and the city's financial situation isn't helped one little bit. Also, there's no guarantee communities won't tax to the full levy limit anyway. Why wouldn't they? Many rich communities pass overrides almost annually, and certainly Fitchburg could use every dollar it can get its hands on.

So, is targeting the property tax over the income tax the right move? Color us not convinced. We're neither economists nor professional budget gurus and don't have the time to investigate, create formulas and be experts. But it seems it just lightly addresses the tax problem while not cure the revenue problems for communities while also increase the state's demand for more revenue.