Property tax hike looks like a winner

27 July 2001

Just as income tax rebates are showing up in residents' mailboxes, activists in Boston are swimming against the anti-tax tide, hoping to get Boston voters to approve a property tax increase this fall. Surprising as it may seem, odds are they'll win.

Some background: Increases to local property taxes are sharply limited by Proposition 2 1/2, the anti-tax law passed by voters two decades ago. But there are loopholes, and one big one (and new one - it only became law last September) is the so-called Community Preservation Act. The act allows a city or town to pass a 3 percent property tax surcharge to be spent in three areas: open space, historic preservation and affordable housing. A minimum of 10 percent has to be spent on each category, leaving the remaining 70 percent up to the city or town's discretion.

The activists behind the law, not surprisingly, include virtually all of the state's environmental, historic preservation and housing groups. They pushed hard to get the law through and since then have waged aggressive efforts to get towns (31 so far) to pass the surcharge.

Now the campaign has moved to Boston. To get on the November ballot, the activists need 13,000 signatures - which should be easy - or simply a majority vote of the City Council. After that, it's up to the voters.

Does it pass? My prediction is yes - easily.

Part of the reason is the issues on which it touches. The surcharge is being billed as a way to promote housing and who, of course, opposes affordable housing? Certainly not the City Council, which has pushed hard to make it the city's No. 1 issue. Certainly not the mayor who - although officially neutral on the surcharge - will be hard-pressed to resist the siren call of new money for an issue he insists is a top priority.

But there's more to it than that. This comes close to being - from a political perspective at least - the perfect tax.

According to estimates by the Boston Municipal Research Bureau, about 81 percent of the surcharge will be paid for by businesses in Boston. In part, that's because the commercial property tax rate is nearly triple that of the residential rate. But it's also because the Community Preservation Act itself cleverly exempts the first $100,000 of residential property from the surcharge. Combined with existing residential exemptions the city already has in place, that means only a handful of property owners will feel any pain.

The beauty of this? Those who vote for it don't have to pay for it.

Now you know how King George felt. Taxation without representation isn't that bad if you're the one doing the taxing.

Even better, the act requires the state to send extra money to communities that adopt the surcharge. In the case of Boston, $10 million of the $31 million the surcharge will raise annually will come from the commonwealth.

Still, there are puzzles about the Community Preservation Act that deserve some thought.

One is in the nature of irony. Boston now has far more subsidized housing (over 19 percent of its housing stock) than any other municipality in the area (nearby Milton and Newton, for example, have less than 5 percent). In more suburban communities, the law has been used to buy up land for open space, which for all intents and purposes limits new housing. In Boston, the reverse will be the case: If the surcharge operates as expected, the proportion of subsidized housing will increase.

The need for affordable housing is a regional issue. But the effect of the surcharge will be to continue to put the burden of solving it on Boston alone.

Second, the act requires that any money it raises can only be spent on open space, historic preservation and housing. All three are unquestionably worthy goals. But other priorities, such as education, matter as well. Yet education, to many arguably a more pressing need, doesn't receive a dime from the tax hike.

In this sense, the Community Preservation Act tax subverts the normal budget process, which requires politicians to think about priorities as they allocate money. In tough times, when tax revenues fall, politicians often have to cut important programs just to preserve critical city services, such as public safety. But the CPA tax? Its flaw - although to advocates, this may be its beauty - is that it is never subject to those trade-offs. It's a dedicated line item.

Third, as attractively structured as it is, the surcharge is still a tax increase. To anti-tax advocates, it's the camel's nose under the tent. If 3 percent is good, why not 6 percent, 9 percent - or more? There's no good answer to that question.

Still, the Community Preservation Act has the feel of a juggernaut. It tackles the hot-button issue of housing, it's painless to most voters and the state kicks in money to boot. At the end of the day, who would dare argue with such perfection?