Tax grab not the key to Boston's fiscal future

9 March 2005

"We are asked to provide public services and support a 21st Century economy," laments Mayor Thomas Menino, "yet we are left with a revenue structure brought over by the Pilgrims."

An antiquated system? Probably, although it's not really the Pilgrim's fault. Yet as bad as the property tax may be, it's not clear - at least as far as Boston is concerned - that anything better is available.

It wasn't until the mid-1700s, well after the Mayflower sailed, that New Hampshire became the first of the colonies to adopt a property tax. Most others didn't implement it until after the Revolutionary War. At the time, property taxes were considered quite revolutionary. A tax on wealth (riches then measured by real and personal property), they struck a blow for economic equality, reducing, it was thought, the disparity between rich and poor.

Nowadays, in Menino's words to last week's annual meeting of the Boston Municipal Research Bureau, the property tax is the "challenge that supersedes all others." The city is "overly dependent" on it (the only other significant source of revenue is state aid). There are loopholes and exemptions. The tax is inflexible - especially under the strictures of Proposition 2 1/2. Since it doesn't touch incomes and spending, it doesn't capture real wealth. And the tax can be unfair, hitting those on fixed incomes particularly hard.

Of course, this has been true since the days of the, ahem, Pilgrims. So why Menino's sudden demand for reform? Perhaps this newest lament is less about the property tax than it is yet another twist on old cries for more revenue. (Menino for years has been pushing ideas such as a sales tax on theater tickets or a boost in the meals tax.) And, as Boston homeowners know well, residential property taxes have been rising at a dizzying rate. With an election coming up, the mayor may be engaging in some damage control.

But let's not be cynical. Let's assume that the property tax itself - not politics and not more dollars - really is the issue. Can the city do better?

Menino has asked the Research Bureau to conduct its own study. But here's my early take: For all of the property tax's flaws, Boston is stuck with it.

How about, as some have suggested, simply giving Boston its proportionate share of monies collected from the sales tax or the state income tax? If so, the city would find itself shortchanged. Boston has 9.3 percent of the state's population. Yet only 7 percent of the state's retail sales occur within its borders. (These are 1997 numbers, but if anything the situation has gotten worse since then.) Similarly, Boston residents account for only about 8 percent of the state's income.

True, as city officials argue, Boston is the "engine" that drives the region's economy and so perhaps from a moral point-of-view it deserves disproportionately more. The only way it could force that, however, would be to impose its own surcharges - a commuter tax, a city wage tax, or an add-on to the sales tax, for example.

That course would be a recipe for disaster. Unlike New York City, which has such charges and gets away with it, Boston is not an island. "Boston is a small part of the metropolitan area," says the Research Bureau's Sam Tyler. "It's too easy to leave." If Boston places any type of significant tax on those living, working or shopping within its borders, then Quincy, Dedham, and Somerville will be thrilled.

The city is in a bind. Sure, one can nibble around the edges - boosting parking tickets or perhaps getting some of Massport's exempt properties onto the tax rolls. But Menino's challenge will likely be the challenge facing future mayors as well: dependent upon the property tax as well as the annual goodwill of state politicians making decisions about state aid, the city simply has to make the best of it.