Editorial: Patrick's push for the freedom to tax
You could call it the Boston Tea Party in reverse. Gov. Deval Patrick is calling for more freedom for cities and towns to enact local taxes to raise revenues, making them less dependent on property taxes. Last week, his naming of six-term Taunton Mayor Robert Nunes as state director of municipal affairs, and his municipality-friendly legislative package puts this plan in motion.
Lawmakers and other observers wonder whether such a "pro-tax" measure will fly. But there’s increasing pressure from the world outside Massachusetts, from other states with cities and towns that are better at attracting businesses and skilled workers because they have more freedom to raise revenues for special projects. Those are the findings of a report released last week by the Boston Foundation, which examines six other U.S. cities that are growing faster than Boston. Suddenly, a more diverse tax revenue stream doesn’t look so bad.
Patrick’s new legislative package is likely to get a mixed reception from municipalities - and lawmakers. It’s calling for relief for cities and towns, but one of its proposals is a state takeover of almost a third of the 107 public pension funds in Massachusetts because they’re underperforming the state’s fund. It also gives municipalities broader authority to raise certain taxes to reduce their dependence on property taxes.
Massachusetts cities and towns are prohibited by current state law from establishing local sales taxes or meals taxes. If they want to raise fees, they have to seek state approval to do so. And they can’t engage in any form of fundraising by lottery. The result is excessive reliance on property taxes – and on state aid to offset them. Boston’s non-property, own-source (i.e. local) revenues – things like restaurant and parking taxes, payment in lieu of taxes, and the like – support only 28 percent of the non-school portion of its budget, compared to 60 percent for Chicago, 65 percent for San Francisco, 70 percent for Seattle, 80 percent for Atlanta, and 85 percent for Denver.
The Massachusetts Taxpayers Foundation’s 36th annual analysis of municipal finances, released last November, shows that property taxes in the state reached a record 53 percent of all local revenues in fiscal 2006, and has been rising since 1982. The MTF calls for the state to increase local aid to 40 percent of annual revenues to ease the pressure. But that can only go so far. The MTF also noted that revenue from fees and charges – up 7.9 percent in 2006 – is the most rapidly-growing revenue source for communities seeking to balance their budgets.
Then, there’s Worcester. The city’s fiscal 2007 operating budget of $465.1 million is made up largely of property tax revenue ($180.6 million, or 38.8 percent) and state aid ($239.9 million, or 51.6 percent). In business, this is called being dependent on two big customers as revenue sources. A municipality is at the mercy of commercial and residential taxpayers seeking tax relief, and at the mercy of the state in cutting local aid.
We applaud the Governor’s initiative to diversify our municipalities’ revenue base, and to give cities and towns more freedom from Beacon Hill in the form of local taxes and fundraising. Bay State municipalities need the flexibility to raise their own revenues if they want to attract and retain new business. Unlike the conditions which brought about the Boston Tea Party, proceeds from these new taxes and other revenue sources will stay local - with a better chance that our businesses and their workers will stay local, too.
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