Left In Lowell

Not So Taxachusetts

11 Responses to “Not So Taxachusetts”

1. gbridgman Says:
   September 5th, 2006 at 1:19 pm

   Apples and oranges on at least one of your statistics:

   28th out of 50 is a measure that compares tax as a percentage of per capita disposable income. NOT per head. I think on a per capital it’s 9th in nation (my recollection).

   7th in nation (re: property tax) is per capita. NOT as function of capita disposable income.

2. Lynne Says:
   September 5th, 2006 at 3:25 pm

   So, then, which is the more honest statistic? Does your more favored stat (per head) take into account how much more money people generally make in MA, or how much more their real estate is worth on average?

   Per person in Massachusetts, I would expect there to be more taxes, because there’s more taxable income made on average per person. That doesn’t mean we should get a tax break. It means we have more infrastructure to keep up on top of all the extra income, such as public universities (to keep our workforce educated and valuable) or roads/public transit (to mobilize said more productive workforce).

   So, which is the more honest statistic?

3. gbridgman Says:
   September 6th, 2006 at 4:39 pm

   I don’t favor the per capita statistic or even care to use that data to substantiate a tax cut. Statistics are statistics. Neither honest nor dishonest.

   However, if one withholds the “income tax per capita” statistic as Mass Budget and Policy does, when advocating that taxes are not high compared to all states, then that’s dishonesty, but it’s not a flaw of the statistic.

   My remark was addressed at the comparability. I’ve searched for the statistic I’ll call “property tax as a function of per capita disposible income”. I cannot find it.

   That missing statistic would be, in my opinion, the best statistic to use in comparing to the 28th ranking of Mass income tax “per capita disposible income”.

   Comparing income tax per capita, Massachusetts ranks 9th and real estate tax per capita Massachusetts ranks 7th. That appears to me a fair comparison, because most people except minors earn and most people except minors own or rent real estate. That ranking shows a couple of things, first, we in Massachusetts pay a lot in taxes. Second, when you introduce per capita income, it also shows that we earn a lot, and arguably can afford the tax we assess. Third, and this is only a guess, we pay a lot of real estate tax but can also afford it because real property values are high.

4. waittilnextyr Says:
   September 6th, 2006 at 5:36 pm

   Property tax is regressive because the economics of supply/demand artificially increase the assessed values of low and middle priced properties, so that a tax proportional to that value hits more toward the low end.

   Affordability of property tax is not as directly related to valuation as the income tax is related to salary, because the valuation is not realized until the property is sold. If one must sell his house in order to pay the property tax, what then follows?

5. gbridgman Says:
   September 6th, 2006 at 6:31 pm

   I agree that property tax doesn’t correlate as well to income as income tax (hence the name INCOME tax).

   But, the statement that we’re 28th in income burden and 7th on an per capita basis for property tax is purely misleading. So, what’s the better comparison?

   Your argument that property tax is regressive is pretty much by the boards. It was at one time a bona fide theory that because the percentage income devoted to housing falls as income rises then the tax on the underlying real estate was regressive. I never heard anyone argue that low value or middle values were artificially high because of an assessment anomaly. Honestly, that sounds absurd. Regardless, many longitudinal studies done over 4-10 years find progressivity and strong corellation between real estate tax paid and income.

   For example: http://www.lincolninst.edu/subcenters/valuation_taxation/dl/youngman_1.pdf

6. waittilnextyr Says:
   September 6th, 2006 at 7:08 pm

   It sounds absurd because you are unable to understand it. To clarify, there are more people able to afford a house in the $250K range, so the demand on those houses usually exceeds the supply. Not too many can afford high end properties, so there is no real demand premium on those sales. Since valuation is closely tied with sales values of like properties, the low end is at a premium, and the tax at a higher relative rate with respect to its cost.

   Maybe you could produce some of those longitudinal studies to which you refer, so we could see how the property tax system is progressive.

7. waittilnextyr Says:
   September 6th, 2006 at 7:32 pm

   I read that Lincoln Institute paper to say there is a strong correlation between income and tax paid on capital. Home ownership is one piece of the capital assets of rich people, but may be the only capital asset of lower income people. So, separating out the home tax, it is pretty obvious that it is a higher percentage on income at the low end.

   But, my point goes beyond that - and that is the excess appreciation of lower income property by the economics of supply/demand.

8. gbridgman Says:
   September 6th, 2006 at 10:02 pm

   Hey, if you believe that the 28th ranking versus the 7th ranking is appropriate, go with it along with the regressive property tax.

9. gbridgman Says:
   September 7th, 2006 at 8:47 am

   Sorry, forgot. If I follow your supply/demand argument, you’re saying that because there are more buyers in the low end, then the low end always demands a premium so therefore demand always exceeds supply. That’s why I said, look longitudinally.

   If there is extra demand, and demand premium, then it shouldn’t take supplier long to see it, and satisfy it, thereby achieving equilibrium. So, over time (longitudinally) no, I still think you’re mistaken.

   There are some better studies out there (try Krugman) to support your regressive property tax argument, but the one you’ve mentioned isn’t one of them.

10. waittilnextyr Says:
    September 7th, 2006 at 10:28 am

    Unfortunately, we have reached the affordability limit already, so there is not much more production at the low end, nor further price increase sustainable. But, we are already there, as might be interpreted from the 28th in nation in income tax, and 7th in the nation in property tax. As you have cited, those absolute numbers can be misleading based on income levels of the State, but relative to each other they tell the story of higher reliance on the property tax.

    If you are familiar with Lowell, you may be able to see the regressive nature of the property tax based on valuation by searching a few properties and their respective valuations at the following site:

    http://www.lowellma.gov/services/gis

11. waittilnextyr Says:
    September 7th, 2006 at 10:34 am

    A possible solution to the regressive nature is to provide a value exemption (basic cost for housing) somewhat along the lines of the individual exemption on the State income tax. Let’s say that exemption was $100,000 (most basic housing cost), so that the tax rate would be increased, but a break-even in today’s dollars would be about $325,000. Those below would pay less in taxes, and those above would pay more.

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