View Poll Results: On what basis should municipalities be allowed to levy taxes?

Voters
6. You may not vote on this poll
  • Keep local taxes based on real estate

    3 50.00%
  • Allow towns to augment real estate taxes with income taxes

    3 50.00%
  • Allow towns to replace real estate taxes with income taxes

    1 16.67%
  • Require towns to replace real estate taxes with income taxes

    0 0%
  • Other

    0 0%
Multiple Choice Poll.
Results 1 to 15 of 40

Thread: Local income tax as an alternative to real estate taxation?

Hybrid View

Previous Post Previous Post   Next Post Next Post
  1. #1
    Join Date
    Nov 2005
    Location
    Wayland MA
    Posts
    1,431

    Default Local income tax as an alternative to real estate taxation?

    Three general reasons that people vote against tax increase include the following.

    1. They think that taxes aren't being spent efficiently, and that the same services can be provided for less.
    2. They don't like paying taxes and/or don't value the services that those taxes provide.
    3. They can't afford the tax increase.


    1. Taxes aren't being spent efficiently
    No budget is perfectly lean, but no one has yet to suggest any significant examples of waste in Wayland's school and municipal budgets. That said, suggestions for areas of improvement are always welcome.

    2. Don't like paying taxes/don't value services
    Not much can be done here except for continual education on the value of school and municipal services.

    3. Can't afford taxes
    No one wants to see taxes increase, even for such worthy reasons as paying teachers, police officers, fire fighters, road workers, librarians, and all of the other employees who serve the town. That said, some in town simply have a difficult time affording these increases.

    In recent years, federal and state governments have lowered income tax rates, and as a result, funds for local services. The burden for providing these services has therefore fallen more heavily on local funds. In Massachusetts, unfortunately, these local funds come not from an income tax, but rather from a much more regressive real estate tax.

    Without downplaying the hurdles necessary to make this happen, it occurs to me that the real estate crunch affecting those with affordability challenges could be eased by one of the following changes to the way that towns raise funds.

    A. Allow towns to augment real estate taxes with income taxes
    B. Allow towns to replace real estate taxes with income taxes
    C. Require towns to replace real estate taxes with income taxes

    I'm interested to know what people think about the idea in general and the specific approaches I've suggested.

  2. #2
    Join Date
    Mar 2008
    Location
    Wayland, MA
    Posts
    52

    Post

    Interesting thread. I believe that a good way to lower my taxes is to live in a (relatively) smaller house. I am a proponent of the flat-tax effect of real estate taxes. We chose to live below our means and put the money saved for our retirement/ kid's education/ charity/ trips/ fine wines etc. As a result we are not gobsmacked when presented with overrides.

  3. #3
    Join Date
    Nov 2005
    Location
    Wayland MA
    Posts
    1,431

    Default

    On the Wayland Town Crier discussion board, Alan Reiss posed several questions regarding a local income tax. I certainly don't have all the answers, nor am I a tax expert, but I'll take a stab.

    Quote Originally Posted by Alan Reiss
    I've heard about this local income tax idea... does this eliminate RE Taxes? How is it tied to gross or net and what would be the details of how it would be judged in terms of taxability?
    Local income taxes might augment RE taxes, or they might replace them. As a starting point, I'd assume revenue neutrality relative to current RE taxes. That is, this isn't a mechanism to increase taxes by virtue of the changeover.

    Quote Originally Posted by Alan Reiss
    For example if someone received gifts from family that were not income then that couldn't be taxed.
    Lottery winnings? Couldn't somebody avoid taxes creatively here?
    To keep this idea simple, I'd simply use taxes as reported on either the federal or state return.

    Quote Originally Posted by Alan Reiss
    What about an increase in Mass sales tax to be distributed locally to offset RE tax....?
    I find sales taxes to be generally regressive, just like RE taxes, so I'd stay away from this.

    Quote Originally Posted by Alan Reiss
    What about tax in telecommunications or internet infrastructure to be distributed locally to offset RE tax... ?
    I'm all for the state to return to its prior state aid commitment. I don't have a problem with taxes such as these to accomplish this objective.

    Quote Originally Posted by Alan Reiss
    Also the issue of local income tax... would that be state or federaly deductable? Because RE tax is... so that would have to be figure into the calculations.
    Excellent question, I don't know if the federal tax code allows for this, but would not want to change federal deductions.

  4. #4
    Join Date
    Nov 2005
    Posts
    726

    Default A mix of taxes...

    I think it would be appropriate (if made legal) to make our local taxes a blend of property and income taxes. It would shift the burden towards those most able to pay, and relax the burden on older, fixed income residents - while still requiring them to pay some taxes based on the valuable asset they live in.

    Something like a 50-50 mix would be fine -- with the overall tax levy unchanged, but shifted partly from a property tax to a income tax.

  5. #5
    Join Date
    Mar 2008
    Location
    Wayland MA 463 Old Conn Path
    Posts
    382

    Default Unintended consequences

    Jeff, as spoke in person on this and for the benefit of the readers, I believe it was the book "Tipping Point" where an Israeli Day Care center was having a problem with parents picking up their kids 'late' without penalty. The Day Care center then imposed a fine of about $3 and guess what happened? The number of violations went up because now the parents saw that there was a small but reasonable price to pay for being late. $3 was well worth the tardiness and now they no longer felt guilty about being late. I mean they were paying a price for it weren't they? The Day Care center then changed the penalty to a much higher figure and on a ' per minute' basis and the problem promptly went away.

    So the point of this story is that if Wayland were to institute a local income tax then it could have unintended consequences. People who make large incomes but live in small houses might flee and in general, people wanting to move into Wayland would have to do a calculation as to what would be a better deal... taxing their income vs. the type of house they could buy. I could see this getting rather complicated. Wayland real estate might suffer in unintended ways.

    So, if something like this were to actually occur it would have to be at least state wide and even better country wide... (as you also pointed out to me).

    One other note is that the city of Philadelphia (where I grew up) put into place a 4.375% income tax for its residents and even those who had to drive through the city just to get to work. (this happened about 1976 under mayor Frank L Rizzo) That was just about the time I decided to think about moving out of Philadelphia which I did at the first chance I had in 1979... small coincidence huh?

    These are good ideas but have to be modeled and thought through to avoid unintended consequences.

    Regards,

    Alan J. Reiss

  6. #6
    Join Date
    Nov 2005
    Posts
    726

    Default Alan's point is fair...

    Alan, you make a good point. And just as you don't want to scare away the resident with the big income in the modest house, you also don't want to encourage the resident in the big house with the small income to take advantage of the adjusted mix either. So any new policy would have to be well thought out and the dynamics studied.

    It certainly would be best done on a statewide level. And that isn't likely to happen. But it would be nice to have some way to shift the burden to those more able to pay. It's unfortunate that all the proposals on the table (meals taxes, hotel taxes, etc.) aren't likely to do much for Wayland. And the proposal to exempt qualified seniors from Prop 2 1/2 overrides appears dead in the senate (no thank you to Senator Brown on that one).

    In the meantime, we need to do all we can to allow for exemptions, rebates, etc. These are tools we do have, and while Wayland has been great about implementing them, I'm not clear that we've been as good as possible about doing the outreach to see the programs are well-known. Also, they are primarily directed at older residents, not at younger, lower-income residents.

  7. #7
    Join Date
    Nov 2005
    Posts
    726

    Default Freakonomics

    Quote Originally Posted by AlanJReiss View Post
    Jeff, as spoke in person on this and for the benefit of the readers, I believe it was the book "Tipping Point" where an Israeli Day Care center was having a problem with parents picking up their kids 'late' without penalty. The Day Care center then imposed a fine of about $3 and guess what happened? The number of violations went up because now the parents saw that there was a small but reasonable price to pay for being late. $3 was well worth the tardiness and now they no longer felt guilty about being late.
    Alan, I think it was Freakonomics. A fun read.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •