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

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

  1. #16
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    Default Jolly good banter

    There’s a chart that I’ve always wanted to make but can’t find the data. You people love data so maybe you can help. The chart would relate the actual assessment (or property tax, it’d represent the same thing) to the actual household income. (It’s actual income per Wayland household data I can’t find, can find the median, average, etc. – the state might not want to publish it.)

    You can visualize the chart: Wayland’s 4,000 households, a vertical bar graph with low income households on left rising to high income households on right. And a bright red line tracing the assessment/tax paid by each household. It’s easy to assume that the red line would show that lower income households pay a much larger percentage of their income to property tax than the higher income households and consequently the burden is greater on the people who actually have less money in absolute terms.

    Ain’t it grand

    As a solution to the “new avenue of taxation” problem and maybe some of the unintended consequences, how about:

    Rather than an additional income tax maybe a “progressive” property tax credit determined by income (or lack thereof)? The lower your income the greater your credit, fading away as income grows with some top limit where the credit stops. This wouldn’t create a second new type of tax and it might even already be legal.

    I’d also vote for a minimum property tax (say, $5,000) that everybody pays regardless of income. This would not only catch the low income rich guy but also the low income regular homeowner. Seems everybody should pay something and the homeowner has a very valuable asset (i.e., the house) whose value can be used to pay taxes. Not to use the house’s value (say in an older person’s case) would actually be protecting the assets of that homeowner’s children. I don’t see any reason why the other taxpayers should be obligated to do that.

    Any unintended consequences?

    The real solution

    To both the problems of people having difficulty with taxes and the existence of very high taxes in general, the answer would be to increase the income of all the town’s residents. You could do this by forcing the poorer folks out of town (I guess that’s what we do now). I’d prefer financial planning, investment advice/coordination, whatever, that helped everyone. If the town was an actual community we could work on this.

    donBustin@verizon.net

  2. #17
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    I don't know of any data showing household income for a particular property (the assessment is of course known). The nature of real estate taxation means that property value is public. Perhaps people don't complain about this "invasion of privacy" because houses can be assessed (with some imprecision) simply by looking at them. Income data, on the other hand, is much more private--I can't imagine that this exists anywhere where we could get at it to help create the chart you suggest.

    That said, there is probably a decent correlation between house value and income, as more expensive houses cost more to support (RE tax, utilities, maintenance, ...).

    Don, your minimum tax idea is an interesting one. I wonder what the minimum RE tax in Wayland is (for a habitable property). Roughly $200k (my guess at lowest property value) x $17/$1,000 (my guess at tax rate) = $3,400.

  3. #18
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    Default

    Quote Originally Posted by Jeff Dieffenbach View Post
    I don't know of any data showing household income for a particular property (the assessment is of course known). The nature of real estate taxation means that property value is public. Perhaps people don't complain about this "invasion of privacy" because houses can be assessed (with some imprecision) simply by looking at them. Income data, on the other hand, is much more private--I can't imagine that this exists anywhere where we could get at it to help create the chart you suggest.
    .
    Jeff, yet another untended consequence. A Wayland city income tax to augment local RE tax based on assessments which are public information but your income is ONLY known between you and the IRS.

    I can see a rationale that if income is now a basis to replace / augment RE tax that income must also become public.
    How do the folks out there feel about that?

  4. #19
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    Quote Originally Posted by AlanJReiss View Post
    Jeff, yet another untended consequence. A Wayland city income tax to augment local RE tax based on assessments which are public information but your income is ONLY known between you and the IRS.

    I can see a rationale that if income is now a basis to replace / augment RE tax that income must also become public.
    How do the folks out there feel about that?
    Certainly, other places have a local income tax, but do not make income tax information public. Is the income of every New York City resident public information?

  5. #20
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    Quote Originally Posted by Kim Reichelt View Post
    Certainly, other places have a local income tax, but do not make income tax information public. Is the income of every New York City resident public information?
    Hey wait a minute, if we are going to use your income to supplant our RE taxes then I want to know how much you make....
    I want to make sure everything is fair.... perhaps your deductions are illegal or your trying to pull something over our eyes.
    I'm going to need my CPA to review your file.

  6. #21
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    To Kim's point, Wayland receives State Aid derived from the state income tax. Alan, I've yet to hear you or anyone else request the underlying tax returns--what's different?

    I don't know how how other localities handle this issue, but for my part, I'm happy to allow the IRS to be the auditor if that's what it takes to ease the burden on lower income residents.

    If Wayland were the first locality to explore income-based taxation, I'd be more concerned about the "unintended consequences." As it is, though, others have solved these problems--I bet MA could too.

  7. #22
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    Quote Originally Posted by AlanJReiss View Post
    Hey wait a minute, if we are going to use your income to supplant our RE taxes then I want to know how much you make....
    I want to make sure everything is fair.... perhaps your deductions are illegal or your trying to pull something over our eyes.
    I'm going to need my CPA to review your file.
    I am totally confused why you would argue that a local tax is any different as far as income transparency goes than a state or a federal tax. You and I are paying for the Iraq war out of our tax dollars, and for new school buildings and state employees, and new highways, etc. This is at the state level and federal level -- so, by your logic, shouldn't we know how much everyone in the whole country makes? Using your logic, you ought to be sending me over your tax files now - I already need to see your taxes. :-)

  8. #23
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    Quote Originally Posted by Kim Reichelt View Post
    I am totally confused why you would argue that a local tax is any different as far as income transparency goes than a state or a federal tax. You and I are paying for the Iraq war out of our tax dollars, and for new school buildings and state employees, and new highways, etc. This is at the state level and federal level -- so, by your logic, shouldn't we know how much everyone in the whole country makes? Using your logic, you ought to be sending me over your tax files now - I already need to see your taxes. :-)
    HR Block saw them last night and no you can't see them because they aren't going to offset our RE tax.
    All the things you mention are at a non-local level... so we have to ask, why do we get to see each other's assessments in the first place?
    I you can come up for reasons for that then maybe we can apply it to seeing your income taxes.

    Anyway, I just don't want to give government another vehicle to tax me.... I want to make that tax vehicle set as small as possible so I can work on one thing at a time.... maybe I just don't trust the government... But I do trust you Kim.

  9. #24
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    Default Pay for what you use?

    I was just sitting here thinking that it might make sense to tax people based on usage. If you could somehow value town services (police, fire, ambulance, etc.) and divide by the number of residents (yes, I know that old people use more services than young ones do, but stay with me on this), you could assess houses based on the number of occupants. Further, you could do a similar assessment (fee?) for children attending schools (school cost divided by the number of students = cost / student). Maybe the problem with this is that you'll wind up with violating "public school" (read that as "free") education rules, or worse, people will wind up having to pay $100,000/year to educate their kids, but at least the people who are creating the costs will be paying them. "What about the poor people?" you ask. Hmmm... maybe mix this idea in with a minimum tax rate that would help spread out the burden, but not force the empty nesters to fully fund schools (unless of course they wanted to donate voluntarily). Another thought might be to hybridize the system, and have a lower tax rate that would be supplemented with school fees to cover the uncovered cost of education. This would make the consumers of the services capable of deciding their own fate with respect to school spending. (I'm really not picking on schools, but they do represent an extremely large portion of the annual town budget...).

    Maybe I really am a Republican and just don't know it. I actually kind of like the idea of flat taxes too (yikes!).


  10. #25
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    Quote Originally Posted by Carl Rosenblatt View Post
    Further, you could do a similar assessment (fee?) for children attending schools (school cost divided by the number of students = cost / student). Maybe the problem with this is that you'll wind up with violating "public school" (read that as "free") education rules, or worse, people will wind up having to pay $100,000/year to educate their kids, but at least the people who are creating the costs will be paying them.
    Seriously, Carl? So what about someone who sends their kids to private school? They shouldn't pay any school-related taxes should they? And obviously people without kids shouldn't pay it. Uh oh... because then isn't what's left privately funded schools?

    Quote Originally Posted by Carl Rosenblatt View Post
    Another thought might be to hybridize the system, and have a lower tax rate that would be supplemented with school fees to cover the uncovered cost of education.
    Have you seen the school fees lately?! I think this is what we already have. :-) One can just argue over the degree of hybridization.

  11. #26
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    Default Taxing questions

    Quote Originally Posted by Kim Reichelt View Post
    Seriously, Carl? So what about someone who sends their kids to private school? They shouldn't pay any school-related taxes should they? And obviously people without kids shouldn't pay it. Uh oh... because then isn't what's left privately funded schools?
    We already have that type of situation, its called charter schools.

    Quote Originally Posted by Kim Reichelt View Post
    Have you seen the school fees lately?! I think this is what we already have. :-) One can just argue over the degree of hybridization.
    Some random thoughts on what you said:

    As one who has railed against RE taxation, I always felt that some degree of balance should exist. We don't have balance in our town.

    The fees are a specific form of taxation based on the providing of services.
    I can recall paying large fees for educational travel for my daughter back in and around 2001. So specific fees are not new.

    Looking at historical film on the 'sputnik' era, the US made a priority on public education which was modeled after the priority on the interstate highway system in the 1950's and which was modeled on the Manhattan project of the 1940's.

    We will never be at ease on a pure locally funded RE tax based system for education. Never.
    The priorities of the US will have to change by putting the people and their future first.

    I don't see this happening anytime soon... do you Kim?

  12. #27
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    Quote Originally Posted by Kim Reichelt
    So what about someone who sends their kids to private school? They shouldn't pay any school-related taxes should they? And obviously people without kids shouldn't pay it. Uh oh... because then isn't what's left privately funded schools?
    Quote Originally Posted by AlanJReiss View Post
    We already have that type of situation, its called charter schools.
    People who send their children to charter schools pay property taxes to fund those schools.

    Quote Originally Posted by AlanJReiss View Post
    We will never be at ease on a pure locally funded RE tax based system for education. Never.
    The priorities of the US will have to change by putting the people and their future first.
    I couldn't agree more, hence my interest in exploring income tax as a way of paying for public schools. As it currently stands, by my estimate, public education in MA gets about 60% of its funding from local (RE-based) revenue, 30% of its funding from state (income-based) revenue, and 10% from federal (income-based) revenue.

    Alan, I'm all for "putting the people and their future first," but what does that mean in practical terms when it comes to health, education, infrastructure, energy, the environment, and so on?

  13. #28
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    Default

    User Fees

    User fees always seem like a good idea (as noted, they’re already used) but maybe a goal would be to expand them wherever possible, schools or town. Besides raising revenue from the people who use the service, fees help to align, I’m not sure what you’d call it, the “costs” and the “incentives”.

    If a service is free, people will more eagerly make use of it. In health care, seems that the availability of “free clinic” visits tend to encourage “frivolous” usage. Hence co-pays.

    A fee seems to allow a more sophisticated judgement about the value of a service. (Generally, what I'm willing to pay for something shows how much I value it , want/need it. You can even raise or lower the fee to actually determine what the “perceived” value of the service is.) If I’m not willing to pay a fee for the service I receive, then maybe it doesn’t really have enough “value”. Maybe taxpayers should then consider the wisdom of providing it for free. Make any sense?

    Means Testing

    You’ll find that another theme of mine is “means testing” for receiving taxpayer-funded benefits. (Definition: …above a certain income level, no benefit.) I never have seen the rationale for governments subsidizing the well-to-do. Yet that is what happens very often.

    Think of the looming “Social Security Crisis”. To me, it could probably be “fixed” by applying “means testing” until the books balance. The reason that’ll never happen is that “affluent older people” do very well by the current system. Hence the infamous “third rail” of politics.

    Back to Wayland schools – how about the providing of lap-top computers to students (high school now, extending to 9th grade next year, I believe). Besides my initial feeling that this is a form of “kickback” (support a large school budget… get a computer) I wonder why no “means testing”. Is it fair to ask our “generic average taxpayer” (let’s say childless) to subsidize a household (with child) that perhaps has an income of 500K, 1M, (or 200K for that matter)?

    Well?

    donBustin@verizon.net

  14. #29
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    Default

    Quote Originally Posted by don Bustin View Post
    User Fees

    User fees always seem like a good idea (as noted, they’re already used) but maybe a goal would be to expand them wherever possible, schools or town. Besides raising revenue from the people who use the service, fees help to align, I’m not sure what you’d call it, the “costs” and the “incentives”. [....]

    Means Testing [....]

    Back to Wayland schools – how about the providing of lap-top computers to students (high school now, extending to 9th grade next year, I believe). Besides my initial feeling that this is a form of “kickback” (support a large school budget… get a computer) I wonder why no “means testing”. Is it fair to ask our “generic average taxpayer” (let’s say childless) to subsidize a household (with child) that perhaps has an income of 500K, 1M, (or 200K for that matter)?
    The trouble with user fees is that they tend to discourage people of lesser means from participating. At some point, you have to ask, "What is a public school?" The point of having public schools is to educate the next generation, and doing so is in the interest of ALL generations. As we add more user fees, we make extras less accessible to people of lesser means. Do you want to tell a lower-income student that they can't participate in clubs or play sports because they cannot afford it? Down the road, perhaps it will be AP courses only for a fee or language courses only for a fee...

    Some of these fee-based extras are currently (and will in the future probably more-so) are the things that enable students to differentiate themselves and prepare themselves for better opportunities down the road. What then will be the opportunities be for those who cannot afford it?

    Means testing may help, but quite often people who cannot afford it are embarrassed to ask for the help they need. Instead, they miss out.

    As far as the laptops go, I am of two minds... If these laptops are going to go with the child, we probably should ask families to pay for them themselves, as your point about a generic taxpayer subsidizing the laptop of a very wealthy family doesn't seem fair. On the other hand, if the point of these is to enable exploration into technology replacing humans to some extent, then the long-term goal is cost savings -- so should we require people to pay themselves for what is going to save everyone else money? That doesn't quite seem fair either. Complicated, isn't it?

  15. #30
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    Quote Originally Posted by AlanJReiss View Post
    As one who has railed against RE taxation, I always felt that some degree of balance should exist. We don't have balance in our town.

    The fees are a specific form of taxation based on the providing of services.
    I can recall paying large fees for educational travel for my daughter back in and around 2001. So specific fees are not new.

    Looking at historical film on the 'sputnik' era, the US made a priority on public education which was modeled after the priority on the interstate highway system in the 1950's and which was modeled on the Manhattan project of the 1940's.

    We will never be at ease on a pure locally funded RE tax based system for education. Never.
    The priorities of the US will have to change by putting the people and their future first.

    I don't see this happening anytime soon... do you Kim?
    There are new specific fees. How about the bus fee? For two kids to ride the bus to school now costs $360. When your daughter was there it was $0. That one fee alone is a 4% hike on the average tax bill!

    Did we have club, athletic and parking fees in 2001, and if so, are they the same as now, or have they been increased? How about a late bus fee? (Ah, that one wouldn't be a new fee, it would be a reduced service since there isn't a late bus. And what about the late, late bus?) Field trips - did we ever subsidize those? Even school lunches are now fully self-funding, where they used to be subsidized.

    If you have ONE kid who rides a bus, does crew and hockey, you're paying about $2500 more than you paid several years ago. Now add a second kid who is in middle school, rides the bus, plays in the orchestra, and goes on the Washington trip, and you've got another $1200 or so to pay... $3700/year for a typical family that hasn't bought any school supplies or rented an instrument yet.

    See, I guess it depends what you call "new", and what you call a "fee".

    I am not sure the town has EVER paid for educational travel, but someone can post a correction if I am wrong.

    I absolutely agree that the US has to put the people and their future first. But I am having trouble connecting the dots with that statement and your discomfort over a RE-tax based system and your dislike of an income-tax based system. I think you want schools to be publicly funded, and I think you want to pay for them out of something other than real estate taxes, so I'm really really confused where you want the dollars to come from if not income tax. Are you suggesting some other tax? Here's an idea: perhaps a sin-tax on non-educational toys and video games to fund education? :-) Help me out, because you have confused me.

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