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Joan Youngman and Andrew Reschovsky

The strengths of the property tax

GOVERNOR DEVAL PATRICK expects millions of dollars in new casino gambling revenue for infrastructure investment and relief for homeowners facing high property tax bills. As the Commonwealth plunges into debate over taxes, revenues, and local services, it should consider whether the property tax is as bad as it is often made out to be.

Property tax bills are going up even as local services decline. The governor says the property tax is broken. Some have already concluded that it's time to give up on the property tax, and fund schools and other critical functions with some new combination of local and state revenue.

But here's a contrary idea. The property tax is basically sound. It works the way it was intended, and its high profile is actually a strength.

The property tax rebellion going on across the country - in Florida, Pennsylvania, and a host of other states - is due in part to the tax's visibility. But for the taxpayer, this greater awareness of the amount paid in property taxes is actually a positive feature. We get the bill, and compare it with the local services we receive. If the comparison is unfavorable, we are motivated to restrict local spending and support local candidates who agree with that view. Linking additional local spending to local taxes is an important source of fiscal discipline.

By contrast, few taxpayers have any idea of the amount they spend annually on sales taxes. Even income taxes that are withheld from paychecks are less visible than bills that must be paid in one or two large installments every year. The transparency of the property tax allows taxpayers to be engaged and to evaluate the performance of their local government to make independent decisions on the mix of taxes and services they prefer.

The property tax also stands up well compared with alternatives. The other big source of revenue for local services - state aid - is notoriously unreliable. State aid is supposed to be a foundation that ensures that each local government has the resources to meet the basic public-service needs of its residents. But unfortunately it has been one of the first items cut in times of economic downturns or budget shortfalls.

The growing interest in optional local sales or income taxes is understandable. Many officials who favor local option taxes hope to export some of their tax burden to nonresidents who work, shop, or dine in their communities. However, while local option taxes would benefit Boston, some resort communities, and cities or towns with a strong retail sales base, many of the state's 351 cities and towns lack the shopping or employment that would allow them to raise significant revenue. These taxes may even encourage suburban sprawl by increasing the incentive for localities to compete with one another for sales tax revenue from new commercial development. The only tax base that cannot move across the border is an immovable one -another benefit of the property tax.

Finally, there is still some misunderstanding about the impact of the real estate market. Many residents point to the doubling of home prices since the year 2000 as evidence that property taxes are out of control. But consider how the property tax works. Increased housing prices lead to increases in assessed property values. Assessed values, however, are the tax base, not the tax bill. The average increase in taxes in the past fiscal year was a relatively modest 4.2 percent for single-family homes, according to a recent Globe article.

The property tax is hardly perfect. There are frequent complaints of large one-year tax increases, and there is no question that some people face very large tax bills in relation to their income. Massachusetts could do more to address these problems. Taxpayers facing large tax bills relative to their income could receive additional state-funded relief, or, even better, be encouraged to defer payment of a portion of their bill until they sell their property.

No one likes paying taxes, but as long as we value the New England tradition of local control over public services, we should appreciate the inherent strengths of our system. With the property tax, the citizenry has its hands on the steering wheel.

Joan Youngman and Andrew Reschovsky are fellows at the Lincoln Institute of Land Policy, a nonpartisan think tank in Cambridge.

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