Property tax shell games

WHILE SOME voters are captivated by Lieutenant Governor Kerry Healey's campaign to roll back the state income tax rate to 5 percent, their wallets are being drained by sharp increases in residential property taxes. Deval Patrick, her Democratic opponent in the race for governor, calls this a ``fiscal shell game." That's an accurate characterization. But Patrick is also fooling voters by suggesting that his election would lead to cuts in property taxes.

Residents are paying more and getting less in the way of local services. Back in 2002, when state aid was sound, an average community depended on local property taxes for 49 percent of its revenues and on state aid for 28 percent. This year, the same town raises 53 percent of revenues from local property taxes and receives only 24 percent from the state, according to the nonprofit Massachusetts Municipal Association. Homeowners wind up paying almost $800 more in regressive property taxes than in 2002 for the privilege of watching a fire station close or a school art budget disappear.

Ultimately, the state needs to enter into a predictable revenue-sharing partnership with cities and towns. The Massachusetts Taxpayers Foundation recommends that 40 percent of the revenues from the state's income, corporate, and sales taxes be returned to cities and towns. This year, such a formula would have amounted to an additional $1 billion for municipalities, according to the Foundation.

While achieving such a figure requires a careful phase-in period, any successful effort to stabilize local property taxes must come from the executive branch or it won't come at all. Legislators are loath to abandon the current system that allows them to engage in last-minute budget heroics.

Healey isn't an especially popular figure on Main Street, having served as the Romney administration's liaison to cities and towns during a period of deep cuts in local aid. But Patrick isn't helping himself much with the campaign claim that he will ``cut the property tax by reinvesting in cities and towns." Even in good economic times like the 1997-1999 period, when state aid to cities and towns was growing, property taxes for the average single-family homeowner increased by about 4 percent annually, according to the state Department of Revenue. In periods of tight state aid, such as 2002-2006, residential taxes jumped by about 6 percent each year.

Actual reductions in property taxes aren't achievable when more than half of the new revenues at the local level are required just to cover increases in healthcare coverage for municipal workers. And, despite complaints about their tax bills, residents still want to restore lost services. The reality, says Taxpayers Foundation president Michael Widmer, is that ``property taxes won't go down at all."

The best a voter can hope for is a sensible plan to keep property taxes in check. Patrick still needs to advance a specific plan beyond his recommendation for a local option tax on restaurant meals if he hopes to lead on the issue. He supports the concept of state revenue sharing with cities and towns, but he won't be tied down on a percentage formula.

Healey is mum on revenue sharing. Instead, she stresses the need for legislation to place municipal employees in the more efficient group insurance plan now covering state workers, and she also wants to roll underperforming municipal pension plans into the state system. Such savings could take considerable pressure off local taxpayers.

Independent candidate Christy Mihos embraces the 40 percent solution. But his proposal to cap all property taxes at the time of purchase until a house is sold would create gross inequities when people in similarly sized homes find themselves with wildly different tax bills. Green-Rainbow Party candidate Grace Ross sees the 40 percent figure as ``reasonable" given that the state no longer honors its ``unwritten covenant" to provide adequate local aid.

The effects of runaway property taxes and declining local services are being felt beyond the town line. A recent Northeastern University study argued that companies look hard at property taxes, traffic congestion, education, and public safety before deciding to expand or locate in the state. All of the gubernatorial candidates stress the need to expand job opportunities. A good way to do that is to ensure a consistent level of state aid to communities.

Geoffrey Beckwith, president of the Massachusetts Municipal Association, says that cities and towns can no longer lurch from fiscal year to fiscal year wondering what the state has in store. But with predictable revenue sharing, towns could get serious about long-range planning. During economic downturns, cities and towns naturally would have to share the pain. But officials would at least know how bad that pain might be.

The Romney administration in the past has accused cities and towns of spending their way into fiscal disarray. It's a bogus charge. Municipalities have done more than their fair share of belt tightening since 2002 to make up for a roughly $700 million loss in state aid, adjusted for inflation. And now cities and towns are taking the lead by practicing revenue sharing within their own borders. In Brookline, for example, town officials project gross revenues and split the pie on a 50-50 basis between the schools and other town departments.

How to restore the eroding relationship between the state and municipalities deserves a central place in the gubernatorial campaign. Voters will be choosing a new partner for their communities. Now it's up to the candidates to prove that they can be good providers.