Friday, February 23, 2007

Patrick's tax relief is more bark than bite

Governor Deval Patrick unveiled another piece of his plan to ease the burden of property taxes yesterday, essentially proposing that the tax credits for seniors be offered to a wider group of property owners. While his plan will bring relief for some, it falls far short of the sort of widespread tax relief that the Governor hinted at during the campaign. Here are the details, from the Sentinel and Enterprise:

Single individuals earning up to $46,000, heads of household earning up to $58,000, or married couples filing jointly earning up to $70,000 would qualify.

The tax break would cover the cost of property taxes plus water and sewer charges that exceed 10 percent of the household income up to $870.

Let's take a mythical middle-class family with a $65,000 annual income. For that family, the tax break will not kick in unless they pay over $6,500 in property taxes (plus water and sewer charges). Using Leominster's tax rate of $10.79 per $1,000, the family home would need to be assessed for $602,409 in order to get even one dollar of tax credit. A family with a city-average tax bill of $2,881 would need to earn less than $28,810 in order to receive a credit.

I suggest that there are more fingers and toes on my person than homeowners in Leominster that would qualify for this tax break.

Simply put, almost anyone with a mortgage will have to make more than the maximum in order to pay for their home in the first place. Other than an occasional resident in 40B low-income housing or older folks who have been in their homes for years, have small mortgages, and are either out or work or disabled, I can't see how anyone else would qualify.

The only provision that might open up the credit to a few more people living in the Boston area is the inclusion of water and sewer rates when figuring "property taxes." Including those items won't help the mythical Leominster family qualify, as they are probably paying little more than $300 per year for their water and sewer. But put that family in an MWRA town with a similar tax rate, and you're looking at an additional $1,000 or more per year. That might increase the "tax" to the point that a few more homeowners are included.

If the Governor is looking to provide property tax relief across the board, he should propose that property taxes be deductible on the state tax return, as it is on the federal filing. In essence, everyone who owns a home and pays property taxes would receive a 5.3% cut to their property taxes. Would that provide a huge relief to every taxpayer? No. But that citizen paying the state average $3,800 tax bill would receive an extra $200 in their tax return.

When you boil it down, Patrick's proposal will only benefit the urban poor. In fact, it's hard to see any middle-class or rural homeowners qualifying for this tax credit, except in extremely rare circumstances. The voters of Massachusetts were expecting more.

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