Williamstown Select Board Pressed to Adopt Residential Tax Exemption
WILLIAMSTOWN, Mass. — Just because no towns east of Interstate 95 have utilized a provision of state law on property taxes, it does not follow that towns outside of eastern Mass cannot or should not take advantage of that provision, a member of the Select Board argued on Monday night.
Stephanie Boyd, who talked about exploring use of the commonwealth's Residential Tax Exemption during her election campaign in the spring, made good on that promise with a lengthy presentation to her colleagues about the structural inequity in the current property tax system and how the RTE potentially could ameliorate that problem.
Boyd went step by step through an analysis of national studies and local numbers to show that taxing all residential property at the same rate is regressive.
Part of her argument relied on data from the Massachusetts Budget and Policy Center that shows that for wealthier Bay State homeowners, a lower percentage of their overall wealth is based on the value of their homes.
For the top 1 percent of homeowners, their principal residence represents less than 10 percent of their total wealth. For the middle 60 percent of residents, the home made up more than 60 percent of their wealth, according to a 2020 study by the non-profit.
At the same time, Boyd pointed to a 2021 study by an economist at the University of Chicago that showed that wealthier homes are typically undervalued in property tax assessments — shifting even more of the burden onto those with more modest homes.
"Using data from millions of residential real estate transactions, this paper shows that assessments are typically regressive, with low-priced properties being assessed at a higher value, relative to their actual sale price, than are high-priced properties," the abstract of the paper reads, in part.
One way to address these inequities is the RTE, Boyd said.
It allows a municipality to exempt up to 35 percent of its average assessed property from the local property tax for full-time owner-occupied residences.
The effect is to shift more of the tax burden onto higher priced properties. Boyd's initial analysis showed that the local "break-even" point for the tax shift would be $514,000 in home value — meaning properties assessed at less than $514,000 would pay less in property taxes and homes valued at higher than threshold would pay more.
Boyd argued that rather than looking at it as a "cost shift" to higher valued properties, it is more accurate to look at the RTE as a "cost correction" for more modestly priced homes that already are taxed at too high a rate.
"We don't do taxes well," Boyd said. "We want to wait for the perfect tax policy. That's not going to happen. It's not perfect now. It won't be perfect in the future.
"We know people at the lower income end are struggling financially. Let's err on the side of making it easier for people at the lower end and a little harder for people at the other end because for years we've been doing it the other way around.
"This is one of the few things we can do directly to affect affordability. And we should all be working together to do that."
The Residential Tax Exemption has been employed by 18 cities and towns in the commonwealth — all in the eastern part of the state and many on Cape Cod.
The Select Board each year has a vote at its tax classification hearing — usually in late August — to decide whether to employ the RTE when setting the tax rate for the current fiscal year.
In years past, board members have been swayed by the argument that the RTE is more relevant in communities like those on the Cape, where there are a higher percentage of second home owners.
Town Manager Bob Menicocci, who came to Town Hall last summer, noted that, historically, the RTE was created to address issues in places like Provincetown, but he did not dismiss out of hand the idea that it could be used at the other end of the commonwealth.
"As our assessor has said to the Select Board in the past [at the annual hearing] … what is done policywide in the commonwealth is in response to two things: a cluster on the Cape and the islands — largely summer homes, second homes — and in the Boston area, all clustered around a larger urban area," Menicocci said.
"The conversation we're having at this point steps outside that, trying to take a tool that was used for some very specific purpose and do something different with it. The core of the conversation we're having now is around tax policy, the regressive nature of it and a desire to do something about it. We'd be an outlier on that chart [of towns currently employing the RTE]. That's completely reasonable, something the town can choose to do."
But, Menicocci said, he would want to see more study and, perhaps, an outside consultant to run the numbers and make sure that the RTE would act as intended and, perhaps, identify unintended consequences.
"That's more than the day job of our assessor can pull off," Menicocci said.
Select Board member Andrew Hogeland, who recently was elected to a fourth term on the board and who has participated in up to nine tax classification hearings (assuming no absences), argued that Williamstown should think long and hard before becoming that "outlier" Menicocci referred to.
"I'm surprised other towns haven't done that," Hogeland said. "I'd be curious to see who has done it. Every year, 300-some communities choose not to do this. … I assume some of those towns have smart people who have done the analysis."
Boyd rejected that argument.
"I agree with Bob that when this legislation was enacted, it was done to deal with inequities in towns that had extremes," Boyd said. "That does not make it not appropriate for us.
"We in this country have only recently started to see these deep inequalities in tax policy. The study I showed you only came out in 2021. There have been a number of cities and towns that have started to make changes based on that work. I think we should be careful … saying it's not appropriate for us today."
Boyd said at one point that she was ready to vote to implement the RTE in town as early as next month, but she recognized that others around the table had concerns that need to be addressed before they could join her in that vote.
She asked her colleagues to share any of their concerns with her so she can answer any questions they might have. One that came up on Monday night came from Jeffrey Johnson, who asked for an analysis of how the RTE would impact assessments on rental properties, many of which house some of the town's lower-income residents.
"A lot of rental people don't get benefits of the tax breaks," Johnson said. "That doesn't mean we shouldn't look at it. That's why I want to get more information."
Boyd agreed to study that specific question. She also said if the board decides it wants to follow the route of hiring a consultant, the members should draft a specific list of questions it wants that outside expert to address.
Later in the meeting, during the public comment portion, two residents told the board that they should find a way to implement the RTE.
"Even though Williamstown may be an outlier compared to other towns, I think it meshes with other town goals and things other boards are working on," said Cheryl Shanks, who serves with Hogeland on the board of the town's Affordable Housing Trust.
"Data shows the current situation is regressive — both for the assessments of lower-valued properties relative to their sales prices and for the income burden property taxes represent. We're not trying to boost advantages to lower income people. We're going into this with a playing field already geared against people living in lower assessed properties."
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