History of property tax in Massachusetts
PROPERTY TAX
The property tax is part of a well-balanced revenue system. Properties are assessed so that the city can provide police and fire protection, road and sidewalk programs, schools, libraries, trash pickup, and other public benefits. Each taxpayer absorbs their fair share of the cost of these services in proportion to the value of their individual property.
HISTORY OF PROPERTY TAX IN MASSACHUSETTS
Property taxes originated as a method for distributing the costs of certain geographically based services such as schools, fire and police protection, lighting, water, and sewer. The "ad valorem" or "according to value" method of tax attempts to distribute these costs amongst those who theoretically benefit from the services. The amount of tax attributable to each property is in proportion to that individual property's value.
The Massachusetts Constitution requires that direct taxes on persons and property be proportionately and reasonably imposed. In the 1961 Bettigole decision, the Supreme Judicial Court of Massachusetts declared that "proportionately" could be achieved only if each parcel of real estate is assessed at its full and fair cash value. In the years following the Bettigole decision, approximately half of the Commonwealth's cities and town revalued.
Thus, in 1974, the SJC mandated that all communities must assess their properties at full and fair cash value. In the landmark Sudbury decision, the court interpreted statutory provisions to hold that the Commission of Revenue had both the power and duty to direct local assessors to perform their legal duties by requiring them to take such action as would tend to produce uniformity in valuations and assessments. Local assessors had a duty to comply with the Commissioner's directive in that regard.
In November 1979, the Legislature enacted, and the Governor signed, a comprehensive piece of legislation, which expanded the Commissioner's powers over local assessment practices by granting him the authority to establish minimum standards of assessment performance and minimum qualifications of assessing personnel. The Commissioner is also required to review local assessments every three years and to certify whether they reflect full and fair cash valuation.
Proposition 2 1/2
PROPOSITION 2½
"Proposition 2½" is Massachusetts' version of a property tax limitation law. The law was enacted through initiative petition in 1980. It limits annual increases in the total proposed levy to 2.5%, plus taxes from new growth. The levy limit provisions of Proposition 2½ affect the total amount of taxes to be raised by a city or town.
Each year a community's levy limit automatically increases by 2½% over the previous year's levy limit. This does not require any action on the part of local officials.
The Commissioner of Revenue determines the maximum levy limit pursuant to Proposition 2½ for each city and town.
"Prop 2½"contains two limitations on the amount of property taxes a city or town can raise:
The property tax levy ceiling (the amount raised) can never exceed 2½% of the full cash value of all taxable property in the city.
The total taxes assessed for any fiscal year cannot exceed an amount equal to 2½% of the maximum limit for the preceding fiscal year plus new construction or new growth, debt exclusions, or voter approved overrides.
When a Community sets its levy below the limit, the difference between the levy and the levy limit is commonly referred to as the excess levy capacity. This is an additional amount the community could, but choose not to, levy.
Once the amount to be raised is determined, a tax rate is calculated by dividing the amount to be raised by the total valuation of the city or town.
Whether the tax rate for the community will increase or decrease from the prior year will depend upon the levy decided upon by the community and whether property values appreciate, depreciate or remain steady in the community.
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