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A Fable: Taxing times in Anytown

In 2000, Anytown, Massachusetts, had 10 houses, all valued at $1 million each, and no commercial businesses, so Anytown’s valuation was $10 million. Town government needed $100,000 to pay for town services that year, so it set its levy at $100,000, and taxed homeowners at a rate of $10 per $1,000 of house value. All 10 homeowners got a tax bill for $10,000 and Anytown’s budget was met

The next year, since Proposition 2½ allows towns to automatically increase the levy by 2.5% each year, Anytown bumped up its levy to $102,500. Housing values did not change, so the tax rate rose to $10.25, and every homeowner got a tax bill for $10,250. So far, residents were not complaining.

In 2002, Anytown increased its levy another 2.5%, to $105,062. But wage increases pushed Anytown’s budget to $110,000. It asked residents for an override to cover the amount needed, and they voted to approve it. Anytown’s levy for 2002 was set at $110,000, and housing values hadn’t changed, so the tax rate rose to $11.00. The 10 homeowners all got a tax bill for $11,000. That represented a 10% increase in two years though, so residents were beginning to show some frustration.

The next year, the levy went up 2.5% again, to $112,750, and no override was needed. However, assessors discovered that houses in west Anytown, where half the residents lived, were selling for higher prices than those in east Anytown, despite the fact they were identical. The assessors revalued all of Anytown’s houses, increasing those in the west by $200,000, and dropping those in the east by $200,000. The town valuation stayed the same, so the tax rate was set at $11.27, but west Anytown homeowners got a tax bill for $13,524, while east Anytowners got a bill for only $9,016.

Now half the town was happy because its taxes went down 18%, while the other half was livid because its taxes went up 23%. West Anytowners didn’t receive any additional services for their money since the town had stayed within a level services budget that year; they were just paying for a bigger portion of the budget pie than east Anytown now. Anger and resentment grew.

In 2004, the levy went up yet again by 2.5%, to $115,569. The town budget fit nicely into that, so no override was needed, and normally the tax rate would have been set at $11.56. But the town had voted the previous year to renovate the library and fund the renovation with excluded debt. The first payment on that debt was now due, so the town added an additional $1 to the tax rate to cover that payment, bumping it up to $12.56. It was allowed to do that because excluded debt is not subject to the 2.5% allowable annual levy increase.

That year, homeowners in west Any-town got tax bills for $15,072. In four short years, their tax bills had jumped by over 50% despite Proposition 2½. Over in east Anytown, homeowners enjoyed the beautifully renovated library while paying just $10,048 in taxes that year, an increase of only half a percent since 2000. West Anytowners never read another book.

Had there been no override or excluded debt, and had housing values stayed equal for everyone, all the residents of Anytown would have received a tax bill for $11,038 in 2004. That would have been an increase of 10.38% in four years, the result of four cumulative increases of 2.5%.

Although Anytown is fictional, since 1980, when Proposition 2½ was passed in Massachusetts, Harvard residents have passed many overrides, paid off millions of dollars of excluded debt, and gone through uneven housing revaluations, the most recent of which was in 2018.

—Illustrations by Tim Eliyesil, a student at Lesley College of Art and Design

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