HOW COULD THIS WORK FOR MILTON?
Allowing cities and towns to collect income taxes requires an amendment to the Massachusetts Constitution, so it is no small task. The Massachusetts Suburban Legislative coalition has some excellent objectives including requiring the state to commit to funding at least 17.50% of the operating budgets of every Massachusetts school district – but the truth is that the state is having trouble meeting the funding requirements of the Education Reform Act as it is.
A starting point could be a proposal that Milton tax at a percentage of reported federal AGI for all households residing in Milton. This would be unlike the City of New York plan which taxes incomes earned in the City of New York, regardless of where the taxpayers reside. Let’s say for example that Milton sets the percentage initially at 3% of AGI, so a household reporting $100,000 of federal AGI would pay $3,000 in tax to Milton. A phasing-in of the income tax in Milton would need to occur as a study to determine impacts on the community. And one option is to allow households to offset property taxes owed with income taxes paid to Milton, and it could follow the property-tax collection calendar that allows FY quarterly payments.
In addition, minimum income-levels could be set so that those households with fewer resources would owe no taxes, this going beyond the simple formula that those reporting lower incomes pay less. An estimate for planning is that median income for Milton is $100,000/year, but this is not the same as Federal AGI as calculated on IRS Form 1040. HUD income-levels for individuals are updated yearly, but let’s say that $100000/year is a median income level for individuals residing in Milton. HUD Household-income levels will be somewhat less as it is calculated differently. In a case approximating the HUD median annual income, one household’s property taxes for 2006 corresponded with approximately 3% of federal AGI. Paid quarterly, that calculates to $750/quarter.
Presently Milton uses a mix of state-aid and other local revenues along with property tax revenues. But the property tax as a source of revenue is now over 50% of Milton’s revenues, and it is the only revenue-source Milton may tap when state aid and other sources are not enough to meet rising costs. Milton could also make a commitment to increase its commercial tax-base, but recent proposals have failed, and options are limited within this small town. Cutting costs should always be a consideration, but increases in costs are largely required by state mandates or employee contracts. Should Milton’s revenues be frozen, it would have no real choice but to lay-off a number of employees each year going forward – not a pleasant or wise prospect. Shifting from the property tax to a local income tax as a primary source of revenues would be most fair. Federal tax reform to allow state and local taxes to offset federal taxes owed dollar-for-dollar makes the idea palatable to tax-payers and businesses.
