Local property taxes represent the major funding source for Massachusetts cities and towns. Both tax rates and tax bills vary widely throughout the state. According to the latest information from the MA Department of Revenue, the winners for the category of highest and lowest tax rates are:
Longmeadow, $24.74 and Gosnold, $2.72;
…while the biggest and smallest average single-family tax bills belong to:
Weston, $21,648, and Hancock, $764 (the tax rate is also the third-lowest at $2.98).
What accounts for these huge disparities? Several factors contribute to this situation.
Single v. Split Tax Rate
Recently there was a NextDoor Shutesbury thread about taxes in our town. A few people (including our Administrative Assessor) noted Shutesbury has a single tax rate since there is little industry or commercial business in town. In communities with split tax rates, commercial, industrial, and personal property (CIP) segments are taxed at a higher—sometimes much higher—rate than residential property. In Shutesbury, one flat rate covers everything.
This is not an unusual situation in Massachusetts. In 2019, 241 of 351 communities had a single tax rate, meaning they did not shift any portion of the tax burden from residential properties onto any other class.
Cities are much more apt to adopt a split tax rate. Boston’s CIP segment makes up 58.30% of the city’s total tax levy, leaving the residential and open space (RO) classifications to fund the other 41.70% (for Shutesbury, the RO classifications fund 94.33%).
Notably, only 17 communities currently tax open space; Shutesbury is not among them.
Residential Exemptions
Twenty-two communities in the eastern part of Massachusetts offer some type of residential exemption as long as the home is the taxpayer’s principal residence. The exemption cannot be greater than 35% of the average assessed value of all residential properties. Once the city or town’s governing body decides on a percentage, it is applied to the assessed value total. This amount is then subtracted from each Class One (residential) property.
The residential exemption gives some relief to the average homeowner while increasing taxes on rental and vacation properties and high-end houses.
State Aid
State funding estimates for the upcoming fiscal year are communicated to municipalities via the Cherry Sheet. The primary types of funding are:
Chapter 70 (Schools);
General Government Aid;
School Choice (Receiving);
State-owned Land;
Veterans Benefits.
State Aid amounts differ greatly from one community to another, from nearly 66% of Lawrence’s annual budget (its public school system went into state receivership in 2011) to a mere .07% of Chilmark’s budget. As you might expect, the property tax levy makes up a much greater percentage of Chilmark’s town budget (nearly 83%) than does Lawrence’s (approximately 22%).
State aid made up 12.6% of Shutesbury’s budget in fiscal year 2021.
Assessed Values
Communities set their tax rate each fiscal year based upon the proposed budget after it is approved by Town Meeting. The tax levy is the amount to be raised through the property tax (subject to limitations inherent in Proposition 2 ½--more on that in future posts), usually expressed as a dollar amount per thousand dollars of value. To arrive at the tax rate, assessors divide the amount of the tax levy by the total amount of assessed property values in town.
This means that a low tax rate doesn’t necessarily translate into a low tax bill. Simple math tells us that in towns with high property values, the tax rate will be lower than in towns with low property values—to raise the same amount of money.
Some of the highest single-family tax bills in Massachusetts stress families’ budgets more than others. In Weston, for example, that pricey real estate tax bill of $ 21,648 represents just 5.60% of residents’ income, while taxpayers in Wenham need to set aside 20% of their income to pay their yearly tax bill of $13,713.
Similarly, Hancock’s minuscule tax bill of $764 takes a 5.77% bite out of residents’ incomes. Monroe’s annual tax bill is a little more than double that of Hancock’s at $1,567, but households use 15.81% of their incomes—nearly three times that of Hancock families—to pay that bill.
Looking specifically at Hancock and Monroe, other differences emerge. Hancock has 314 single-family parcels compared with Monroe’s 63, where the average single-family home is valued at less than half that of Hancock’s. Interestingly, Monroe has a split tax rate, saving the town’s homeowners from paying an even bigger share of the tax burden.
Ultimately, what residents pay in property taxes depends upon the municipality’s annual budget—meaning that fiscal restraint will lower both tax rates and tax bills.
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