Andrew Jackson was president and East Boston was not yet annexed as part of the city of Boston. The year was 1830 when the Massachusetts Legislature passed a law mandating that nonprofits be exempt from paying property taxes, the main revenue source that funds city and town services in Massachusetts.
What might have begun with the best of intentions has led now to our city’s overreliance on a tax system in which close to half the property is tax-exempt, forcing the city to raise its revenue from a relatively small tax base composed of residential and business properties.
The taxation on the tax base of residential and business properties accounts for 69% of the city’s funding supply. The state adds another 15% and other miscellaneous local taxes (excise, meals), parking fines, and so on account for the rest. As state aid has declined from 22% to today’s 15% in the last decade or so, the problem of how to pay for needed services has been exacerbated. Even as the city’s reliance on the property tax risen from 59% to 69% in the last decade, the city is still hamstrung — not only is the land base limited, but Proposition 2 1/2 limits the growth of the property tax rate.
Given the slow and steady decline of state aid, more people have looked to our city’s major nonprofits (Harvard, Boston College, Boston University, Northeastern University, Mass General Hospital, and the Museum of Science, to name a few) to step up and “donate” their share. The word donate is key. We cannot make them pay their fair share, and that’s the rub.
Even granting that the nonprofits help out the city, provide jobs, prestige, business, and so on, they also use our resources, such as fire, police, parks, and more. As the nonprofits cannot be forced to pay, they are asked to pay. Some pay a lot, some pay a little, and some pay zero (as in nothing). All of this makes it difficult for the city to raise revenue, as so many other avenues for raising revenue are closed.