[Ed note: My Southborough accepts signed letters to the editor submitted by Southborough residents. Letters may be emailed to mysouthborough@gmail.com.
The following letter is from Carl Guyer.]
To the Editor:
Now that Southborough’s town election is behind us, it may be a useful time to revisit an assumption that regularly surfaces in local discussions about economic development: Will expanding the town’s commercial and industrial tax base reduce residential property taxes?
The argument is familiar. More commercial development means a larger tax base. Businesses pay a greater share of the tax levy, leaving homeowners to pay less. Given that Southborough’s residential tax rate is higher than that of 87 percent of Massachusetts residential property, it is easy to understand why residents find this argument appealing.
The more important question, however, is not whether commercial development generates revenue—it clearly does—but whether it reliably produces lower residential property tax rates.
Data from the Massachusetts Department of Revenue provide useful perspective. Communities containing roughly 80 percent of the Commonwealth’s commercial and industrial property value have adopted split tax rates, under which commercial and industrial properties are taxed at higher rates than residential properties. On average, these communities set commercial tax rates approximately 84 percent higher than residential rates. They also contain roughly two-thirds of all residential property value in Massachusetts, meaning that most Massachusetts homeowners live in communities whose local officials have concluded that higher commercial tax rates are necessary to moderate residential tax burdens.
If commercial development by itself produced meaningful residential tax relief, one might expect the communities with the largest concentrations of commercial property to have the lowest residential tax rates. That is not what the data show. Residential tax rates in split-rate communities remain near the statewide average despite substantial commercial tax bases and significantly higher commercial tax rates. If those same communities were required to tax all property classes at a single uniform rate, residential tax rates would increase significantly (an average of 21%) above the current state average..
Put differently, if these communities were required to adopt Southborough’s single-rate tax structure, residential tax rates for two thirds of residential property in the state would likely be substantially higher than they are today. A notable condition conflicting with local tax policy strategies.
It is difficult to imagine residents in communities with split-rate tax policies supporting a return to a single tax rate based solely on the promise that additional commercial development would eventually provide comparable tax relief.
None of this should be interpreted as an argument against commercial development. Commercial and industrial activity is essential to a healthy economy. Massachusetts consistently ranks among the states with the highest GDP per capita in the nation, supported by technology, life sciences, manufacturing, financial services, and research. Commercial development creates jobs, generates income, and broadens the tax base.
The question is whether those benefits translate into meaningfully lower residential property taxes in communities that use a single tax rate. The evidence suggests they generally do not.
The issue becomes even more challenging in communities with above-average residential property values. Of the 50 Massachusetts communities with average residential assessments higher than Southborough’s, only three have a greater concentration of commercial and industrial development than Southborough. All three have adopted split tax rates—a combination of commercial development and tax policy that those communities have determined is necessary to moderate residential tax burdens.
Massachusetts communities have already answered the question through their tax policies. Additional commercial development can increase municipal revenue and strengthen the local economy, but by itself it appears to provide only limited residential property tax relief.
Carl Guyer,
146 Middle Road
