A bunch of maps about property taxes

There was a post recently on a Facebook group, Hello Holyoke!!! [sic] where someone complained that the city’s taxes are the highest in the state (spoiler – they’re not, though they are relatively high). Many others bemoaned the high tax rate, and blamed it for failing businesses, empty storefronts, and blighted mill buildings. This post inspired a lot of passion, vitriol, and bile from those who commented (pro-tip: once the number of comments on a post exceeds 20, it’s best not to read them).

Facebook post on taxes. 

I don’t know too much about tax policy, and especially about municipal tax policy. That post got me interested in looking to see what tax rates are like across the valley, and how the various communities fall. Fortunately, the Massachusetts Department of Revenue has a really handy table showing all municipal tax rates, and so of course I made some maps.

Taxes Across the State

First, a comparison of taxes across the state. Property taxes are based on what’s called the “Mill Rate,” or taxes per $1,000 of assessed value. For example, Holyoke has a residential mill rate of 19.17. That means that our tax rate is 0.01917% of the assessed value of our house.

Residential Mill Rate
Commercial Mill Rate

Interestingly, most communities have just one property tax rate. A handful, including Holyoke, have a split property tax rate, where commercial property is taxed at a higher rate than residential. I’m not really sure why that is, except that perhaps the thought is that commercial and industrial property is less easily movable? I don’t know but would be interested in finding out.

Anyway, you can see that residential tax rates are lower inside Route 128, near Boston, and higher in the rest of the state. Commercial tax rates, on the other hand, are all over the place, though they do seem to be higher in the higher-population urban areas.

Those two maps, of course, are only showing the tax rate – not the actual amount of money being paid in taxes. Property values are WAY higher in the Boston area, so even though the rates are relatively low, the tax bills are still relatively high.

Average Residential Tax Bill. Some communities, like Boston and Cambridge, are missing. That’s just a quirk in the dataset I was using. 

Taxes in the Pioneer Valley

I also got curious about how Holyoke compares to our immediate neighbors. So let’s take a look.

Residential Mill Rate
Commercial Mill Rate

The two maps above confirm that Holyoke’s tax rates are relatively high – though generally on par with Westfield and Springfield, two of the other largest communities in the Pioneer Valley. But property values in these communities are pretty low.

PV_Med_home values
Median Residential Property Value. Source: 2016 American Community Survey

So, with low property values, even a high rate doesn’t translate into especially high property tax bills. You can see this in the average residential tax bill.

Average Residential Tax Bill

Of course, this is just the residential tax bill. As shown above, Holyoke has a very high commercial tax rate – actually, the third highest in the state after Holbrook and Pittsfield (side note – where is Holbrook?). Regardless, commercial property values in Holyoke, Chicopee, and Springfield are also relatively low, meaning that the relatively higher rates probably still don’t translate into a disproportionately high tax bill compared to surrounding communities.

Thoughts on Economic Development

Now for the policy deep dive. The real question, of course, has to do with tax rates and economic development – that’s what the guy who posted was really complaining about. I don’t pretend to be an expert on economic development or tax policy, but it does seem to me that there are a lot of places in Massachusetts that are expensive to do business, and yet business is booming.

Kendall Square in Cambridge has some of the most expensive property in the world, but is a power-house commercial district nonetheless. Despite the sky-high cost of developing or renting property, Fortune 500 companies locate there because they have Harvard and MIT a stone’s throw away to pull talent from. They have ample high-end housing and restaurants and bars. And they have bike paths and the Red Line and the Charles River Basin. The cost of doing business, including local taxes, doesn’t seem to be a major impediment.

Indeed, the Urban Institute wrote about taxes:

Taxes are a consideration in business decisions about location, but they are not the only one. Although firms welcome tax incentives, availability of transportation and low labor costs more often drive business decisions about expansion or relocation. Corporate site selection professionals rank the availability of skilled labor and adequate land and infrastructure higher than they rank tax policy.

At a macro-scale, taxes appear to have a fairly tenuous connection to broader economic performance. The Brookings Institution put together this chart during the most recent debate on slashing the corporate tax rate:

brookings tax chart
Federal tax revenue (left) seems fairly unrelated to per capita GDP (right).  

Yes, taxes shouldn’t be any higher than they need to be (of course!). But economic success depends on so much more than the mill rate – Holyoke and the rest of the greater Rust Belt would be well served to remember that quality of schools, quality of life, and quality infrastructure are all crucial ingredients to effective, sustained economic development.

PS –  That’s where high-tax Holbrook is.