MARBLEHEAD

A BRONZE BUST of Howard Jarvis, Father of the American Tax Revolt, sits on the top of my bookcase.

In 1978, he created California’s Proposition 13, the first national property-tax limit. Two years later, voters in Massachusetts passed our own version, called Proposition 2½.

The Howard Jarvis Taxpayers Association gave me the bust a few years ago at a National Taxpayers Union dinner; it’s not only a conversation piece but a piece at which to direct conversation now and then. Since I became a senior citizen, as he was in ’78, I appreciate his leadership even more than I did then. Property-tax limits are really important when one is on a fixed income.

Fresh from his own victory, Howard advised Massachusetts’s Citizens for Limited Taxation (CLT) as it was drafting its own initiative petition. For instance, he warned us not to freeze assessments, as he had done, because this provision was being challenged in California courts.

We couldn’t have frozen assessments anyhow because the Massachusetts Constitution requires that all property be assessed at its full and fair market value. Prop 2½ , unlike Prop 13, is a statute, not a constitutional amendment; in California it’s relatively easy to amend the state constitution but in Massachusetts this requires cooperation from the legislature, which we knew we couldn’t get.

So property values, then as now, are set by the ongoing constitutional requirement for true market value, and our limit was drafted to fit within that requirement. Prop 2½ says that a community’s property taxes cannot exceed 2.5 percent of the community’s value, which is determined as of Jan. 1 of the calendar year in which the taxes will be paid. Even with values decreasing during 2007, most tax rates in the commonwealth should stay below that 2.5 percent limit. But I know it seems strange that home values are dropping but property taxes on those homes increasing.

I was CLT’s office secretary when the initiative petition was being drafted. The idea came from economics writer Warren Brookes, who analyzed Proposition 13 and determined that a similar limit here should have a maximum tax rate of 2.5 percent. In the summer of ’79, a lawyer had been hired to do the actual draft, and on the eve of the deadline to file the initiative petition with the Massachusetts secretary of state in preparation for the petition drive, volunteer activists were going over the final language.

One of them wondered aloud: If tax revenues depended on home values, wouldn’t local assessors be pressured by local politicians and unions to, maybe, nudge those values up a little higher than they should be? The activists decided to do assessors a favor and protect them from that potential political pressure. It added a provision that said, regardless of the latest assessed values, the property-tax levy from year to year could increase only 2½ percent — in effect, creating two limits. The tax rate couldn’t be more than 2.5 percent of value, and no matter how much that community’s value increased, the tax levy could increase just 2½ percent over the previous year’s levy.

So if a community’s value doubled, the tax rate would be cut in half, before the allowed 2½ percent increase was applied. Later a provision to let the levy to increase by new construction was added, and an override provision was available for emergencies.

The limit doesn’t apply to individual parcels, but to all property in a community: Some parts of town, some kinds of home, might appreciate faster, and therefore carry a larger share of the burden, and there might be different rates for residential and business property. But overall: 2.5 percent of total value, 2½ percent a year increase plus new growth plus overrides.

Of course, if a community’s value drops, the tax rate will increase to allow the same 2½ percent levy increase — but no one back in 1979 was thinking about values dropping.

The actual tax reductions required in communities whose tax rate was greater than 2.5 percent of value took place in the next few years, then all Massachusetts cities and towns were living under the second limit: the 2½ percent annual levy increase. The economy took off and there was plenty of “new growth” revenue added, and after the 59-41 vote for Prop 2½ in 1980, the state began to share local aid with the cities and towns.

To CLT’s surprise and dismay, some local voters began passing overrides, not just for emergencies, but for operating expenses, including pay raises and public-employee benefit levels. Much local aid was also spent this way. So now when taxpayers’ own revenues are limited, frozen or reduced, and their homes are losing value, the so-called “fixed costs” of local government increase each year, forever.

With the coming state fiscal crisis, local aid will be reduced and pressure will mount for overrides; CLT is filing legislation to allow them only on the biennial statewide election ballot. Once again, it is time for taxpayers to assert themselves and defend their homes. Somewhere, Howard Jarvis wishes us taxpayers well.

Barbara Anderson, an occasional contributor, is executive director of Citizens for Limited Taxation.