Boston Mayor Michelle Wu testified in support of H4805, a bill regarding the City of Boston’s property tax classification, at the State Capitol on July 16. (Staff photo by Stuart Cahill/Boston Herald)
Boston Mayor Michelle Wu, at a hearing with state lawmakers, portrayed the plan to increase commercial taxes as a necessary evil, saying residents could be forced out of their homes if the bill doesn’t pass and property taxes would skyrocket next year.
Wu and his two top finance officials dismissed the concerns of skeptical members of the Assembly’s Joint Committee on Ways and Means during a hearing on Tuesday, where the mayor’s administration argued that the proposed “emergency legislation” was the only reasonable option for the city to provide short-term tax relief to residents.
The plans have drawn persistent criticism from business leaders and financial watchdogs who say they will further harm commercial sector businesses already struggling with falling property values and vacant city centre office space.
“I’m not bringing this bill because I want to do anything hurtful,” Wu said. “I’m here because there’s a potential problem for residents that needs to be solved in the short term.”
“I wish there was a way to have a completely different tax system that could be tailored to the needs of each business and resident,” the mayor added, “but we have the system we have now, and unfortunately we know it’s working well.”
Wu said the city’s budget relies on property taxes, which account for about three-quarters of annual budget revenue, of which about one-third comes from the commercial sector, so the continued decline in commercial property values is expected to make residents’ tax burdens heavier next year.
To avoid that scenario, she testified that homeowners could be hit with a 33% tax increase if the Legislature doesn’t approve her plan, which would give cities the power to tax businesses above the state limit for four years.
The city proposed a nearly identical bill two decades ago, when homeowners faced a roughly 40 percent tax increase, and it won state approval.
“A 33 percent increase in residential property taxes would be devastating not only to our residents, but to all the businesses that rely on them as customers, clients and employees,” Wu said, citing feedback he has received from area residents.
“Our proposal would give the city the tools it needs to protect resident taxpayers and ensure all residents, homeowners and renters, can continue to live in their homes,” she said.
The mayor stressed that business owners’ property taxes will still be lower next year, although not as much as they would have been if the plan had not passed.
But the business sector has largely rejected the argument, pointing out that the proposals could exacerbate declining property values and disproportionately harm small businesses. Critics say landlords could pass on the tax hike to small businesses through higher rents and other costs.
Jessica Muradian of the Massachusetts Restaurant Association made a similar argument, testifying that small businesses from East Boston to Mattapan will “bear the brunt of the tax increase at a time when they are already facing additional costs due to inflation, rising interest rates and other market forces.”
“To me, this could be a very dangerous measure,” said state Assemblyman Francisco Paulino, who sits on the state legislative committee, citing concerns about how the plan would affect small businesses.
Other committee members offered muted reactions to the mayor’s plan, with Assembly Speaker Mark Cusack taking some issue with Wu’s testimony that residents could face a 33 percent tax increase next year.
Kasak said the surge would occur between the second and third quarters, meaning Boston’s actual year-over-year tax increase would be about 16.5%.
Figures cited by Boston Tax Commissioner Nicholas Arniello in support of the 16.5% tax increase: He said the average tax bill for a single-family home with the home exemption in 2024 was $5,522 and would rise to $6,432 next year if the bill doesn’t pass.
State lawmakers also questioned why Wu officials were pursuing options that require Beacon Hill approval rather than tapping into the city’s roughly $1 billion reserve fund or cutting spending, as the city’s budget has grown 8% this year.
City Chief Financial Officer Ashley Grofenberger said the other options were not good in city officials’ view, pointing to the city’s strong AAA bond rating and the potential impact on city services.
“This tool really helps bring and maintain stability in the city,” Groffenberger said, noting he worries about using up the city’s reserve fund “once to plug a hole” and then having to come back to council in an even worse situation with no savings.
“We’re here because this is the best tool we have,” the mayor added.
The hearing ended today with no recommendations from the joint committee, which will decide whether to bring the issue to the full House.
