Should Charlestown residents get a tax cut?

It's time to REALLY make housing affordable

By Will Collette

Charlestown is about to embark on its own mini-version of the current national debate over whether to give tax breaks to low and middle-income taxpayers funded by a surtax on the super-rich.. 

There is a proposal put on the table by the Charlestown Democratic Town Committee to add a new tax credit that would give a $1000 credit off your tax bill if you make Charlestown your home.

The benefits of this tax break will go to homeowners who own homes assessed at less than $900,000. It will have its greatest benefit in the brackets where most Charlestown residents live - in homes assessed between $100,000 and $500,000.




Non-residents and owners of $1+ million properties would see their taxes go up - but by relatively little - to fund the tax break, Will we see the same dynamic in Charlestown? Will the RI Statewide Coalition and Charlestown Citizens Alliance rise to the defense of the millionaire absentee land owners?  responds to a proposal that would cut the property taxes for middle and lower income homeowners - the vast majority - through a Homestead Tax Credit that would shift the tax burden to non-resident owners of million dollar properties. 

Incidentally, the Charlestown Democrats’ proposal includes freezing the tax cost for Charlestown businesses so that their net taxes do not increase due to the Homestead Tax Cut.

If Jim Mageau owned this house, he would get an additional
Homestead tax credit of $814. 

We've already heard from Jim Mageau who is against the Homestead Tax Cut, concerned that "non-resident property owners are already raising hell about not being permitted to vote in the town's Financial Town Meeting/Referendum. What do you suppose they'll do if this idea ever gets any traction. I think that their [SIC] is case law in Connecticut that may give you the answer."


Charlestown is no stranger to the tax credit concept. We already have tax credit programs: low-income seniors, the disabled and blind and religious buildings.

We have several categories of tax credits for veterans - in fact, this is how Jim Mageau has escaped paying any taxes to the town since at least 1999.

We have a tax reduction program for properties used for farms, forest or open space.

So the town Democrats have proposed to give people who make Charlestown their home – by declaring Charlestown as their legal residence and having lived here at least one year – a property tax credit – a tax cut – of $1000 off their tax bills, starting in July when the new tax year begins.

The homeowners who will get the greatest benefit from this plan are those who own homes assessed at less than $500,000. That’s also the price bracket for the homes where most Charlestown residents live.

The cost of this proposal would shift to primarily to non-resident homeowners and those whose homes are assessed at more than $900,000.

We’re going to hear a lot of stuff about class war as the Democrats’ tax cut proposal goes through the process. It should be on the agenda for the December 12 meeting.

Progressive Charlestown’s resident tech genius Tom Ferrio adapted the Progressive Charlestown Magic Tax Calculator that predicted the impact of last July's tax increase on individual properties to let you see what the  Democrats’ Homestead Tax Cut proposal would mean to you. NOTE: our Calculator came within $1 on most of last July's tax bills and was exactly right on many - I have every confidence that Tom has nailed it again. 

You take your current tax assessment (click here to get your current home value), plug it into the Progressive Charlestown tax calculator, and it will give you two numbers: one if you are a resident and the other if you are not. Detailed instructions here.

Because Charlestown’s budget must, by law, be balanced, the tax cut proposal will have to be offset by a change in the tax rate. We estimate the tax rate will rise by $1.10 (and again, we were right on track estimating the rate hike after last spring's reassessment). Whatever your tax bill is with this new tax rate, you then get $1000 taken off if you are a resident.

Examples:

• If you own your home, live it at least six months of the year and it is assessed at $100,000, your net savings over this year’s taxes will be $890.
• If your home is assessed at $200,000, you will save $780 next year.
• If your home is assessed at $300,000, you will save $670. And so on.
• Even if your home is assessed at $900,000 and you are a resident, you will still save $10.

Now, before you start hearing all the stories about how the Charlestown Democrats want to screw the rich, let’s look at how it will affect people with high-end properties ($1 million and up).

Let's start with this fact: Charlestown's property tax rate is among the lowest in the state. And compared to the taxes most of our million-dollar non-resident owners pay on their primary homes, Charlestown is a bargain.

Of the 279 Charlestown residences assessed at $1 million or above, 80% are owned by non-residents. Incidentally, the taxes for a resident who owns a million dollar home will go up only $100. For a non-resident with a million dollar, the increase is $1100 

There are a few very high-value homes owned by full-time Charlestown residents. One Charlestown resident lives in a home that is assessed at $2.75 million. Under the Democratic proposal, the owners would pay $2,025 more.

If they were non-residents, they would not get the $1000 credit and their tax bill would be $3025.

The Walsh estate: Do you think they can afford to pay $6000 more in taxes?

The Charlestown home with the highest assessment is the summer “cottage” of the Walshes of Greenwich, CT. Their assessment is $6,018,000. Their tax bill would go up by $6,620 to help bring some relief to Charlestown residents who deserve a break.

While $2,025 is a lot of money to a family living in a $350,000 home, it means a whole lot less to a family who can afford to live in a $2,750,000 estate.

Sorry, that’s class war talk. But you’re going to be hearing from CCA and others that if we don’t defer to the wealthy, if we don’t pander to non-resident property owners, they might do something bad. Like leave.

Well, lots of luck. If the Walshes decide that a $6000 tax hike on their $6 million summer house (the tax hike equals 0.1% of the home value) is unbearable and they put it on the market, mazel tov. Either they get their price or not. But they can’t take their house with them back to Greenwich, CT.

This isn’t a deal where they decide to move a factory to Cambodia rather than pay better wages. Charlestown still has that nice $6 million property on the books. Unless the Walshes decide, “to hell with it” and walk away.

Ka-ching! Tax sale! Open space!

Property tax breaks are a long-standing and common practice in Charlestown,. Homestead tax breaks are common around Rhode Island. The Homestead Tax Cut proposed by town Democrats is modeled on both Charlestown's and the state's established precedents. Yes, it shifts taxes from middle and low income homeowners to rich and absentee owners. But no differently than the way last spring's uneven tax reassessment shifted taxes from rich property owners to middle-range property owners. 

The 279 residences assessed at $1 million or more would receive modest tax hikes to fund a major tax break for approximately 2,000 Charlestown residents with low-to-average priced homes. Another 600 or so Charlestown residents with homes worth up to $900,000 would get smaller tax cuts or break even.

The good of the many outweighs interests of the few.