MassBudget: Why Top-Income Households Receive Most Tax Benefits from Charitable Deduction

MassBudget    Information.    Participation.  Massachusetts Budget and Policy Center    Democracy. February 11, 2019 Why Top-Income Households Receive Most Tax Benefits from Charitable Deduction BOSTON - Our Commonwealth does best when all people experience rising prosperity. But for several decades, the wealth and income of the top 1 percent of households has grown briskly while others have been left behind. While there are many reasons for this trend, one contributing factor is the way the federal tax deduction for charitable giving disproportionately rewards the giving of those with incomes over $1 million compared with donations made by moderate- and low-income tax filers. While higher-income households have more money to give away - and therefore give larger dollar amounts to charity than households with less income - the benefits of charitable tax deductions remain heavily skewed towards top-income households, according to a new Massachusetts Budget and Policy Center (MassBudget) report. The top incomes average 160 times more than those earning incomes below $50,000, but their average charitable deduction is about 1,320 times larger. "In Massachusetts, taxpayers who have incomes over $1 million claim almost half of all charitable deductions, though they make up less than 0.5 percent of tax filers. Meanwhile, tax filers with incomes of $200,000 or less claim only 29 percent of charitable tax deductions," said Phineas Baxandall, Senior Policy Analyst at MassBudget and author of the report. Research shows high-income households do not necessarily give a larger portion of their incomes to charity than lower-income households. Some studies find that, in fact, low- and middle-income givers actually contribute a larger percentage of their incomes. A key reason the tax benefits for charitable giving are skewed toward high-income households is: charitable giving can only be deducted from federal taxes if they are itemized (listed in detail).  Most low- and moderate-income taxpayers don't tend to itemize their deductions, instead they usually opt for the larger (and simpler) standard deduction. For most top-income households, the standard deduction is too small compared to the deductions they can claim, so the vast majority choose to itemize deductions and avoid taxation on a larger portion of their incomes. Massachusetts does not currently have a charitable deduction for state income taxes but, if the state's income tax rate drops to 5.0 percent in January 2020 - as anticipated by the Department of Revenue and following policy triggers enacted in 2002 - then a state charitable deduction would kick in the following year.  Adding a state charitable deduction would reduce revenues by about $300 million per year, leaving less money for education, public health, transportation, affordable housing, and other programs funded by the state budget. "In Massachusetts' upside-down tax system, people with lower incomes pay a larger percentage of their incomes in taxes than top-income households. Adding a state charitable deduction on top of the federal one would make this system even more imbalanced," said Marie-Frances Rivera, Interim President of MassBudget. Read the full report here http://massbudget.org/report_window.php?loc=Why-Highest-Incomes-in-Massachusetts-Receive-Most-Tax-Benefits-from-Charitable-Deduction.html. The Massachusetts Budget and Policy Center (MassBudget) produces policy research, analysis, and data-driven recommendations focused on improving the lives of low- and middle-income children and adults, strengthening our state's economy, and enhancing the quality of life in Massachusetts. MASSACHUSETTS BUDGET AND POLICY CENTER 15 COURT SQUARE, SUITE 700 BOSTON, MA 02108

Massachusetts Budget and Policy Center, 15 Court Square, Suite 700, Boston, MA 02108 Sent by mrivera@massbudget.org in collaboration with Try it free today

Live reporting: Tax classification hearing

5. APPOINTMENTS	None
6. HEARINGS	None

Chris Feeley, chair of Board of Assessors
Kevin Doyle, Assessor; Chris Sandini, Comptroller

80.31 %   19.68%

motion to close hearing, seconded, passed 9-0

motion to move tax motions to now, rather than wait until later, seconded, passed 9-0

10b. LEGISLATION FOR ACTION	Resolution 18-66: Classification Tax Allocation - Residential Factor (Motion to Approve Resolution 18-66 - Majority Vote (5)) motion to approve, seconded, passed 9-0
10c. LEGISLATION FOR ACTION	Resolution 18-67: Classification Tax Allocation- Open Space Exemption (Motion To Approve Resolution 18-67- Majority Vote (5)) motion to approve, seconded, passed 9-0
10d. LEGISLATION FOR ACTION	Resolution 18-68: Classification Tax Allocation- Small Business Exemption (Motion to Approve Resolution 18-68 - Majority Vote (5)) motion to approve, seconded, passed 9-0
10e. LEGISLATION FOR ACTION	Resolution 18-69: Classification Tax Allocation- Residential Property Exemption (Motion to Approve Resolution 18-69 - Majority Vote (5)) motion to approve, seconded, passed 9-0

What drives the tax rate? How stable is our budgeting process?

The tax rate will be voted on during Wednesday's Town Council meeting. It is expected to be set at 14.66/thousand, an increase of .01 over the tax rate for FY 2018 (14.65).

The tax rate increase is minor due to the increase in our overall property valuation and new growth. A larger pie is available to divide the levy by. When valuations go up, the rate flattens. It can also go down as shown in the 2000-2007 years. We are still in the recovery phase from the great recession that started in 2008.

Franklin, MA - Net Change in Valuation (Million) vs. Tax Rate (Percent)

How stable is our budgeting process can be shown in the slight variation of our free cash as a percent of total budget. Free cash is neither free nor cash. It arises from two budget factors: (1) when revenues to the town exceed that forecast and (2) when expenses budgeted are less than forecast. Both of these amounts add up to what is called 'free cash'.

Certified Free Cash as Percent of Franklin, MA Budget

Both charts were created from Town of Franklin Board of Assessors data combined with MA Dept of Revenue, Division of Local Services data. The Division of Local Services has a variety of data and reporting available 
https://dlsgateway.dor.state.ma.us/reports/rdPage.aspx?rdReport=Dashboard.Cat1munioperatingpos

The Town Council agenda can be found on the Town of Franklin page
http://www.franklinma.gov/town-council/agenda/november-28-town-council-agenda

Specifically the tax rate info can be found here
http://www.franklinma.gov/sites/franklinma/files/agendas/town_council_meeting_agenda_for_november_28_2018.pdf

Franklin, MA: Town Council - Meeting - Nov 28, 2018

The published agenda and documents for the Franklin Town Council meeting scheduled for Wednesday, November 28, 2018. This meeting sets the tax rate for the fiscal year 2019, effectively completing the budget cycle that started a year ago and officially funds the Town's operation for July 1, 2018 through June 30, 2019. 

(Note: where there are active links in the agenda item, it will take you to the associated document)

You can also find the full set of documents in one PDF

http://www.franklinma.gov/sites/franklinma/files/agendas/town_council_meeting_agenda_for_november_28_2018.pdf

Agenda Item	Summary
Town Council Meeting Agenda	Meeting of November 28, 2018 - 7:00PM
1. ANNOUNCEMENTS	a. This meeting is being recorded by Franklin TV and shown on Comcast Channel 11 and Verizon Channel 29. This meeting may be recorded by others.
2. CITIZENS COMMENTS	a. Citizens are welcome to express their views for up to five minutes on a matter that is not on the agenda.  The Council will not engage in a dialogue or comment on a matter raised during Citizen Comments.  The Town Council will give remarks appropriate consideration and may ask the Town Administrator to review the matter.
3. APPROVAL OF MINUTES	None
4. PROCLAMATIONS/RECOGNITIONS	a. Swearing in of Firefighters
5. APPOINTMENTS	None
6. HEARINGS
6a. HEARINGS	Tax Classification Hearing
6b. HEARINGS	Zoning Bylaw Amendment 18-821: Zoning Map Changes On Or Near Plain Street, Pond Street, and Palomino Drive
7. LICENSE TRANSACTIONS	None
8. PRESENTATIONS/DISCUSSIONS	a. Snow Update
9. SUBCOMMITTEE REPORTS	a. Capital Budget Subcommittee b. Budget Subcommittee c. Economic Development Subcommittee d. Town Administrator Search Committee
10. LEGISLATION FOR ACTION
10a. LEGISLATION FOR ACTION	Resolution 18-65: Conditional Offer of Town Administartor Position to Current Deputy Town Administartor (Motion to Approve Resolution 18-65- Majority Vote (5))
10b. LEGISLATION FOR ACTION	Resolution 18-66: Classification Tax Allocation - Residential Factor (Motion to Approve Resolution 18-66 - Majority Vote (5))
10c. LEGISLATION FOR ACTION	Resolution 18-67: Classification Tax Allocation- Open Space Exemption (Motion To Approve Resolution 18-67- Majority Vote (5))
10d. LEGISLATION FOR ACTION	Resolution 18-68: Classification Tax Allocation- Small Business Exemption (Motion to Approve Resolution 18-68 - Majority Vote (5))
10e. LEGISLATION FOR ACTION	Resolution 18-69: Classification Tax Allocation- Residential Property Exemption (Motion to Approve Resolution 18-69 - Majority Vote (5))
10f. LEGISLATION FOR ACTION	Zoning Bylaw Amendment 18-821: Zoning Map Changes On Or Near Plain Street, Pond Street, and Palomino Drive - 1st Reading (Motion to Move Zoning Bylaw Amendment 18-821 to a 2nd Reading-Majority Vote (5))
10g. LEGISLATION FOR ACTION	Zoning Bylaw Amendment 18-822: Changes to §185-20. Signs - Referral to the Planning Board (Motion to Refer Zoning Bylaw Amendment 18-822 to the Planning Board - Majority Vote (5))
10h. LEGISLATION FOR ACTION	Zoning Bylaw Amendment 18-823: Changes To Sign District Regulations - Referral to the Planning Board (Motion to Refer Zoning Bylaw Amendment 18-823 to the Planning Board- Majority Vote (5))
10i. LEGISLATION FOR ACTION	Zoning Bylaw Amendment 18-824: Changes to Sign District Overlay Map- Referral to the Planning Board (Motion to Refer Zoning Bylaw Amendment 18-824 to the Planning Board- Majority Vote (5))
10j. LEGISLATION FOR ACTION	Bylaw Amendment 18-825: Chapter 47, Alcoholic Beveralges- 1st Reading (Motion to Move Bylaw Amendment 18-825 to a 2nd Reading - Majority Vote (5))
10k. LEGISLATION FOR ACTION	Bylaw Amendment 18-828: Fees Bylaw Changes- 1st Reading (Motion to Move Bylaw Amendment 18-828 to a 2nd Reading- Majority Vote (5))
11. TOWN ADMINISTRATORS REPORT
12. FUTURE AGENDA ITEMS
13. COUNCIL COMMENTS
14. EXECUTIVE SESSION	None Scheduled
15. ADJOURN

Municipal Building, 355 East Central St, Franklin, MA

Franklin Tax Hearing - Nov 28

The Following notice will be published in the Milford Daily Newspaper on Monday,
November 12, 2018.

FRANKLIN TAX HEARING

NOTICE OF PUBLIC HEARING

PROPERTY TAX CLASSIFICATION

The Franklin Town Council will hold a Public Hearing in the Council Chambers in the Municipal Office Building, 355 East Central Street, Franklin, MA on Wednesday evening, November 28, 2018 at 7:10 P.M. on the issue of allocating the local property tax levy among the 5 property classes for the Fiscal Year 2019. The hearing will provide an open forum for the discussion of local property tax policy. Interested taxpayers may present oral or written information on their views.

Prior to the setting of the tax rate, the Town Council must adopt a Residential Factor following which the Council selects the percentage of the levy to be borne by Commercial and Industrial and Personal Property. 

The hearing location is accessible to persons with physical disabilities. If you have any questions, please call the Town Administrator’s Office at (508) 520-4949.

Submitted by,
Chrissy Whelton

MassBudget: Sweeter than SALT

Highest-income households get federal tax cuts more than twice SALT losses

MassBudget    Information.    Participation.  Massachusetts Budget and Policy Center    Democracy. Sweeter than SALT: Highest-Income Households Get Federal Tax Cuts More Than Twice SALT Losses  The federal government has enacted very large tax cuts targeted mostly at higher-income taxpayers. The resulting loss of an almost $1.5 trillion in federal revenue is likely to lead to cuts in federal support for programs that are important to people in Massachusetts and to the state budget. Amid these deep tax cuts, a new federal limit on the deductibility of state and local taxes (SALT) has received a lot of attention. Households that itemize deductions and pay over $10,000 in combined state and local taxes will no longer be able to deduct more than this amount when calculating their taxable income for federal taxes. For Massachusetts' highest-income households-those with annual incomes over $1 million-the average tax cuts from other federal changes in the law are more than twice the average size of the impact from the loss of SALT deductibility. Massachusetts' highest-income households will become substantially affluent as a result of the federal tax changes. Households with incomes over $1 million in 2019 are projected to have an average income of $3.4 million. For this group the federal tax changes-including the limits to SALT deduction-represent a combined $2.58 billion tax cut. The average tax cut for these taxpayers will be $95,800 after accounting for the effects on the SALT changes. Read this fact sheet online here. The Massachusetts Budget and Policy Center (MassBudget) produces policy research, analysis, and data-driven recommendations focused on improving the lives of low- and middle-income children and adults, strengthening our state's economy, and enhancing the quality of life in Massachusetts. MASSACHUSETTS BUDGET AND POLICY CENTER 15 COURT SQUARE, SUITE 700 BOSTON, MA 02108

Massachusetts Budget and Policy Center, 15 Court Square, Suite 700, Boston, MA 02108 Sent by nberger@massbudget.org in collaboration with Try it free today