Do any of you remember Tom Lehrer’s song “New Math” from back in 1965? It was his send-up of trendy math teaching of the time, in which he deftly pattered through a subtraction problem in base eight, which he described as “just like base ten, really, if you’re missing two fingers.”
I was reminded of that song recently when reading the July newsletter of the Provincetown Part-Time Resident Taxpayers Association. This group spends a lot of its energy opposing the residential tax exemption (RTE), which has been adopted by 16 municipalities in the state, including Provincetown, Truro, and Wellfleet, as a modest way of supporting year-round residents in places where the second-home market has driven real estate prices sky high.
The RTE operates according to a formula that even Tom Lehrer might have trouble getting right. The part-time resident taxpayers’ newsletter got it wrong. The recent edition starts out with a warning that town officials are planning to raise the exemption from the current 25 percent to 35 percent, which is almost certainly not in the cards. Then it continues: “How does it work? The Assessor values all properties in Town as X and that equals a grand total of property taxes as Y. But a certain category (year-rounders) receives an artificial decrease of property value by (currently) 25% — lowering the property tax payment for the year-rounder. So to get to Y, part-timers must pay more to make up the difference.”
Well, let’s have a little math and civics lesson, shall we?
First, not all year-rounders have the assessed value of their property decreased — only those who actually live in the property (second and third homes aren’t eligible) and who apply for the exemption. Some year-rounders who don’t need a tax break don’t apply for it, and don’t get it.
Second, not all those who get the exemption necessarily pay less in taxes. That’s because the RTE is progressive, in that the more your house is worth, the less benefit you get from it.
Here’s how it actually works. Those who qualify for the exemption, and ask for it, get to deduct from their assessed home value 25 percent of the average value of a residential property, which last year was $175,221. To make up for the tax revenue not collected on this exempted value, the overall tax rate has to go up. Last year, in Provincetown, the tax rate was $7.08 per thousand. Without the RTE, it would have been $6.77.
So, taxpayers who didn’t qualify for, or didn’t request, the exemption paid an extra 31 cents per thousand on their assessed value. If you’re a year-rounder and your house is worth $400,000, that’s a big bonus — about $1,100 — enough to buy a new washer and dryer. If your house is worth $4 million, though, you don’t get any bonus at all.
Meanwhile, if you’re a part-timer and your second home here is about average value, currently $700,000, the RTE costs you an extra $217. Is that so terrible? I don’t think so. But I’m just a math nerd. What do I know?