January 21, 2019
Editorial

Tax breaks are a short-term win

You can't get what you don't ask for.

It's easy to vilify businesses for taking tax breaks from local governments, even if they are bringing in jobs and investment. In the same year Marlborough awarded retailer TJX Cos. a 50-percent, 20-year tax break on a $54-million expansion in the city, the company made $1.5 billion in worldwide profits and the Marlborough School Committee instituted a temporary hiring freeze. But economic development isn't that simple, nor is municipal tax policy.

First off, the two aren't connected. Marlborough schools were running a multi-million-dollar deficit well before TJX received its tax break. And, like nearly all local government tax breaks, TJX received a tax-increment financing agreement, which means the 50-percent discount only applied to increases in its future tax bills. Marlborough received more tax revenue because the expanded TJX property increased in value, and TJX was able to move into a new headquarters without paying full price on the additional real estate value. Critics of local tax breaks would argue the city could have held out for someone to move in without a tax discount. But with development cyclical with the ups and downs of the economy, a bird in hand is preferable.

In an ideal world, these tax breaks wouldn't be necessary. Worcester has utilized the TIF tool quite often, and with its sky-high commercial property tax rate of $34.90 per $1,000 in valuation, it's no wonder Worcester has had to cut deals to attract development. Worcester has handed out more tax breaks (28) in the last 20 years than any other Central Massachusetts community. As one of the few cities in the region with a dual tax rate, Worcester's political leadership, despite constant urging from the business community, has continued to hammer its commercial tax payers while keeping the residential rates at almost half at $18.91. A more judicious split between residential and commercial rates would not put a stop to the TIF agreements, but it would certainly attract more incentive-free development and spread the benefit out among all commercial owners, not just the big guys who can leverage a tax break.

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