House passes controversial Boston tax bill after Wu agrees to compromises

BOSTON — The House Ways and Means Committee passed Boston Mayor Michelle Wu’s controversial business tax increase on Tuesday afternoon.

The bill passed with 132 yeas to 24 nays.

The tax bill would grant the Mayor’s office the power to temporarily shift the division of commercial and residential property taxes in response to projected economic upheaval. Under state law, cities and towns can tax commercial and residential property at separate rates, and push the commercial rate as high as 175 percent of what a single, unified rate would have been.

The original proposal, which the City Council approved, would have allowed Boston to increase the maximum commercial shift to 200 percent and gradually reduce it back to 175 percent in the fifth year.

Wu said when the bill becomes law, she will sign an Executive Order that limits the length and scope of the proposal to 190 percent and shorten the ramp-down timeline to three years instead of five.

In a statement, Mayor Michelle Wu said:

“After thoughtful conversations with legislators and stakeholders across Boston’s neighborhoods and business community, we are pleased to see an updated proposal advance that incorporates feedback received at the city and state levels. As Boston addresses economic shifts impacting cities around the country, it is imperative that residents in this far too expensive housing market are protected from drastic spikes in housing costs. And it is also critical for local small businesses to receive support and protection in this time of uncertainty....I am prepared to sign an Executive Order once this legislation has been enacted that will limit the scope and duration of shift from 175% currently, to no more 190% rather than 200%, stepped down over three years instead of five; and direct the City’s CFO to seek appropriations of up to $15M in each of these years to mitigate any potential impact of this legislation on small businesses in Boston.”

“The order will provide up to $45 million in tax protections over three years for small businesses employing 50 people or less, or those who have an annual revenue of less than $5 million,” said Representative Aaron Michlewitz (D- Boston) Chair, House Committee on Ways and Means. “By mitigating a potential massive increase in residential property taxes, and by providing much needed support for our small businesses, this plan is a balanced approach that will allow the City of Boston to address any potential revenue issues, thus allowing the City to continue to thrive while weathering the imminent financial storms ahead.”

Despite the alleged deal in place, critics of the bill say the proposed tax burden shift would harm businesses of all sizes and ultimately result in higher residential rates. Business owners in the city and commercial tenants are especially concerned about the potential of higher taxes when margins are thin and inflation has skyrocketed prices.

“The Mayor’s petition ultimately will fail to accomplish what it claims to seek while greatly harming the city’s business community, in some cases beyond repair,” says Daniel J. Swift, principal in the Boston office of the global tax consulting firm, Ryan LLC.

Swift also says the city has other options available to help residential taxpayers but hasn’t opted to use them.

“We don’t need any more expenses,” said Stephen DeAngelis, owner of the Golden Goose Market in the North End. “You are going to drive business out of the city.”

The bill now goes to the Senate for consideration.

*Excerpts from the Statehouse News Service were used in this article.

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