Boston City Council, Wu administration disagree on push to exempt small businesses from commercial tax hikes

Boston City Councilwoman Gabriela Coletta Zapata is pushing for a small business exemption to provide tax relief should the mayor’s plan to raise commercial tax rates pass into law. (Matt Stone/Boston Herald, file)

The Wu administration threw cold water on the Boston City Council’s push to partially exempt small businesses from the mayor’s plan to raise commercial tax rates, saying the extra assessment work it would require may not be feasible.

Chief Financial Officer Ashley Groffenberger said if the city were to adopt a small business exemption, it would require changes to the bill it sent to the state Legislature last month. It would also require a review of roughly 6,000 commercial properties expected to qualify for the tax break, she said.

“This would be a significant administrative boost for the department,” Groffenberger said at a City Council hearing Tuesday on the proposed ordinance. “We estimate it would take 24 working days or five weeks before they did anything else, for them to do the work required to implement this in time for the rate to be set.”

The exemption would be built into the commercial property tax rate — which the city could raise above the state limit for four years under the mayor’s plan — and apply to properties with an assessed valuation of less than $1 million that are occupied by a business with no more than 10 employees.

Boston already has a homestead exemption, which excludes a portion of a qualifying homeowner’s property value from taxation. The mayor and city council typically adopt the maximum residential exemption, which according to the city’s website saved qualifying homeowners up to $3,610 on their tax bill last fiscal year.

The city council is trying to give similar tax breaks to small businesses, such as “mom-and-pop” shops, restaurants, retailers, hair salons and corner stores that they say would be most affected by the temporary tax increase.

A number of council members cited concerns about how the city’s plan to tax businesses beyond the state line would affect those small businesses when they debated and ultimately approved Mayor Michelle Wu’s home rule petition last month.

The city’s tax classification proposal aims to blunt the effects of what the mayor says could be a 33% increase in residential taxes due to declining commercial values ​​next year, by shifting more of the tax burden to businesses.

Wu lobbied for the bill’s passage in a private meeting with state lawmakers this week, and expects there to be a formal legislative committee hearing on it next week, the mayor said Tuesday on GBH’s Boston Public Radio.

Councilwoman Gabriela Coletta Zapata, who proposed the local ordinance that would create the small business exemption, argued that the loss in tax revenue the city would experience from qualifying properties would be a “drop in the bucket” compared to the financial strain higher taxes would put on mom- and pop stores.

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