Council Approves Deduction

A measure increasing the tax exemption for city residents who own their own homes may lead to slightly lower tax bills for middle-class city residents, but could hurt wealthy homeowners and poorer renters, City Councillors said yesterday.

Two weeks ago the City Council voted 8-1 to raise the "residential exemption" for owner-occupied housing from 10 to 20 percent of the average value of all the houses in Cambridge--about $300,000.

New Deduction

City residents who live in houses, rather than owning them as investments, can now deduct 20 percent of that average--a fixed sum of $59,499--from the assessed value of their property. What's left is the sum on which they must pay taxes.

To balance that deduction, the council increased the overall tax rate on residential property.

According to a report issued by City Manager Robert W. Healy, the exemption would lower the tax bills for people who live in their own three-family houses, but raise them slightly for people who own and live in of one- and two-family units.

The exemption will probably benefit those low-income families that own their own homes, said David E. Sullivan, the only member of the City Council to vote against the increase. But, while he called the increase "progressive" in spirit, he said it would hurt a large segment of the families it was designed to protect.

"I maintain that the majority of low- and moderate-income people in this city are renters," said Sullivan.

Because the increase in the residential exemption will require a corresponding rise in tax rates, Sullivan said, owners of low-income, rent-controlled housing will face a significant tax increase, which will they will eventually pass along to their tenants.

"It may take some time, but sure as the night follows the day, that will happen," Sullivan said.

Another group hurt by the exemption consists of wealthy homeowners, according to Vice Mayor Alice K. Wolf. She said that owner-occupied homes worth $490,000 or more would also face a slight increase in taxes, perhaps only as much as two or three dollars a month.

"From a public policy point of view, it's an interesting dilemma." said Wolf.