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Repeal of the state income tax would spell disaster This November, citizens of Massachusetts will step into the election booth and vote on Question 1, which poses abolition of the state income tax. The attraction of spending less in taxes is self-evident; however, the implications of a “yes” vote are staggering. Thanks to the presidential election of 1988, the commonwealth of Massachusetts got the nickname, “Taxachusetts.” Twenty years later, “Taxachusetts” no longer exists. In the past two decades, state and local taxes, fees, and charges in Massachusetts have declined as a percentage of personal income by nearly 25 percent, the largest decrease in the nation. While local taxes are high, Massachusetts ranks 43rd out of the 50 states when state and local taxes, fees, and charges are measured as a percent of median family income. During the past 15 years, state tax cuts have reduced available funds at the state level by more than $3 billion annually. The result is that hard-earned gains in education, public safety, and infrastructure maintenance are jeopardized, and consequently, there has been an over-reliance on the regressive property tax at the local level. The reliance on the property tax has meant that state-wide, on average, property taxes have gone up by more than 48 percent between 2000 and 2007. According to the Mass. Dept. of Revenue, in suburban towns like Harvard, Concord, and Wellesley, the increase has been between 60 and 75 percent. This is with the state income tax, which funds 40 percent of the state’s budget. Without that 40 percent of revenue, what would be cut? All state aid would be affected, including Chapter 70 aid (education funding) and Chapter 90 funds (highway and infrastructure aid). Virtually everything in the state budget would be affected—road and bridge maintenance, state police, parks, beaches—every aspect of life in the commonwealth would be adversely impacted. If there is an attempt to keep level services in the town, it would have to be funded from property taxes—which would require those taxes to increase by at least 30 to 40 percent in one year to make up for the roughly $2 to $3 million shortfall in state aid. For fiscal year 2009 our total state aid is $4.1 million. If the state budget is cut by 40 percent, the cut in local aid would be more than 50 percent—potentially much more, due to the fact that much of the state budget is nondiscretionary spending. Property taxes are especially regressive when considered in context to the real estate boom of the last two decades. Many people are living in houses they could not buy today. Forcing people out of their longtime homes is wrong. None of us is happy about paying taxes, but doesn’t society have an obligation to make it as fair as possible? Income tax is an inherently fairer way of funding society than the alternative of taxing an asset that pays no interest or dividend. If you still haven’t decided yet to vote against Question 1, look at some of the divergent groups that support a “no” vote:
A complete listing of organizations opposing Question 1—more than 100 groups—is available at www.votenoquestion1.com. I urge voters to help properly fund our commonwealth and town by voting “no” on Question 1 this November. Scott Road resident Stu Sklar is chairman of the Harvard School Committee. |
Residents and schools could benefit from elimination of the state income tax The Press carried an article in the Aug. 29 edition, “School Committee takes stand against Question 1.” Question 1 will appear on the November ballot. If it passes, it will require the state legislature to reduce the state personal income tax rate on Jan. 1, 2009 to about one-half the current rate, and then eliminate the tax altogether “on or after Jan. 1, 2010.” The result will be about a 44-percent reduction in state revenue, from $27 billion to about $15 billion. The $12 billion that came from the state income tax will stay in the paychecks of the citizens, while the legislature still gets to spend 56 percent of the previous budget. The president of the Harvard Teachers Association appeared before the School Committee at its Aug. 25 open meeting and made a case against the repeal of the income tax. She called for the defeat of the ballot question, saying that it was “vital to the health of Harvard’s schools.” The School Committee then voted unanimously to support opposition to Question 1. They talked about approaching other town boards to do likewise and then join with them in putting together a written document that reflects a united position. From the Press article, there did not appear to be much study or debate of the matter by the School Committee. It seemed to be a knee-jerk reaction reflecting the perceived harm that would come to the Harvard school system. A little number-crunching and consideration of alternatives, however, would have presented a different view. The School Committee should take the time to study the matter and then have another vote that reflects a more considered opinion of the Question 1 proposal. When you crunch the numbers, it appears that repealing the state income tax would not necessarily hurt the Harvard school system. Indeed, repeal could be a significant opportunity for Harvard to take more control of its spending and governance. Furthermore, repeal of the state income tax could bring enough new money into the possession of citizens that the town could fund the school system and other services at an even higher level if so desired by the voters. How so? At the Annual Town Meeting, we would have to vote a significant override to make up what we lose from state reimbursements. For example, the town will receive in fiscal year 2009, according to the Massachusetts Department of Revenue, a total of $4.1 million in state aid. This includes about $2.2 million in all education items. So, in the worst-case scenario where we would lose all state aid (unlikely), how can we afford an additional $4.1 million on top of our already strained budget? With the repeal of the state income tax, the average Massachusetts taxpayer will see a $3,500 increase in take-home pay ($12 billion taken in income taxes, divided by 3.4 million taxpayers equals the $3,500 average.) It should be noted, however, that Harvard citizens earn well above the average income in this state. State figures indicate that our income is 60 percent more per capita than the average. The actual “pay raise” per household that we receive, therefore, could be as high as $5,600. To be conservative in the calculations that follow, I used the state average figure of only $3,500. Since there are about 1,900 Harvard households, our citizens will see a total increase in their incomes of about $7 million. If Harvard voters decide to increase our local taxes by the $4.1 million that could be lost from state aid, then we can cover the loss and the citizens would still end up with an effective pay raise totaling $2.9 million, or more than $1,500 per household. Thus, while our local taxes will be up, our total tax burden will be reduced considerably. Here are some arguments that opponents will present in rebuttal of this idea of supporting the income tax repeal and taxing ourselves more to make up the difference: “Some Harvard citizens own houses, but have little income. This approach will increase their property taxes significantly without increasing their ability to pay.” Answer: The town can develop a method to exempt from the increase in local taxes all senior citizens and those that have homes or lands/farms but have limited incomes. This approach will not impact significantly our ability to cover any loss of state aid and still have an ongoing pay raise of $1,500 or more. According to the Press article, Governor Deval Patrick said, “The state will be unable to fund vital services like road repairs and school building.” Answer: The state will still have 56 percent of its current income or about $15 billion in revenue from federal reimbursements and a range of other tax sources like the sales tax, capital gains, death tax, etc. The gas tax and tolls are designated for road repair and construction and should be used for that. As shown above, towns like Harvard will have the ability to make up for any loss of state aid that went toward school operations or construction. “What about the towns and cities that, unlike Harvard, can’t make up the difference with their local taxes because of the lower-than-average income of their residents? And, what about the welfare programs aimed at helping our poorest citizens?” Answer: First, most of the working residents of the lower-than-average income cities and towns will be getting a pay raise with the elimination of the state income tax so they can afford some increases in their local taxes without increasing their tax burden. But, more importantly, the state will still have $15 billion to spend. What the state legislature and the governor will have to do is reduce the excesses and waste in state government, and prioritize their spending so that the neediest among us are not hurt by the change. “Repealing the income tax will ‘cut the legs out from our economy’ by slashing public expenditures.” Answer: The $12 billion in lost state revenue will not be leaving the state. It will be in the pockets of our citizens. They can use some of it to replace any lost state aid that will then be spent at the local level. The rest of their pay raise will be spent on personal expenditures. The fact that Question 1 made it this far indicates that many Massachusetts residents are fed up with bloated state government that is inefficient in providing services to its residents. The repeal of the state income tax will force the lawmakers to live on a smaller budget while citizens get to keep more of their income and to spend it at the local level, where they have greater control. This preliminary analysis of the state data certainly suggests that Harvard residents and schools could benefit from the elimination of the state income tax. This is, however, a momentous vote that we have before us and it deserves serious consideration. I invite others to scrutinize and respond to these ideas and lay out their views about the pros and cons of repealing the state income tax. Anthony J. Marolda lives on Jacob Gates Road. |
