Another Tax Hike Is the Wrong Course
T here they go again, the hordes of tax-hike advocates, spreading out across the Commonwealth to urge support for Gov. Deval Patrick’s $1.9 billion tax package.
I’ve met these kinds of advocates on the tax trail before, beginning in 1980 with their opposition to property tax limits in Proposition 2½. Now, though, I offer institutional memory on just the income tax.
In 1989, Gov. Michael Dukakis returned from the presidential campaign trail and demanded tax hikes to fund a billion-dollar budget increase; supporters rallied at the State House, some of them dressed as giant crayons, to protest potential cuts to the arts. The legislative leadership was able to get the votes for the tax package only after promising that the new income tax rate, increased from 5% to 5.75%, would be temporary. The Legislature raised the rate again the next year, ‘temporarily,’ to 6.25%.
In 1990, a coalition calling itself the Tax Equity Alliance for Massachusetts defeated a ballot question to repeal the Dukakis tax hikes. However, Bill Weld, who supported it, was elected governor and oversaw a reduction in the rate to 5.95% in 1992.
In 1998, despite opposition from a group now called the Campaign for Massachusetts’ Future, voters approved a reduction of the investment-income rate to the same rate as wage income, and in 2000 they approved a rollback of the income tax rate to 5% over three years. Two years later, the Legislature ‘temporarily’ froze rollback and investment rates at 5.3% after heavy lobbying by pro-tax groups. Then the Campaign for Our Communities was formed, calling for a return to the 5.95% income-tax rate.
Instead, in 2011 a formula created in 2002 dropped the rate to 5.25%, where it remains — 24 years after the first ‘temporary’ increase, and 12 years after the voters demanded a rollback to 5%.
Now Gov. Patrick is proposing to increase the income tax rate to 6.25% again, as part of a $1.9 billion tax package. The Campaign for Our Communities has been fanning out across the state in support, and held a huge rally this week at the State House.
Who are these teams and campaigns for equity, our future, and communities? The list is long, made up of the many public-employee unions, both national and statewide with their local affiliates; various human service providers; individual Democratic town committees; and city councils. For them, it seems, taxes will never be high enough.
Patrick’s offset offer of a reduction in the sales-tax rate is hard to credit from the governor who raised that rate from 5% to 6.25% just two years ago. Come the next fiscal crisis, the sales tax will likely be hiked again.
Personal exemptions have been increased in the past to sell a rate increase, only to disappear at the next fiscal crisis. Deductions come and go, depending on what special-interest lobbyists are doing on Beacon Hill.
The Massachusetts tax burden is the fourth-highest in the nation per capita, and the eighth-highest relative to personal income. The state is not suffering from a lack of taxes; it is suffering from a lack of accountability for the taxes already paid. The ongoing scandal over electronic-benefits cards is a maddening example of this.
With cuts coming from our dysfunctional federal government, there will be many pleas for revenue increases to address not only transportation but the operating budget and local aid. Eventually the easy ‘new revenue solution’ will be exhausted, and a better-managed state will be essential. Why not do the better management now?
Tax advocates carry signs saying ‘invest’ to hearings on new taxes. First we need to invest in respect for voters and taxpayers, who have been awaiting the return of the 5% income tax rate they were promised in 1989 and voted for in 2000. If they ever find reason to respect their government again, we as a Commonwealth will benefit.
Barbara Anderson is executive director of Citizens for Limited Taxation.