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Massachusetts Liberal

Observations on politics, the media and life in Massachusetts and beyond from the left side of the road.

Thursday, January 17, 2008

Taxachusetts is dead

One of the enduring Massachusetts myths (no, not the former governor but he's certainly a part of it) is that Massachusetts taxes are crippling business and economic development and damaging the state's competitiveness.

That canard is being rolled out again as business leaders bemoan Deval Patrick's proposal to reduce the corporate tax rate as part of a package deal to close corporate tax loopholes and raise some revenue to pay for sorely needed services -- like education.

Patrick's proposal to trim the rate gradually from 9.5 percent to 8.3 percent. As the Globe explains:
While the corporate tax codes would be tightened in January 2009, Patrick wants to delay his corporate tax rate reduction until 2010, and it would be phased in over three years. Closing what the governor describes as loopholes would generate $297 million in the next fiscal year and $490 million a year after that.

But that would be offset by about $210 million a year in lost revenue, once the tax rate reductions for businesses took full effect. The net increase in new taxes for the state would be $280 million.

The cries of "no fair" were quick.
"This isn't any meaningful reduction," Paul Guzzi, president of the Greater Boston Chamber of Commerce, said yesterday. "We need to do things that are pro-competitive. In our view, this package doesn't fall under that category."
Yes, anti-competitive. The cry has been very successful. Its most recent victory was in limiting the per employee cost to small business for failing to provide health insurance to $295 annually. The cost to the individual who fails to buy care on the other hand, is rising as high as $912 annually.

But perhaps the leading Massachusetts expert in state taxation has rejected the idea that corporate taxes are anti-competitive. The conclusion by Robert Tannewald of the Federal Reserve Banks of Boston (pdf):
In debating Massachusetts business tax policy, protagonists have cited many different indicators purporting to assess the fairness, adequacy, and competitiveness of the Commonwealth’s business taxes. These statistics actually reveal very little about the degree to which Massachusetts business taxes achieve these widely accepted tax policy goals. The author explains why these indicators are misleading and presents new indicators of business tax competitiveness that, although imperfect, are more accurate than those most widely quoted.
The article concludes that the fairness of Massachusetts business taxes is unclear and that the Commonwealth’s corporate income taxes are inadequate. The clearest conclusion drawn is that Massachusetts business taxes do not harm its competitive standing.
And while we're at it, let's recall where the state really stands in terms of overall personal taxation: 28th, right in the middle of the pack.

No, a stronger argument for the Massachusetts Malaise (the real Romney economic record) is deteriorating quality of life caused by decaying infrastructure, deteriorating public elementary, secondary and higher education, the higher cost of basic public services like trash collection, water and sewer. Toss in high housing costs and an unfriendly climate and viola, business (and employees) are leaving in droves.

Republican policy since the Reagan days has been "no tax and spend." The largest federal deficit have been rung up under Ronald Reagan and George W. Bush. Heck, we ran a national surplus under Bill Clinton that W. squandered on war.

Locally, 16 years of Republican governors -- and the Reagan-era Proposition 2 1/2 have squeezed tight and, despite those limits, property taxes are high once again and part of the season people are leaving.

Efforts to create a fairer income tax instead of a flat tax that hits the millionaire with the same rate as the laborer have been resoundingly defeated -- by the same interests fighting corporate tax reform.

But hey, there's a light at the end of the tunnel. A proposal to eliminate the income tax totally has made it to the ballot and has a better than equal chance of winning as of today.

If passed, the last one out of Massachusetts (forced out by the lack of services and a horrid quality of life) could turn out that light.

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Blogger Garrett3000 said...

The purpose for eliminating the State Income Tax isn't just about returning money to our pockets. Its about changing the role of government. The state government is far too big and powerful. There are several agencies than do not to exist and only make it more difficult to run a business, let alone start one.

The main objective of ending the income tax in the state is to force the state government to stop expanding and go the other way.

February 23, 2008 1:23 PM  
Anonymous Anonymous said...

Could this be the begining of the the end for the infamous welfare state of Massachusetts. I'm all for it. Even if it means I lose my job. You see I work for Social Service Agency that is funded by breaking the bank accounts, and backs of the middle class tax payor.

March 02, 2008 4:18 PM  
Anonymous Anonymous said...

It's back....! :-)

July 01, 2009 10:46 AM  

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