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Massachusetts Liberal

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

Friday, April 24, 2009

Let me add my own two cents

It's one of the more common expressions of daily life. In the 1920s, it was the cost of a glass of seltzer on the Lower East Side. Over time it has come to represent something cheap and easy.

Apparently two cents in Massachusetts can be worth up to $1.5 billion -- if it is tacked onto the sales tax. And I can't help but have a nagging feeling that if the Massachusetts Legislature goes in that direction they will be making a cheap and easy decision.

OK, not cheap.

The Globe reports a "consensus" is building to stick two pennies on the 5 percent sales tax, a 40 percent jump in the levy. No gas tax hike. No sweets and soda tax.

An easy solution to a complex problem. But it's not.

For starters, sales taxes hit everyone the same, no matter whether than can afford it. A 40 percent increase is much harder on a single parent than on some hauling down six figures.

As I discussed yesterday, a sales tax-only solution hits different people up for different problems. A kid buying school supplies would be paying for the Big Dig, while his own school may well suffer because revenues that could go to the general fund and for education get diverted to pay for the transportation infrastructure mess.

And, as I noted, we've tried it already, earmarking a penny of the current five-cent tax for the MBTA. That's worked well. Not.

House Speaker Robert DeLeo is facing massive headaches in his first months on the job, a position he won by serving the needs of his constituents -- 159 other House members. His goal is a clean and simple tax vote to make their lives easier next November.

But clean and simple votes aimed at an election 19 months away is not in the best interests of the more than six million folks who live in Massachusetts. Especially when it doesn't take into account other options.

How about some creativity -- like expanding the scope of the sales tax? The handy rule of thumb is if you can eat it, drink it or wear it, you can't tax it (unless you eat or drink it in a restaurant).

Lawmakers actually expanded the sales tax in 1990 to include business services (including utilities and telecommunications), a tax hike that lasted long enough for Michael Dukakis to move out of the Corner Office and let Bill Weld move in.

That vote and repeal took place during the last really major downturn that hit Massachusetts. Dukakis, then the most hated man in politics, took the heat for what was a courageous vote. But courage crumbled in the face of a newly elected governor who benefited from the other tax hikes Dukakis helped to engineer.

That's what happens when votes are placed ahead of the common wealth. It's more important than ever to do the right thing, not the politically expedient thing.

Why don't I believe that will happen?

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Blogger dan bosley said...

Two comments: First, tax legislation is incredibly arcane and complex. It is hard to have a real discussion in the budget debates, especially when faced with incredible budget declines forcing people to look for revenues at any cost for this year's budget. We need to think of how this impacts us five or ten years down the road also. That is not always possible in the heat of the budget debate.

That said, Bob DeLeo has been given an impossible task and has to face this now or else put off the budget deliberations and that is not possible.

Budget debates are often a reflection of what people hear back home from their constituents. The buzz back home is that we shouldn't raise the income tax and I think that, given the ballot questions on repealing income tax increases in the past, that leaves sales tax as the most practical solution for many. However, my choice would be income tax, if we have a consensus to raise taxes at all. As you know I like to run the numbers. Here you are: A 2 cent increase in sales tax raises $1.45 b and costs the taxpayer on average $230/capita/yr. It is flat and whether you are at minimum wage or make millions, you pay the same tax when it is applicable.
If you were to raise the income tax to 5.9%, you would raise the same $1.45b and it would cost the average taxpayer $185/capita/yr. Not only would it be less, but it is progressive and doesn't send people over the border to New Hampshire or to the internet.

That said, let me add a third point: people emailing the
house are asking for a revenue increase so that their programs can be put back or level funded. If we were to do either of these taxes, we are only replacing about a third of the cuts, and when the Senate gets the budget, they may have to cut close to a billion more than the House budget in order to reflect accurate new revenue projects. these keep falling and we need to adjust for the reality of the economy.

April 24, 2009 10:39 AM  
Blogger Outraged Liberal said...

Thanks for the comments. I do appreciate the difficulty of balancing calls for programs with calls against taxes.

I would love it -- on those rare occasions when TV covers tax issues -- they challenge everyone who says we pay too much in taxes by asking them what they would give up to avoid new ones. That would be must-see TV.

April 25, 2009 10:20 AM  

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