When did badly imitating existing state law become innovative? And when did taking a tax cut away from working families become a mark of fiscal sobriety?
If you read the daily papers and watch the TV ads, you might believe that Chris Gabrieli has invented a thoughtful way to gradually cut the income tax as state revenues grow. In truth, his tax plan is a lot worse than current state law, because it will end the implementation of a tax cut that benefits working families. If his plan becomes law next year, working families will lose their tax cut in order to give an immediate cut to upper income families.
Gabrieli’s gimmick, which uses one hundred percent of the growth in state revenues, would end a phased-in growth in the personal exemption enacted by the legislature in 2002. So working families will not get their tax cut but the rate reduction, most of which goes to households higher up the income ladder, will move forward.
Deval Patrick briefly mentioned the flaw in the Gabrieli plan when he talked about “Chapter 186” at the end of the Ch. 4 debate on September 13, but only legislators like me, or hard-core tax wonks, would catch the reference. It was good to hear that at least one of the three candidates actually understands that Gabrieli’s plan is bad for working families (full disclosure: I support Deval in this race).
A little history is needed here. The legislature in 2002 delayed the implementation of two tax cuts. The first cut was an expansion of the personal exemption championed by former Senate President Tom Birmingham in 1998. It was one of the most progressive ways possible to cut the income tax, giving equal sized cuts to working families and millionaires. The second cut was the rate reduction that passed by ballot initiative later the same year. Rate reductions give greater benefits to wealthier households.
When the economic meltdown occurred in 2001-2002, the legislature froze implementation of both cuts. It created trigger mechanisms based on the growth in state revenue for the two, first increasing the personal exemption and then gradually reducing the income tax rate. Massachusetts taxpayers have received the benefits of an increase in the personal exemption for each of the past two years and if revenues keep coming in at the current rate, we will get another increase next year and the year after as state revenues grow.
Once the exemption reaches the maximum level voted by the legislature, future growth in state revenues will trigger income tax rate reductions until the rate is 5%.
Gabrieli wants us to believe he is the Goldilocks in this election: “Reilly’s tax cut is too big; Deval’s is too smal; mine is just right.” It seems instead he is Pinocchio. Deval supports the current law that phases in the income tax cut. Gabrieli, trying to be clever, would repeal one of the best pieces of legislative tax policy in the past decade.
Is it possible that Gabrieli does not know what the state law already is? Or is it just a gimmick to mislead the voters of Massachusetts?