First a little background. Article 44 of the Massachusetts state constitution states that the same class of income must be taxed at the same rate, creating a Steve Forbes utopia right here in “Taxachusetts.” A constitutional amendment allowing for a graduated income tax first appeared as a ballot question in 1962, where it met with defeat. Proponents of a progressive tax structure tried again in 1968, 1972, and yet again in 1976, but failed each time.
In 1994, Massachusetts voters were presented with two questions on the ballot dealing with the state income tax. The first was a constitutional amendment creating a graduated income tax, while the second contained the specifics for the graduated income tax plan. Both questions failed to garner support from even 30 percent of voters.
Is there a reason for this that requires a longer period of residency than seven years in the commonwealth to understand it? Or did The Worst Argument in the History of Bad Arguments made by the Beacon Hill Institute in 1994 actually gain traction with voters? Did middle class folks in Massachusetts really say, “Gee, this would save me a lot of money, but what if I struck it rich down the road?”
Are people worried that this somehow would dissuade large companies from relocating here because their executives would be getting soaked on their state taxes? Our economic competition in California (9.3 percent on income over $41,477) and New York (6.85 percent on income over $500,000) don’t seem to be too worried about that. As a matter of fact, neither does trendy “New South” player North Carolina at (8.25 percent on income over $120,000). The Research Triangle seems to be doing just fine, thanks.
Are people concerned that our beleaguered wealthy would seek refuge across the border in a neighboring state? Rhode Island already has a progressive income tax (25 percent of federal tax liability) and New Hampshire is busy living free and/or dying. Besides, then they’re stuck commuting with the rest of the hoi polloi until work is finished on that helipad in the backyard.
Over the last few years, I’ve attempted to raise this issue with everyone from my state reps to the folks at CPPAX, and no one seems to have the slightest bit of interest in going down this road again. Perhaps someone who was around and following politics in 1994 (or better yet, the 60s and 70s as well) can shed some light on why we’re still stuck with a flat tax here and why no one is talking about changing that at all.
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By way of your comparison, Calif, NC and NY have progressive rates, but they also allow more deductions: taxes, mortgage interest, charitable. As result, without running some numbers, it’s hard to tell if the guy making $300K with a million dollar house would pay more in Calif, NY or MA. They may well be less progressive than the Mass flat tax.
Eschewing regressive deductions like mortgage interest can be progressive, but a flat tax can not be progressive, They are, after all, antonyms.
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Are you suggesting that if Massachusetts were to leap forward to the 20th century with a progressive income tax, this would in fact hurt the state in terms of luring companies?
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It seemed so implausible that I debated even raising that point in the original post, but there was such a dearth of arguments against a graduated state income tax that it was about the best I could come up with.
First, you’ve hit the nail on the head: a leap to progressive would be very 20th century. 21th? I’m not sure.
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Second, the Mass tax is kinda progressive already, with its circuit breaker and exemption, separate passive income rates and rent deduction.
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But third, Mass has a low rate and the system is relatively simple (could be better). Making it progressive seem much ado ’bout little and I could see it turn into a slippery slope of complexity, much the same as has happened in the snake-pit of a tax code called California: interest deductions, charitable deduction, tax deduction, waters edge election, alt min, voluntary credits. It just never ends, because each special interest group has its claws into advocating for their own special deduction.
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Here ya go: try this tax.
Out of curiousity, what percentage of the consumption tax pushers would you estimate belong to households with incomes of over $100,000 per year?
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And why do you think conservatives (read: the monied) are so enamored with the idea of a consumption tax?
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You’re going to have a hard time convincing me anything other than pure selfishness and cheapness is the driving force behind this (non) movement. People of wealth are simply looking for an opportunity to reduce their tax burden.
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If you’re interested in a non-biased examination of the consumption tax and its inherent problems, read this.
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P.S. I’m generally not one to tell people what to do with their lives — I try to leave that to conservatives — but I have to think there are more fulfulling things for you to do with your time than trying to spread the gospel of the consumption tax on a liberal blog. You might as well be selling Yankee merchandise at Fenway.
Hey, thanks for the advice but I’m no advocate for tax reform–flat, consumption or otherwise. Took me 25 years to learn the rules. Why change them? I just replied to you post because it looked lonely and no one else seemed interested.
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Me? It’s in my personal interest to create the most complex and progressive multi-rate tax scheme possible, repleat with deductions, credits and alternatives.
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I hate to break this to you, but if you’re pushing an idea by suggesting its appeal to others and providing them with links to organizations pushing the idea, by definition you’re an advocate for it.
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But yes, you’re onto us liberals. We enjoy nothing more than the thrill of giving away more of our hard-earned money to the government. And liberal politicians get off on seeing how much they can bring in in tax revenues. It’s actually a contest in lefty circles. They just love to amass huge amounts of cash so they can some up with new frivolous programs to spend it on. In fact, I believe Deval Patrick was in charge of money-wasting initiatives at Coca-Cola and Texaco, which is why so many of us are so inspired by his exciting money-wasting ideas.
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As for progressive taxes for states, I’ll leave it to you to explain how something that is the norm (33 of 50 states) is also “not even on the horizon.” I assume in your world wireless telephone service is also only a twinkle in the eye of some dreamer?
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Perhaps you can explain to us why — if it’s not in your professional interest to implement a consumption tax — you seem so enthralled with it? What’s your interest?
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Frankly, it’s just the right tax. A Consumption tax is, a tax that is not imposed on capital, but rather on consumption: you eat, own or buy it you pay a tax; you save and invest then you don’t. Eliminate the regressivity by allowing a minimmum consumption on which no tax is imposed.
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It’s the step beyond a pigovian tax, which I also endorse.
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There are so many advocates for spending, both in government and personally, and so few advocates for savings. I’m the latter.
It’s also within this line of reason, user fees by government should be endorsed.
A flat tax cannot be “kind of” progressive because it cannot be progressive at all! I progressive tax progressively increases with increases in income.
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I can deal with complexity, we didn’t seem to let such an argument stop us when landing a man on the moon so I don’t really see how it is much of an argument for making sure that we stop screwing the middle and lower classes. Flat taxes are a joke and a huge boon for the uber wealthy. But if you are looking for a simple system and a flat tax why don’t we just tax incomes of $100k or higher at 25%? That is simple and it is really flat. What do you think Gary?
Well, it is kinda progressive. I don’t know how else to explain it:
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And that’s without taking a rent deduction or a circuit breaker (elderly) credit. Those items tend to make the tax even more progressive.
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I’m not sure at which level the tax flattens to 5.3%, but even after than, there’s the 12% rate on passive income. The 12% is paid principally by higher middle class plus wealthy so that the more you make; the higher your rate.
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The more you make, the higher the rate: that’s kinda progressive. Maybe not progressive enough for you, but isn’t it kinda progressive?
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Something tells me the 25% is probably too high at the $100,000 breakpoint. But maybe 15% – 20%? I can’t answer your question, without looking at some statistics.
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FYI, right now the federal tax flattens out to around 35% at folks with taxable income of around $4.0 million.
how do you measure flattens out? I mean clearly it asymtotically approaches the max rate as income approaches infinite, but do you mean federal hits 35% at $4 million within a dollar? within a cent? or within just to 2 digit percentile accuracy (IE it goes over 34.5% at that point))
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just wondering how you’re defining it…
I just ran a few numbers on the computer and noticed that at $4 million the rate was 34.9 and that at $10 Million it was also 34.9.
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I guess it looks like an asymtotic curve, but, from what I know of the tax code, I would have guessed it would, at some point, actually hit 35%, flat.
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I believe the person who ran the 1994 Progressive Income Tax Ballot Campaign and who also founded the Tax Equity Alliance of Massachusetts (TEAM) around that same time which BTW has morphed into the Mass. Budget and Policy Center (who do really good important work) is none other than Jim Braude of current NECN and 96.9 FM fame.
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Another lead for a person to talk with about this important public policy/ social justice issue would be the co-chair of that ’94 ballot campaign, who I believe is the spouse of State Rep. Jim Marzilli (D-Arlington).
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Somervillain, thanks for raising this issue and for sparking informative commentary. After reading the comments I’m left pondering the question: Can’t taxes be both simple and fair? Which leads me to ponder this question: Can’t our healthcare system be both simple and fair? One common-sense approach would be to implement reforms for a simplified financing mechanism to guarantee affordable universal coverage for everyone? I guess these kinds of public policies rely on the concepts of fairness and equality actually carrying some weight with our political leaders.
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And that leads me to this final thought: Deval Patrick, please don’t let us down. We’re ready to work really really hard with you to make this state a much better place in which to live and thrive, to raise our families, and to enjoy our later years in life.
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Hope can sustain a people for only so long, and its been a really rough stretch these past few years. But you’ve got me and a lot of other folks believing “Together we can”.
…I believe it has been on the ballot a few times since the 60’s–and Jim Braude would know. After the ’94 defeat, I think it’s pretty much a dead issue in this state for at least another decade or so more.