It’s a simple idea. On your state income tax, simply record your city or town of residence, and your 0.25% local income tax is sent directly to city or town hall. If you live out of state, and you pay income taxes because you work in Massachusetts, your 0.25% goes to the transportation trust fund. Given the estimates of income tax revenues that floated around the Commonwealth at the time of the income tax repeal ballot question ($11 billion), this would generate over $500 million in revenues for cities, towns, and transportation.
The local income tax, combined with a 2% local meals tax, should take lots of pressure off of property taxes. We will be able to adequately fund schools and local services.
Please share widely!
But I am not sure how much income that raises, and whether it is “flat” or “progressive”.
Exclusionary zoning? No restaurants? No Dunkin’ Donuts? No meals tax for you!
Why not? More, more, more!
We are not raising enough revenue to maintain local services. We need to find a way to pay for local services (police, fire, schools) or sit back and watch our communities deteriorate.
… ignoring the revenue side of the debt equation on the advice of Mr. Laffer has gotten us in more trouble. Rethinking this idiocy is the necessary first thought in order for our fiscal brains to tell our policy hands with the ‘tax cuts for the wealthy’ shovel to stop digging.
Part of the solution may or may not be raising taxes, but I believe there is very little appetite for raising taxes (and rightfully so) until we deal with the fundamental problems we have.
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p>1. Health Care Costs
2. Pension Reform
3. Budget and tax policy that seems to send us scrambling for new revenue sources every 5 years
4. Corruption
5. Inefficiency (and have it taken seriously even when times are good!)
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p>Raising taxes is only a temporary solution that will require future additional taxes after we again fall behind because we didn’t solve our fundamental problems. The same reason adding casinos wasn’t going to solve it.
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p>2. Pension Reform is a good idea, depending on what is meant by it. But it won’t provide enough revenue by itself.
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p>3. Identifying new revenue sources is the way to avoid new crises every few years.
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p>4 and 5. Corruption and inefficiency will always be problems and should always be fought against. Where have those problems been solved?
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p>However I agree that the more politicians make it clear they are working on these issues, the more likely they are to get support for new revenue sources.
Given the economically segregated state of housing in this state, with “wealthy” towns and “poor” cities, won’t such a tax simply make the rich richer? It would seem to trend the same way the property tax does — not many poor people living in Dover, not many rich people living in Lawrence. It would also provide even less incentive for communities to build housing for average people — they will chase the superstars even more.
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p>How about a compromise — add both this scheme and a small dedicated sales tax to the community in which the sale takes place. That would balance things out some more — not much retail in Dover, that is in larger, more permissive communities.
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p>How about putting even more options on the table? I think the way to reduce reliance on the property tax is to make more options available to communities. Allow each city/town the flexibility to tax to their strength. When that happens, there will be little need for redistributive state aid. If people are scared about being taxed out of existence, either put in a limiting factor or make a community’s tax plan approvable by the state.
The rich are rich, but Proposition 2.5 limits the ability of municipalities to access that wealth. However, the local aid formulas distribute state money based on the wealth of the community.
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p>The sales tax is regressive, but the meals tax is a luxury item and NH taxes meals at 8%. If we raise the meals tax, that helps cities and towns with restaurants.
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p>Traditional local aid will continue to help communities that lack a tax base.
The problem with “local aid” is that it tends to get cut or frozen quite a bit, so a city depending on it isn’t really that good of a thing.
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p>In Springfield, the projection is that there will be a 10% cut in non-school local aid this year alone, and maybe a 20% reduction next year. Since this local aid funds maybe (I’m guessing) 50% of non-school expenses, that means there will be a 5% reduction in revenue for those expenses, meaning that there will be a 5% cut.
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p>In a town where local aid funds 5% of non-school expenses (because there is more money coming in from local revenue), those communities will face a 0.5% cut with a 10% cut in state aid.
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p>That is why the town manager of Longmeadow basically shrugged off any local aid reduction — most of their money comes from property taxes, so the cut isn’t going to affect them. More people will choose to live in Longmeadow, since services there will be stable. And the cycle will continue.
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p>There is the secondary problem of being treated the way most people treat welfare recipients. People point to poor communities and say “hey, they get a lot of local aid, they shouldn’t have free trash pickup”, the same way someone points at a welfare recipient and says “hey, they’re on welfare, they shouldn’t have a big-screen TV”.
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p>More local options are the way to go, in my opinion. The only reason Springfield is “poor” is that the revenue is based on the property tax. If the state changed the rules so that the revenue would be based only on sales tax, a lot of formerly “wealthy” communities would find themselves suddenly “poor”.
I don’t think Springfield or Lawrence would have very many local options that would raise much revenue.