So, there’s been a lot of outrage down here about some developments in the past couple of weeks. While the State Senate here was doing its debate on the budget, two crucial issues came up: freezing the corporate tax rate (excise) and increasing the sales tax by 25% to 6.25%. Let’s start with the first: apparently it was politically unacceptable for anyone to be raising excise taxes to make up for the state’s revenue deficits, so the best that could be managed was a sales tax freeze while sales tax increases were on the table. Simply said, the legislature was perfectly OK with raising the taxes of regular consumers, but when it came to companies, that was perfectly unacceptable.
But first, some background on the situation is warranted. Massachusetts is bound by its Constitution (specifically Article XLIV under the Articles of Amendment) to keep a flat income tax for its citizens, currently 5.3%. The state finds ways to get around this, namely deductions such as the $4,400 personal exemption, no tax status for some people with low income, deductions for renters, the property tax circuit breaker for seniors,and the EITC (Earned Income Tax Credit) also for people with low income. All these help make the tax system more progressive because they proportionally affect people with low income less than others.
However, even with these “fixers”, taxes such as the sales tax and gas tax push Massachusetts taxes as a whole away from progressivity. For the distribution see this graph via the Massachusetts Budget and Policy Center. With the recession dominating the political discourse, spending cuts have been made, but more tax revenue is needed to keep the state government functioning. Thus, this should seem like a golden opportunity to fix the regressivity of the tax system.
With the votes by the Senate to protect the rich by voting down an excise tax freeze and to burden the people with a sales tax increase, this opportunity has been lost. The sales tax is extremely regressive (as you can see with another MBPC graph) and it is just another example of something politically expedient that hurts the common man. Nobody is even offering to touch the income tax or to make it more progressive, even though it would seem that that is a much more sensible choice here. Instead, we have a tax that on top of being regressive, continually raises less than expected revenue, which is why institutions like the MBTA are constantly underfunded.
So what’s a better approach? The simple approach would seem to outright create tax brackets in the income tax by amending the Massachusetts Constitution. The main problem with this approach, sadly, is the political impossibility of getting such an amendment through the legislature. It would have to pass the legislature twice and then go to a referendum to the voters, after which new rates have to be made, passed again, and sent to the Governor. This would take years after any situation could be addressed with short-term taxes, and that is only if everything goes perfectly politically. Not gunna happen.
However, there are ways to accomplish something very close through other approaches. First, increasing the personal income tax credit would eliminate the income tax for families it puts a real pressure on now. No tax exemption only applies to couples with $16,400 and under, and the threshold increases by a thousand dollars for each child. However, families of four who make $60,000, for example, are still put under a heavy load with the income tax. Eliminating their income tax would make the system more progressive, and its revenue shortfalls could be easily corrected with a higher flat tax rate. Another approach could be to extend the property tax circuit breakers to all people by making eligibility for the circuit breakers more lenient and removing the cap on its usage. This would also make the system more progressive, although it would require some spending cuts or tax increases to make up for the lost revenue. All of these ideas have been proposed by other people, but their voices have been lost in the overall debate.
Overall, this debate signifies the new battle lines between progressives and the Democratic Party. In these times of crisis, there is little temptation to turn to Republicans who simply propose balancing the federal budget nationwide to provide “stimulus” or cutting essential programs while also proposing irresponsible tax cuts. They are the ones who have driven Massachusetts to the deficits that have made this recession even worse for those in the state. The new battle lines are between those of us who favor a progressive approach to taxes and increased revenue and those in the Democratic Party who would prefer doing something politically easy like increasing the sales tax instead of tinkering with the progressive income tax or making tough reforms on corruption, transportation, and pensions. This isn’t just limited to wonkish state stuff like this though. These are the same battle lines that we are seeing in the debates over issues like rendition, Gitmo, and healthcare reform. Progressives must have the ability to constantly hammer down the urges of capitulation and moderation inside the party if we are to take full advantage of the majorities we have.
UPDATE: Here’s a step forward, but it’s not a leap…Legislation here
BTW, any help here would be great…I don’t know as much as most people here do about the MBTA troubles and the mayoral race and the Globe agreements, but I’m in the process of learning here. It’s been a great process so far, and I look forward to more of the same.
“It would have to pass the legislature twice…”
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p>”Pass” in this case actually only requires 25% of a joint session, thus 50 members in any combination of Representatives and Senators. It shouldn’t be too difficult in this state to find 50 who feel politically secure enough to vote to at least move the process forward.
The 25% rule is for initiative petitions (i.e. those initiated by citizens via a signature drive). Amendments initiated by legislators (“legislative amendments”) require 50%+1 in both votes.
think is even slightly wrong I will fix…I think it’s kind of important that people realize that liberal stuff doesn’t pass through without a fight in a blue state like ours. We can’t afford to have people thinking that reform goes through an echo chamber in Massachusetts…On the completely selfish side, this diary at Kos apparently caught the wrong time to be posted. Only comment there is my automatically generated tip jar. Guess you can’t win them all…
I can’t see a constitutional amendment for a progressive income tax ever passing in this state. The electorate is far more conservative on tax issues than the bloggers here.
Your idea of raising personal exemptions on lower income earners and raising the flat income tax rate can be done. However, the careerists in the legislature would have to be dragged kicking and screaming to pass it. They still have nightmares about the Duke’s tax increase 20 years ago. Heaven forbid it might spur a anti-tax revolt and someone might run a real campaign against them and they might succeed and there goes the pension!
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p>Question? Why did a income tax increase fail to gain traction in either the House or Senate?
“The electorate is far more conservative on tax issues than the bloggers here. “
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p>A savvy education campaign could correct that, and now is the best opportunity that’s appeared in a long time. The Republicans are at a historic low in influence, the economy is in everyone’s thoughts, and the legislators have to be feeling at least a little vulnerable after the recent string of scandals.
Welcome to BMG and thanks for your substantive post.
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p>We need to launch a pro-income tax campaign for the fall and spring. Let’s raise the rate to 5.95 or 6.3 percent.
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p>Bobby Haynes (Mass. AFL-CIO) was cheered vigorously by Democrats from around the state when he called for this tax increase in his rousing speech to delegates at the Mass. Democratic Convention earlier this month.
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p>The big question remains….Will the union leadership actually DO ANYTHING to help make this progressive vision a reality?
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p>If you are a union member, call on your union leadership to get behind Bobby Haynes’s call for an income tax increase.
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p>Let’s start laying the groundwork for a real campaign.
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p>–Leo
a graduated income tax. You seem to be talking about an increase in the flat tax. I do not endorse that as being as good as a graduated tax.
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p>Thanks for the welcome, though. It’s always nice when someone notices you’ve entered a room. Even if it’s a year later.
The current tax on the table is a 25% increase in the sales tax — the most REGRESSIVE tax proposal I’ve heard in years. Yet it was the only alternative the lege seriously considered.
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p>An increase in the flat income tax is surely far more progressive than this, is actually possible (because it requires no constitutional amendments), and could become law if the lege were pressured sufficiently by voters (including progressives like us).
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p>It seems to me that this is wrong time to push for a graduated tax. Even if successful, such a movement can’t bring results in time to avoid serious fiscal calamity for government in MA — and I think it’s even less likely to succeed than the already-risky contemplated flat-tax increase.
Raise the flat tax now, and begin the amendment process to implement a graduated tax to replace it. If you’re right, then your only-somewhat-regressive tax is in place. If you’re wrong, something better is achieved. If not now, when?
My fundamental problem is that a graduated income tax will never work as intended, because at the higher end of the distribution, “income” is essentially arbitrary.
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p>The issue is the distinction between “income” and “wealth”. An important threshold is crossed when income from accumulated wealth exceeds consumption. Once that happens, any further “income” is readily manipulated by the taxpayer to accomplish whatever the taxpayer chooses. Goods and services that lower-wealth individuals depend on wages and salaries to fund can be purchased by high-wealth individuals using short-term loans (secured by their portfolio) and similar mechanisms — all of which do not require “income” and therefore evade income taxes altogether. A “loan” secured by an equity portfolio can be liquidated as soon as the portfolio climbs a point or two without forcing anything to be bought or sold and therefore without any tax consequences.
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p>The only people subject to income taxes, therefore, are people who rely wages and salary — and that, by construction, tends to exclude the very wealthy.
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p>In fact, the effect of a steeply-graduated income tax is to raise the barrier for crossing that threshold. The effect is to make it harder, not easier, for successful individuals to join the ranks of the truly wealthy.
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p>I thus suggest that the alternatives are to either tax wealth or consumption. The former is done using the estate tax. The regressive nature of the latter can be addressed using a direct constant subsidy to the bottom one or two quintiles (or to everyone, relying on the fact that the subsidy is valuable to the lowest two quintiles and relatively less important to the others).
“A “loan” secured by an equity portfolio can be liquidated as soon as the portfolio climbs a point or two without forcing anything to be bought or sold and therefore without any tax consequences. “
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p>I don’t see any income involved in that, so it seems irrelevant to a discussion of income tax. I would also point to the effect of Bush’s massive reduction in upper-income taxes on federal revenues as evidence that your “exclusion of the very wealthy” from income taxes is not real.
Once a person’s wealth has accumulated sufficiently, “income” — as taxed by an income tax — is no longer needed, and becomes one more quantity manipulated arbitrarily by money-managers on the behalf of the individual.
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p>The premise of a graduated income tax is that it will target the truly wealthy. The fatal flaw in that premise is that the truly wealthy don’t HAVE (taxable) income and don’t need it. Increasing marginal tax rates will only shift the way the top 5% handle their wealth, and simultaneously block those with high incomes from becoming wealthy.
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p>I fear you confuse income and wealth. It is instructive to explore the wealth distribution of the US population (as opposed to the income distribution). The information is surprisingly hard to come by (but see this example). From this link, the top 1% of the US population accounted for an astounding 34.3% of the US net worth and 42.2% of nonhome wealth in 2004. The top five percent accounted for 58.9% of US net worth, and 68.9% of nonhome wealth. That’s two thirds of the nation’s wealth in the hands of one twentieth of its population.
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p>By comparison, the same top 5% held a substantially smaller 35.2% share of the nation’s income. According to wikipedia, this group paid 38.5% of the federal tax burden, including social security. This appears, to my eye, to approximately representative of their income share.
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p>The point here is that neither the income nor the tax share of the top five percent reflect the extraordinary concentration of wealth in this same top five percent. The magnitude of this distribution is masked by federal tables that, for example, show the top quintile and label it “net worth above 500,000”.
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p>The truly interesting graph is household nonhome net worth on the horizontal axis and number of households holding that net worth on the vertical. You’ll find that this truly is a long tail — an astounding 68.9% under the very rightmost tail (a tail that asymptotically approaches the horizontal axis, and therefore must be REALLY long).
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p> * Pro sports players make millions in salary.
* Top execs make their salary in wages, stock options, and dividends.
* Trust funders make their income from their trust, and while there are some tax free investment vehicles, oftentimes just paying taxes on the gains results in options with higher net results than just sticking it all in tax free bonds… and that means taxes are being paid.
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p>Are games played? Sure. But this suggestion that the very wealthy pay no income tax is crazy… their assets generate income and tax gets paid. Raising the marginal rates on the high end would almost certainly result in more taxes being paid on high-end income.
The data for wealth versus income for the topmost 5% of the population (by nonhome value, for example) is hard to find and tricky to analyze.
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p>For example, the increased value of stock is not taxed until it is sold. So an individual with a portfolio worth, say, $2.0B who sees that portfolio increase by, say, 10% over the course of a year or two sees an increase in wealth of $200M — all of it tax-free, since no taxable events occurred.
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p>The example of a pro sports player making “millions” (as in single-digit millions) sounds like cherry-picking to me. The fact that one lucky lottery winner gets $20M doesn’t make playing the lottery a viable investment strategy; we must instead look at the number of people who play the lottery and ask how they fare. Further, an individual making “millions” in income is still not wealthy if their expenses are even higher (see Michael Jackson).
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p>Top execs collect compensation — that’s totally different from “salary” — and the whole point of various deferred compensation packages is to avoid “income” and therefore income taxes. Stock options, for example, are not taxable until they are exercisable, and there are gazillions of ways to play with that (particularly when significant amounts of money are on the table).
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p>I think it would be more informative to look at the top 5% of the population by wealth share, and then look at the income they reported and paid taxes on. Then ask what would change if a graduated tax were to be applied — how much of that marginal “income” would simply disappear into other transactions if it were taxed at, say, 70% instead of 30%.
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p>You wrote (emphasis mine):
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p>No doubt.
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p>The question remains, though, whether raising the marginal income tax rates on the high-end would result in more taxes being paid by the topmost 5% of the US population, by wealth. I suggest that a more immediate effect of raising marginal rates on the high end would be to simply reduce the amount of high-end income reported and thus taxed.
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p>I don’t think you’ve yet made the case that your scenario is any more likely than mine.
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p>But all of it use-free, since stock wealth can’t be spent easily. Sure, it can be used for loans, but you can’t get a loan for anything near the value in wealth (due to risk) and you pay extra in the form of interest (which sure is tax deductible but the deduction isn’t the size of the interest payment). Of course, when you later sell the stock and realize the wealth gain, you pay the taxes and you’ve already paid interest on the loan. So, I’m not sure I understand the relevance of harping on gains “on paper” like stock portfolio, since unrealized gains don’t buy much.
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p>True, but if we’re taxing income, the revenue comes in before it’s been otherwise spent. And by “pro sports player” I simply point out that there are industries where people make $1MM+ in the form of salary. It isn’t just pro sports players, but it certainly includes them. What percent of people who make $1MM+ a year in taxable wages are pro sports players? Dunno.
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p>No it isn’t. The “whole point” is to align the exec’s interests with the company’s interests — you make more if the stock price goes up. It’s true that many options have become more like golden parachutes, but even still — a stock option on paper isn’t worth much. Exercise the option, and you pay the tax. That’s not to say there aren’t loopholes, but this idea that those folks don’t pay taxes is crazy talk. I know about three or four people who have exercised large stock options (mostly dot commers). All payed more in taxes on that one option than I make in 5-10 years.
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p>Fair enough. Let’s play this game: we raise the marginal rate on income tax at the high end. There are two effects:
1. Those who were paying at, say, 30% now pay at 35%. Same base, higher rate. Tax revenue increases.
2. Those who were paying at, say, 30% now pay on substantially less income at 35%, resulting in the product being worth less than prior.
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p>Now, here’s the thing: those in category (2) are doing it in one of two ways: (a) legally through taxation or finance schemes… why weren’t they doing it before? Remember, we’re talking about 5% of $1MM+: $50,000 minimum. If it were legal before, they’d already be doing it. (b) illegally through blatant fraud. Sure, there’ll be some of that, but I contend that there won’t be much because, after all, it’s not worth going to jail over 5% of income for lots of people, even if it is a Martha Stewart jail.
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p>So, my contention is this: there will be some of (b), but not very much. There’ll be almost none of (a) because if it’s worth playing legal games to hide the income at 35%, it’s worth it at 30%. Therefore, there will be plenty of folks who will neither do (a) any more than they already are, or will do (b) because they’re honest or fear jail. In either case, that means tax base goes up, no?
BrooklineTom –
Well put. But, wealth at tax time is not wealth over the course of a year. In the simplest example, if two people make $500,000 a year, and one spends $200,000 and saves the rest, and one spends $400,000 and saves $100,000, the second person shouldn’t have a lower tax burden just because he or she bought a couple extra yachts.
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p>Stomv –
In principle, on what basis do you think the tax burden should be distributed? Is there some virtue in taxing wealth at the moment of transition to an individual? Taxing wealth in the aggregate seems to get at the core of what income tax proponents generally cite as their motive – shifting the tax burden to those most able to pay it. Even if income is a comparatively great proxy for that, why tax the proxy when you could just tax people according to a direct measure of what they can pay?
It’s your “category 2” people that this approach tends to miss. Also, those in your category 1 will migrate into category 2 as soon as possible.
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p>I agree that your 2-b (those who commit fraud) is negligible for the purposes of this discussion.
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p>Regarding your 2-a, the high-wealth people that I’ve worked with view it as a balance between their desire to minimize taxes and their desire to be “good citizens” (noblisse oblige and all that). In essence, they decide how much they are willing to pay, and instruct their portfolio managers to adjust their holdings accordingly.
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p>Let me offer two concrete examples from the late eighties (I don’t think the relevant tax laws have changed significantly since then, and if so have changed to make such adjustments easier rather than harder):
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p>1) “Chas Champagne” (the antithesis of Joe Sixpack) decides that he wants to acquire a new vacation home in Hawaii, a steal at $1.2M. Chas has a portfolio valued at $250M, well-balanced between equity, bonds, and indexes. Chas pays for the new house with a margin loan of $1.2M. No tax event yet. At less than 1% of his net worth, it’s a low-risk loan. The house now belongs to him, and he owns it outright. Being a low-risk guy, Chas then takes out a $1M mortgage on his home. Still no tax event, except that now he has mortgage interest deductions available. His margin loan is now an insignificant $200K, he owns the home, and has a new source of deductions. With any luck, his home will begin to appreciate and he has a new source of wealth increase — again, not taxable until he sells.
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p>2) Chas’s brother Biff, who happens to not only be wealthy but also enjoys flying jets (he acquired the necessary licenses from the FAA in his spare time), decides he wants to buy a jet. In this case, Biff also happens to be the CEO of a major corporation. Biff arranges for the corporation to buy the aircraft manufacturer (yes, this actually happened), and then arranges for a shiny new jet to be available to his company whenever he wants it. Along the way, he creates a subsidiary to operate the jet so that it can be leased when Biff isn’t using it. None of the expenses of acquiring the jet appear in Biff’s tax returns, neither Biff nor his companies have any increased tax exposure (if anything, their exposure is decreased) if the company bean-counters do their jobs right, and Jeff gets to fly the new jet whenever he likes (always for legitimate business purposes, of course).
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p>These are two examples of how the truly wealthy — remember that we’re talking about the top 5% of the population by wealth share — use their wealth.
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p>The real-life examples from which I drew “Chas” and “Biff” are dedicated true-blue Democrats who give generously of time and money for Democratic causes, and feel a genuine desire to contribute their fair share.
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p>Neither Biff nor Charles is going to be significantly affected by any change to marginal income tax rates, unless they choose to pay more.
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p>That’s why I don’t think a graduated tax is going to force a significant shift in the tax burden of the very wealthy.
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p>Instead, I suggest that a more realistic way is through the operation of the free (or almost free) market itself. Both Chas and Biff are significantly affected by changes in fundamental market dynamics, so that their fundamental wealth itself is, over time, moved away from them and into the long-tail of emerging new companies and industries.
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p>We are seeing this in the newspaper industry — witness the changes happening to Sulzberger family (owners of the NYTimes).
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p>We should also remember that the population we are talking about has the ability to restructure their assets to take advantage of the various tax laws of their entire world. In my view, it is a serious mistake to place too much reliance on policy decisions made by a particular government or political affiliation — no matter how sympathetic we are to that government or its politics.
Big difference between taxation on earnings (w-2, K-1, Sch C) and dividends.
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p>Maybe more taxes per individual who didn’t respond to higher taxes; but reality is that people respond after a fashion ion their economic self interest. Ever wonder why Greenwich CT became the hedge fund capital of the world, with NYC right next door? Not a matter of politics, just the fact that people act in their economic self interests. Certainly on a state level you’d see enough shifting that end result is uncertain. But I’ll guarantee you that you’ll be disappointed in the revenue results if all you did was take current data and adjust the current v. proposed percentages to figure out how much you’d gain.
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p>This has nothing to do with political ideology; but you have to realize that higher end earners for the most part will act to maximize their earnings (or if they don’t know how, will hire those who can point out the way).
Raising the income tax goes after the working “wealthy” who aren’t able to (legally) take advantage of what our tax laws provide. If you want to pin your revenue entirely on high wage earners who work for large corporations, go ahead. But think that you might find that many of your intended targets can adapt to whatever you throw at them if they’re small or have ownership interests.
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p>There are many ways legitimately (if you’re small enough) to manage taxation. Relying entirely on nailing the rich doesn’t work; just look at CA right now for further proof. For the most part, state income taxes in CA are trivial for most due to “progressivity”. They’re hammered now because of an overreliance on taxing high income earners. Legitimate argument could be made that such a “progressive” move could essentially put the state on essentially relying on the equivalent of capital gains taxes, which many sober minds are realizing isn’t exactly the most stable tax base.
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p>Also consider (and I hate to keep harping on this point but it can’t be raised often enough) we are a truly puny state geographically. Not alot of heavy industry generating the wealth here; push to hard and Nashua and Smithfield RI look pretty enticing. It’s not like we’re making this debate in Butte Montana here.
Note that in California, there’s significant movement now away from the progressive income tax because of the damage it has done via the state’s resulting reliance on high-end wealth which dropped in ’08.
Massachusetts relied on its relatively higher rate on capital gains to make the budget work, until it went kaput. However, upper-end income is more reliable than capital gains as a tax source. The problem wasn’t the tax policy, but idiots cutting taxes willy-nilly without thought about the volatility of revenue sources.
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p>The problem where? Massachusetts or California? Because, both states seem to have kept pace pretty well in the tax raising business. But agree on the volatility of revenue sources point. I think that point is the principal reason for Califonia’s movement to return to flatter taxation.
I view this as a “two-step” campaign.
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p>First, raise the rate. This fiscal year. We need the revenue now, and our flat icome tax (thanks to personal exemptions)is still one of the most progressive options available to legislators at this time.
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p>Second, and while doing this, launch a multi-year campaign to win the fight at the ballot box for a graduated income tax.
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p>A winning campaign will require multi-year grassroots ORGANIZING (of the type that Mass. Equality taught us is possible) as well as real financial resources (like MTA put into last year’s defensive No On ONE campaign) adequate for a winning end-game media strategy.
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p>–Leo
why you think raising the income tax is better than raising the sales tax. An income tax increase comes out of your paycheck no matter what. You can avoid a sales tax by simply not spending money. So it leaves the consumer/citizen in more control over how much of the tax they want to pay, simply by modifying their spending habits.
You can go ahead and now state that people will spend less and therefore the economy will nosedive, but I don’t believe that, the middle class is already not spending money on unnecessary products. An income tax increase on the middle class is a bad idea.
the graph of “Distribution of Personal Income Dedicated to State Sales Tax in Massachusetts, 2006” already cited in the thread starter.
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p>The steep and pronounced peak at the left demonstrates how regressive the sales tax actually is (as measured).
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p>In particular, I invite you to compare it with the accompanying graph “Distribution of Personal Income Dedicated to State and Local Taxes in Massachusetts, 2006“, also already cited in the thread-starter.
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p>The latter graph (showing total taxes) is flat in the same region where the former graph slopes dramatically downward.
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p>The contrast between the two demonstrates that the sales tax is regressive. Period. The (flat) income tax is relatively constant, especially in comparison to the sales tax, for the first three or four quintiles.
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p>There is no way to avoid raising taxes on all classes, including the middle class. Surely raising the taxes disproportionally on the lower classes is even worse than spreading the pain across the board.
sometime statistics and graphs are amazing things but they do not always tell the true story.
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p>The sales tax data shows that IF someone spends X dollars on something they will pay this percentage of their income in sales tax. It does not say that if they don’t spend X dollars, then the percentage does not apply.
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p>I don’t care how relatively constant the state income tax graph appears, it shows that the middle class pays more, and will pay even more if the income tax is raised. There will be no choice to pay it or not, it will be taken right out of paychecks, no matter how much a person is trying to save money and spend less.
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p>Raising the income tax on the middle class is a bad idea.
These show how Massachusetts residents were actually taxed. Not “if” anything; these are graphs of where tax revenue actually came from in 2006. Where do either of these show that the middle class pays more?
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p>None of these is a “state income tax”. The second one shows total taxes, from all sources, as a percentage of personal income. It shows that the overall tax rate was approximately constant for the lower four quintiles.
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p>The point of comparing the two is to demonstrate that the sales tax, which our “true-blue” lege has passed, is clearly and flagrantly regressive, far more so than overall tax picture and far more so than a personal income tax increase will be.
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p>It’s true that the middle quintile will pay a slightly higher rate under an increase in the personal income tax, because (constant) personal exemptions and deductions are a higher percentage of income in the lowest quintile. In my view, that is how it should be — that is, after all, the definition of “progressive”.
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p>If you agree that additional tax revenue is needed, then you seem to be saying that this increase should fall disproportionally more on the lower classes. If this is what you mean, then I beg to disagree with you.
Would you please save all of your receipts and invoices for purchases throughout the year, total the sales tax you paid, and then find the percentage of your gross income it was. Let me know how it turns out for you, OK?
The voters showed they were much more intelligent on this issue than you give them credit for during the Patrick campaign, rejecting Kerry Healey’s claims and buying Patrick’s (true) ones. This was reconfirmed when the voters, by a gigantic margin, rejected the income tax referendum last November.People would be amenable to changing the tax system. The days of Carla Howell scaring the bejesus out of everyone is over.
Rejecting the tax referendum last fall was a no brainer. In my Town both democrat and republican elected officials proclaimed what would happen to services if it had passed. As far as Kerry Healey she was a flawed candidate who got some awful advice. Carla Howell and Christy Mihos should both crawl back into their holes and let reponsible adults carry on the tax debate.
It depends on what you mean by “progressive” as to whether or not it’s a “progressive tax.” It’s not progressive insofar as it taxes people at higher rates the more income they earn. However, it is progressive in terms of the fact that it fits right in with movement progressive policy. Global Warming is killing the earth’s ability to sustain animal life (including human kind) — and raising the gas tax is one of the best means of reversing that. Now, raising that revenue means the revenue must be spent wisely: A gigantic proportion of it should be given to the public transportation system, which would be a huge boon to those who can least afford to buy a car and pay for its costs.
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p>Usually, lefty, progressive policy is highly in sync with taxes that rise disproportionately based on income, but there are policy reasons why there are sometimes reasons to buck that trend. The environment is one such example — getting people off gas and into public transportation is a policy goal this state and country must employ. Raising the gas tax is the best means to achieve that. Progressives would want to ensure that the policy best serves those who can least afford the tax — and that’s why the funds we earn from the gas tax should go toward public transportation.
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p>—
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p>As for everything else you say, I think some of your proposals border on outright dangerous — whilst your claim that changing the constitution to insert tax brackets is “not gunna happen” is neither helpful nor actually true. Just these past two years, a lot of things that were “not gunna happen” just happened. Times have changed in the 15-20 years since we last tried to amend the constitution to make taxes fair.
I will agree with you that an increase in the gas tax is justified, for many of the reasons you listed. In the Rt495 belt there is much anger at Mass Pike tolls and gas taxes. I wished I lived in Newton and could jump on the Green Line to go to work, but I don’t. I have to drive, it is too long to walk! Investment in public transportation in the western burbs will take years and billions of dollars to be workable, if it can be proved to be workable at all. I’ll be retired (I hope) by the time it happens.
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p>I’ll ask the question again, why did not the Great and General Court try for a income tax hike rather than the rergressive sales tax?
Small correction:
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p>Senators Jamie Eldridge and Sonia Chang Diaz did offer an income tax option and wrote a great column in the Boston Globe, May 17: http://www.boston.com/bostongl…
Sens. Eldridge & Diaz did do that, but I do not remember any one else in the Senate even discussing the prospect. I’ll ask the question once more, why did the Legislature not even discuss raising the income tax in lieu of raising the sales tax?
Senator Chang-Diaz bravely offered an increase in the income tax as an amendment to the Senate version of the budget. It was defeared 28-11. In favor? Eldridridge and Diaz. And Senators Berry, Donnelly, Fargo, Jehlen, McGee, Menard, Pacheco, Rosenberg and Toman. Granted, not much “discussion” but more than 25% of the Senate actually voted in favor of raising the income tax.
but I fear the progressive income tax will not be a near term solution, if ever.
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p>Maybe we need a different approach, built around the concept of the greater exemptions from a higher rate income tax as suggested.
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p>But the income tax is only one factor in driving the curves of effective tax rate. Let’s do the same for the others.
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p>Provide an exemption for real estate values – like the first $100K is exempt. The higher tax rate needed to have a net zero change would shift the burden to high asset properties.
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p>Increase the gas tax, but provide a base usage tax credit on the personal income tax to mitigate the penalty for low usage consumption. And if the sales tax is increased, provide a similar tax credit. In both of the latter cases it may be a net cost increase to the citizens (revenue increase to the Commonwealth), but done so to make the effective tax rate a little bit progressive instead of the regressive trend that currently exists.
Another option would be to provide our local cities and Towns with the authority to authorize the state to collect up to say 2% of the local communities’ income on the State tax return by Town vote. The income tax is at least somewhat progressive even if it is flat. The property tax is highly regressive and to the extent it can be shifted to an income tax would make our overall taxation much more progressive.
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p> This would provide significant local revenue for schools and local services and avoid the risk of sending tax dollars to Beacon hill. It would relieve the state from a significant amount of pressure to fund local services, and would reduce the excess reliance on property tax. It would also make local taxation more progressive.
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p>In our local community, 20% of our seniors currently pay real estate tax representing about 20% of their income. This is wrong. Unfortunately the state says we have no choice but to tax them out of town if we want to fund our schools. If we could tax 2% of our local income, we could cut the property tax in half, and significantly improve this situation.
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p>I think focusing on a local right to have income taxes collected would do more and be more likely to get approved politically. Do the math in your own community.
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p>Bruce Leicher
Why should the towns be limited at all as to what taxes they can levy, anyway, as a matter of principal.
The problem is our State Constitution. It gives the Legislature sole taxing authority and the legislature delegates taxing authority as it pleases. Always wonder if the legislature has a vested interest in controlling the purse strings?
shouldn’t you be using this chart…
instead of this one.
There is no clear definition of what the middle class is. If you want to raise the income tax but only ease the burden for those making $60,000/yr or less, I would say you are asking the middle class to take the burden of a tax increase. Using the chart above, It seems fair to say the 4th 20% should be considered the middle class, and therefore, exemptions should be extended to that group as well to ease the burden of a tax increase and help to make the income tax a more progressive tax. Until the exemptions for the middle class are considered in an income tax increase proposal, I will continue to stand by my belief that the sales tax is a better way to raise revenue without putting the middle class into the ground.
because my computer was turned inside out by trojans and other viruses for a full week, but I just wanted to thank all the people who have been contributing to the debate about taxes both in this comment section and across BMG for a long time now. Never thought this would be front-page stuff, but much more important than this post is the overall goal of having a progressive income tax.
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p>Responding to some of the comments, I have a few quick points:
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p>1. When I said the gas tax was regressive, I did not imply that I did not support an increase. It would be pretty simple to make such a measure revenue neutral and use the money to cut taxes on something progressive. A “net-zero” plan makes a lot of sense. Taken to the extreme, such a system would probably become more regressive than otherwise, but it is implementable.
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p>2. Um, wealthy people have “income” other than stocks that can be gauged. Besides, I think MA taxes non-paper income higher (something like 10%).
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p>3. Yeah, I wish getting a constitutional amendment through was easy too. But the people we have right now are just SO comfortable in their seats and can’t stand being elected with 68% of the vote instead of 76%. But when I said “nobody” in my post, that was more of a rhetorical flourish than an actual statement.
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p>What does that mean?
also have the ability to stay another month in Palm Beach to get to the 6 month threshold, wherein your 10% goes to 0% since they’re no longer residents. It happens.