[Crossposted from ONE Massachusetts]
The things that make Massachusetts a great place to live – good schools, clean water, safe streets – are only possible due to our shared, ongoing support. Unfortunately, a decade of tax cuts and subsequent years of declining revenue have left Massachusetts with a multi-billion dollar structural deficit – forcing our elected officials to make difficult decisions in order to balance our budget. The wellbeing of our communities depends on us. It is time to decide whether we want more cuts or more revenue!
On Yawu’s blog “Bad Breaks” NoPolitician rightfully said:
I think we owe it to the governor to, when people complain about cuts or taxes, to make them tell us what they would do instead. For example, if you don't like the candy/soda tax, then tell us what you would get rid of to save the $61.6 million that will be lost by eliminating it.
Based on NoPolitician comment I would like to share some talking points that the team at ONE Massachusetts put together that can be used when calling or meeting your state representative or state senator. These talking points are prospective revenue proposals that would promote a more adequate tax system in Massachusetts that minimize cuts and increase funding for our programs and public structures. We, as a community, can not afford to lose more funding for our programs. Urge your state representative and state senator to take a balanced approach to filling the budget gap by drawing on federal stimulus funds, wise use of rainy day funds, judicious cuts and closing costly tax loopholes.
REMEMBER TO SAY THANK YOU! It’s not all bad news – it is important that we take the time to thank our legislators for their support of the Sales Tax increase last year. Without the $750 million in revenue that it raised, there would have been even more cuts. Your friends and neighbors across the state also worked hard to defeat Question 1 in 2008, which would have cut the income tax and taken away 40 percent of the state’s revenue. We are already organizing a campaign and will work hard to defeat the ballot referendum on cutting the sales tax to 3 percent, since that would cost us $2.5 billion.
MAINTAIN YOUR BALANCE. We urge the legislature and the governor to take a balanced approach to filling the budget gap by drawing on federal stimulus funds, wise use of reserve funds (rainy day fund), judicious cuts and closing costly tax loopholes.
EVALUATE ALL OF YOUR OPTIONS. These are just some of the short-term revenue options that can help bring balance to our budget:
• Film Tax Credit: Repealing this credit can save as much as $150 million per year. [Governor Patrick's Proposal]
• Dividends and Interest: Restoration to a 12 percent rate would raise as much as $500 million a year. An exemption could be added for the first $5,000 of income – exempting middle-income folks.
• Life Sciences Tax Credits: Limiting this credit can earn Massachusetts $5 million per year. [Governor Patrick's Proposal]
• Aircraft Sales Tax Exemption: Repealing this exemption can save $4.5 million per year. [Governor Patrick's Proposal] • Cigars and Smokeless Tobacco Sales Tax Exemption: Removing can earn $10 million per year. [Governor Patrick's Proposal]
BROADEN OUR BASE. Next year, we will face an even greater challenge as federal stimulus funds run out, and while all of our options are worth careful consideration, it is important to push for adequate, balanced, and stable ways that we can all support our state together:
• Services Tax: Currently, Massachusetts exempts all services from the Sales Tax, forgoing $9 billion a year in revenue. By carefully selecting certain services for taxation, we can add an additional, progressive source of revenue.
• Increase the Income Tax Rate: A 1% increase in the income tax rate would raise $800 million a year. Combined with an increase in personal exemptions, this would allow us to raise revenues without increasing taxes on families earning under $100,000 a year.
For more information about how you can use the information together with tips on how to set a meeting with your legislators and talk more effectively about government and taxes visit the following links:
• Talking Points on Our Revenue Options [PDF]
• Guides to talking and writing more effectively about government and taxes
• Guide to Organizing a Legislative Meeting [PDF] from Massachusetts Community Action Network
with sensitivity toward the economic conditions that many of the people of the state are facing. The income tax increase will surely outrage middle and working class constituents, so remind legislators who are speaking to constituents that it’s a good idea to mention the exemption before you even mention the tax. At least be sure to get them in the same sentence. I think exemptions for those who earn less than $150,000 is a better idea.
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p>Overall good ideas. Interested in what will be the carefully selected services that might be taxed.
More information and backgroud than you problably wanted to know about possible carefully selected professional services that might be subject to a sales tax.
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p>Some guidelines from the Center of Budget and Policy Priorities
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p>And from the Federation of Tax Administers (who knew there was such a group) a look at what states do take advantage of this rich revenue stream. Note Delaware — a famous haven for tax evading businesses taxes takes advantage of lots and of professional services.
Information from the DOR:
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p>Upholstery is treated as the “fabrication” of a tangible product. Charges for labor used to fabricate goods that are sold (as well as charges for materials used) are included in the sales tax base. So the short answer is that upholsterers should charge sales tax on the full amount of their retail charge, regardless of whether they charge a lump sum or charge the customer separately for materials and labor.
..but wondered if Judy did (in fact, have a laminated copy of the MGL to show that it IS true, and not an attempt at rip-off). But car repair is not (fabrication/repair of tangible object using components). Neither is plumbing.
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p>There are MANY weird little things like this marbled through the tax system now. So talk of ‘master categories’ need to be examined.
I have no problem with repealing the film tax credit. The Life Sciences program probably needs to be scaled back for now, but this is part of a broader strategy to support one of the few ares of commerce in which the Commonwealth is a national leader. We should be mindful of this.
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p>Increasing the tax on dividends and interest to 12% will be a big tax on retirees. These folks vote, and as a result I think this idea is DOA. Of course, the retirees can always move to Florida or Arizona, and reduce their taxes owed in Massachusetts to zero.
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p>”Carefully selecting” the services to be taxed is easier said than done. If I live in Boston, I am going to get my hair cut locally. If I run a company in Boston, I can buy a lot of my IT, payroll processing, advertising, legal, accounting, and many other services out of state. Be careful about the incentives you create. You should recall that growth in the sales tax has been anemic (or even negative in some years) for the last ten years. One reason why– for many kinds of items, sales tax is easy to avoid. Thank you, inter-web tubes!
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p>By the way “evasion” means not paying taxes by doing something illegal. “Avoidance” means reducing your taxes by doing something the law permits (or even encourages).
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p>If by careful selection of services to tax you mean making sure that residents won’t pay any more tax, I think that also means you won’t raise much revenue.
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p>I would go along with a reasonable increase in the rate of the income tax on wages and self employment income. Its a proportional tax. Talking about a full percent (nearly a 20% tax increase!) is beyond unrealistic.
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p>The business about a big increase in the exemption to shield most residents from an increase reminds me of the old saying about the definition of tax reform:
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p>Don’t Tax You
Don’t Tax Me
Tax the Fellow Behind the Tree!
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p>If you want to argue for more revenue, don’t exempt yourself from the discussion.
Gross receipts in the state went down when the sales tax was increased, so even though the state got more revenue – sales in the state were depressed. Lets not do this with services also.
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The state has to live within it’s budget it hasn’t for years. Between Fiscal Year 2006-2009, the Massachusetts budget grew by 20%.
Can you provide a citation for this?
Sales tax from NFIB
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p>Massachusetts’ Revenue Commissioner recently extolled the positive role of last summer’s 25% increase in the sales tax in this fiscal year’s 9.2% increase in the state’s revenues.
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p>But the sales tax rate went up 25% while state’s revenues increased only 9%. That translates into an average 8 percent reduction in sales and revenues for thousands of small retail shops across the Commonwealth. If you take into account the artificial bump in sales tax revenues attributable to the cash for clunkers program, the situation for most Massachusetts retailers is even more disastrous. “
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p>and for the state budget
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p>http://taxfoundation.org/files…
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p>BTW – I find this data just about impossible to find.