It was almost physically painful to read the absurd anti-tax screed by Meredith Warren, attacking the proposed Fair Share Amendment that would increase the state income tax rate on high income earners, that appeared on yesterday’s Globe’s op-ed page. This piece makes sense only if you uncritically accept its two basic premises (which are both assumed but not defended):
- Taxation is a form of theft; and
- Different tax rates on different levels of income are inherently unfair.
Our friends over in the Libertarian Party might agree with the first point (though I wonder whether one of its newest members, former MA Governor Bill Weld, actually thinks that way) . But there’s a reason the Libertarian Party gets only a tiny number of votes every time they run: that view is espoused by a minuscule minority of Americans, and it is often associated with views that are even less mainstream. Basically, most people understand that a functioning government is necessary, and that taxes are needed to make it function. Even Warren herself doesn’t seem to agree that taxation is theft, since she says that “[t]here’s no question we need more money for education and transportation in Massachusetts.” Where does Warren think that money will come from?
The second point makes perhaps even less sense. The federal government, and most states with income taxes, have espoused some form of progressive taxation for decades. States with a single income tax rate, like Massachusetts, are a distinct minority. And this is probably because common sense tells you that people who earn a lot of money can better afford to pay a higher marginal tax rate than those who don’t. It seems to me that a responsible state tax policy should do two basic things: generate the revenue that is required to meet the state’s needs; and apportion the tax burden in a fair way. If you have only one tax rate (like we do), simple arithmetic tells you that low-income people are paying more money than they would if you could ask higher-income folks to pay a little more. A policy like ours therefore places a higher burden on the people who are least likely to be able to afford it. Progressive tax rates help ameliorate this problem, which is probably why the federal government and most states have adopted them.
Warren doesn’t engage with any of this. Instead, she offers this analysis as her sole justification for rejecting progressive tax rates:
The argument that “they can afford it” might be true, but it certainly doesn’t make it fair and equal. Would we support a burglar who breaks into the home of someone with more stuff than said burglar has at home because the burglar is merely taking his “fair share?” How is breaking into the bank account of our more well-to-do residents any different? It’s robbery — legislated.
Sigh. It pains me to have to point this out, but burglary is not legal, which explains how progressive taxation is “any different” from burglary, and why we should not “support” burglars who only rob rich people. And the “robbery – legislated” argument makes sense only if you accept the two premises set out above – which you shouldn’t, because neither of them withstands much scrutiny.
Warren, of course, cannot resist trotting out this old saw:
That it takes a constitutional amendment to enact such a tax is evidence of why the proposal is discriminatory. The state constitution doesn’t allow setting different income tax rates for different classes of taxpayers. In other words, legislators are attempting to write a form of discrimination into the constitution.
But this, too, is wrong. I’ve explained before why the state Constitution probably never was intended to require a single income tax rate across all income levels, and that the fact that it’s now interpreted that way is much more an accident of history and a single misguided Supreme Judicial Court decision than it is evidence of what the authors of Article 44 thought they were doing. Furthermore, to argue that “legislators are attempting to write a form of discrimination into the constitution” simply begs the question of whether this proposal is unfair or not. Yes, of course, the purpose of the proposed amendment is to “discriminate” (in the neutral, non-pejorative sense of that word) between income earners who make less than a certain amount vs. those who make more. But if there is a good and fair reason for doing that, then that form of “discrimination” is not problematic. Most states and the federal government apparently have concluded that this particular form of “discrimination” is not unfair discrimination – and it’s unfair discrimination that we want to avoid.
Finally, as noted above, Warren concedes that “[t]here’s no question we need more money for education and transportation in Massachusetts.” And I ask again: where is that money going to come from? Would she support raising the income tax rate on everyone? I find it nearly impossible to believe that she would. What’s her alternative? She never tells us.
Maybe there is a good argument against adopting the Fair Share Amendment. But this sure wasn’t it.
Different types of income can be
Currently Mass taxes short term gains at 12% and long term gains at 5.2. If that is constitutional, why can’t the legislature simply de
Different types of income can be taxed at different rates in Mass. Apparently it is perfectly legal for the legislature to tax capital gains, which one would presume are a single type of income, at different rates based on holding period (notwithstanding the SJC’s decision in Salhanick). If that is ok why can’t the legislature simply declare ordinary income over a certain threshold a different type of income and impose a different tax rate on it?
is that income tax “shall be levied at a uniform rate throughout the commonwealth upon incomes derived from the same class of property.” If you accept the notion that all earned income is income “derived from the same class of property” (which you shouldn’t, but which the SJC unfortunately did in 1921), then you’re stuck with a uniform rate.
One could, I suppose, argue that especially high incomes are somehow derived from a different “class of property” than lower incomes. But it’s hard to see what that “class” would be, and it’s also hard to imagine the SJC seeing the maneuver as anything other than an end-run around the prevailing (though IMHO erroneous) interpretation of Article 44.
This is a trivial problem. In common usage, however unfortunate and insulting, “upper class” property owners means wealthier people, and “lower class” means poorer people. There is no constitutional bar to taxing upper class people at a different rate from lower class ones. The constitution’s only intent is to make sure that people within the same propertied class are treated equally.
😉
….that salaries and wages are derived from different classes of property and the former usually results I think in higher incomes than the latter. Also, SomervilleTom has often argued we need to tax wealth, which can certainly be argued a different class of property than income.
On distinguishing salaries from wages, I assume you mean something like an agreed-upon annual salary vs. an agreed-upon hourly wage? I don’t think that would work. Lots of salaries – the vast majority, in fact – are well below the cutoff for the Fair Share Amendment. On the second point, taxing wealth is an entirely different ballgame and is not constitutionally problematic even without an amendment.
This nails my reservations about all this.
We could begin taxing WEALTH right now. We need to be taxing wealth in addition to income. It is wealth, not income, concentration that is sucking the lifeblood out of our economy.
Instead, our “progressives” are doing a long, involved, and tortuous dance routine that may or may not accomplish anything.
It feels, to me, like a distraction from the problem at hand.
Abigail Johnson, our wealthiest resident, saw her portfolio increase by something on the order of FIVE HUNDRED MILLION DOLLARS this year. I’d like to know what, if any, corresponding increase in state taxes she paid. If my government can collect and save EVERY detail about the places I take my cellphone for YEARS, then my government can tell me information like this about the very wealthy.
I’ll wager a round at the next Stammtisch that Ms. Johnson did NOT pay the statutory 5.20% rate that a minimum-wage worker pays when her hourly rate goes from $9 to $12 per hour.
I understand that we don’t want to publish individual tax information. We could, however, aggregate the increase in estimated net worth of our wealthiest 1%, aggregate the increase in taxes paid by that population, and publish the resulting percentage.
Perhaps we should take odds on what that effective tax rate on wealth increases of the top 1% actually is.
I have a box of baseball cards which survived my childhood of flipping cards, or putting them into spokes on my bike to make noise and then went on to sit in the attic. A couple of Mickey Mantles, Reggie Jackson rookie, and people tell me they’re worth hundreds. I paid a nickel a pack.
People have found Picasso’s at yard sales, paid $20 and found out it’s worth $200,000. They just like the picture. People buy land out in the sticks real cheap, put in their own roads, improve the landscape and just want to enjoy the solitude.
What is the “wealth”? Do you tax on the market value of what something might sell for, even if the owner doesn’t want to sell? Do you include real estate, art works, gold bars, antiques ?
I understand we need to pay for some government functions. Why can’t we concentrate on taxing consumption. If two people each buy a Mustang for $20,000 they pay the same tax. Someone buys a Lexus for $40,000, they pay more. The government gets their cut, the rich pay more. If one guy cares for his Mustang and in 20 years it’s worth more than other cars he shouldn’t be penalized.
Abigail Johnson has a portfolio estimated at about fourteen billion dollars.
That $14,000,000,000. We’re not talking about the value of your box of baseball cards or the occasional Picasso worth $200,000.
The reason it doesn’t work to tax consumption is to look at the numbers. I suggest that very few of us have a net worth in excess of $10M. That’s $10,000,000. Ms. Johnson’s net worth FOURTEEN HUNDRED times that.
Ms. Johnson is not going to buy 1,400 Mustangs, or Lexus’s, or whatever.
You don’t seem to comprehend how much more the very wealthy have from everyone else.
It’s currently valued at 700 million. If she bought it would that price be deducted from her wealth? You can’t just say tax the wealthy. If she had a billion and bought the painting would she be under the limit?
I understand the disparity, I just wonder what you would exclude/include.
And what would be your threshold. At least the income tax has a million dollar threshold. I agree “income” may not be the way to get people to pay their fair share. Really rich people can hide their money, even middle income tradesmen I know hide income by doing jobs “under the table”, who gets screwed?
The poor stiff stocking shelves overnight at Market Basket.
It needs to be an amendment because a different generation of progressives about a hundred years ago enshrined it into the State Constitution so there could NOT be that kind of manipulation, although their concern was that the uber rich would exempt income OVER a certain amount, using the argument that they had paid enough already in actual dollars rather than a percentage of income. They wanted to be sure all income was taxed equally. Now, they WANT unequal taxes, but only on the very rich.
I will set aside arguments about the uber rich being able to manipulate their income to avoid this surcharge. We all know it is true that they can, and you are hoping they won’t bother. I am surrounded by elderly rich people who are legal residents of Florida, which has no estate tax, so I think they WILL bother. Even Rose Kennedy died in Florida while on her porch in Hyannisport.
I have no objection to the surcharge if that is what voters think will solve their problems. In my mind, it works like the Community Preservation Act, a surcharge on the property tax, which can only be spent on specific purposes – housing, land purchase, and historic preservation. But it is my experience with this tax that makes me oppose the amendment as written.
We regularly have surpluses in one account while there is a deficit in another. But because of the language and percentages guaranteeing the division of proceeds, it cannot be moved where needed. This new tax will go to the usual suspects – the corrupt Education formula, and the even MORE corrupt public transporation authorities. Once again, the Sacred Ten cities will receive more than 100% of their education money from the state and spend the surplus on fire trucks while the communities outside 128 get screwed over waiting in vain for the legally required 2002 examination of the formula. Once again, MassDOT and its fiscally unaccountable board will get a gravy train stream of untraceable income – because that has worked so well in the past.
IF this surcharge went to the general fund, or the Rainy Day fund, to be appropriated for immediate need, it might be OK. As it is, it advances the boondoggle of the usual suspects once again.
I will just repeat, for the record, my view that the authors of Article 44 never intended to impose a uniform tax rate on earned income.
But the court does not agree. And saying they were wrong is not reality based. I can think of lots of court decisions I disagree with, but my opinion doesn’t Trump theirs.
They’ve basically acknowledged as much recently (see footnote 3). But they’ve apparently taken the position that at this point, it would be more appropriate for the political process rather than the judicial process to change the rules. I can see the argument.
at this point it takes the amendment. Though I think your argument is quite brilliant.
You are absolutely right that care must be taken in the budgeting process and perhaps in additional legislation, improvements to the Chapter 70 formula, and improvements at Mass DOT, to ensure that real benefit to schools and transportation will result from this amendment. Based on my informal conversations with legislators, many already see the potential dangers, but in my opinion the fact that everything else is not perfect doesn’t mean we should not support the amendment itself.
Good old Tommy Jefferson wrote a letter to a friend in which he wrote about wealth inequality and what the government could do about it. He wrote: Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions or property in geometrical progression as they rise.
I wonder if my Tea Party pals will put that on a bumper sticker?
You’re not supposed to read that crap, David. Let this be a lesson.