Since it’s a gorgeous sunny day, I’ll favor the most wildly optimistic take on today’s WBUR polls of the tax ballot initiatives. The millionaires’ tax? Very popular! 77% support it. The sales tax cut, from 6.25% to 5%? Also very popular! 67% support.
The millionaires’ tax is likely to net about $2 billion, designated for transport and education; the sales tax cut would lose $1 billion. The sales tax is regressive, hitting the poor harder than the rich — such that it was opposed by liberals like Mike Dukakis back in the 60s. Isn’t it all fungible anyway? (Am I missing something?) I’m not saying that money isn’t necessary, but like the lottery, it does come from a sub-optimal source.
As two interested observers in California and New Jersey attest in Commonwealth Mag, raising revenue in a progressive way is not a catastrophe, the higher taxes causing hardly a ripple in the quality of life; but creating the possibility of long-awaited public investments:
While our state economies differ in some basic ways, the people in each have reached similar conclusions about the value of taxing the highest incomes to make important public investments that improve our schools, economies, and quality of life: it works. We heard many of the same arguments that are now being made against the proposal in Massachusetts to raise taxes on incomes over a million dollars in order to invest in education and transportation, and our experience with similar taxes has proven to us – and the people of our states – that those claims don’t hold up. The new revenue has helped improve our states’ economies by supporting vital investments in education and infrastructure. And rather than suffer from millionaire migration, our states have grown million-dollar earners at a healthy rate — in fact at greater rates than many low- or no-tax states.
It’s been confirmed again, the way to support local business and job growth — in manufacturing in particular — is well known: Provide infrastructure and education. That means public investment, and not giveaways to private interests like Amazon. From a new report from the Center for Budget and Public Priorities, this is how you do it:
- Expand customized services to small and medium-sized manufacturers. Manufacturing can be cost-effectively promoted by manufacturing extension services and customized job training. Manufacturing extension services provide individual firms with lower-cost access to high-quality advice on improving competitiveness. Customized job-training programs provide worker training specific to the firm’s skill needs.
- Invest in infrastructure and services that make the community’s land better for business development. Job growth can be cost-effectively promoted by improving services in distressed neighborhoods, cleaning up brownfields, and investing in transportation infrastructure.
- Increase public spending on services that increase local workers’ job skills. Better skills for local workers help attract and grow higher-wage jobs. Adult skills can be improved by programs from birth onward. Effective skills development programs include the following: high-quality child care, high-quality preschool, K-12 education, college scholarships, and adult job training.
The second two bullets: That’s what we’re about to do … with or without the legislature’s help.
I’ve never understood why the sales tax, with exemptions for necessities like food and clothing, is not progressive by default. Seems to me that the more disposable income you have, the more (and more expensive) taxable items you will purchase, thus the more you contribute in sales tax. Plus as with any other tax cut I would ask how you pay for it.
I fear you misunderstand just how much wealth the wealthy have. You may also misunderstand the limits of how sales tax can be collected from an individual, and how much more wealth than that wealthy individuals have.
A single person or household cannot buy an infinite number of clothing, sundries, and various other low-cost taxable goods. I’m not talking about necessities, I’m just talking about stuff. How many taxable alarm clocks can a household buy in a year?
This is even more true for big-ticket taxable items. A person or household that wants to buy more than one or two luxury cars in a year, for example, will simply establish a corporate entity and arrange for that entity to buy the vehicles (or planes, or boats, or whatever).
In practice, it is actually rather hard to buy spend more than some maximum amount on (sales) taxable goods. I don’t know what that number is. The point is that our wealthy residents gain FAR more than that amount in a given year (where “gain” is a loose term different from “income”).
All that wealth that the person or household cannot and therefore does not spend on taxable goods is therefore not taxable.
Thus, the portion of the that person or household’s gain that is paid in sales taxes is MUCH higher for those on the bottom than for those on the top.
Meanwhile, I think the sales tax holiday is a terrible idea. The state is already slashing goods and services that it provides because we have already been under-taxing ourselves since proposition 2 1/2.
If we want to take less money from the poorest among us, we would be far better served to kill the lottery than to do these silly “tax holidays”.
Sources like this indicate that the state kept $1.035 B in lottery profits in FY 2017. That’s about $2.8 M per day.
Meanwhile, the state reports that it collected $6.21 B in sales tax revenue in FY2017, or about $17 M per day.
I’d rather see the state do a “lottery holiday” six days than a “sales tax” holiday for 1 day.
Both NJ and CA are hemorrhaging their upper middle class populations. Look at CT for an example closer to home. Both are among the most unequal states in terms of wealth, they have terrible comparative poverty because of high costs of living, and the poor parts of those states are utterly downtrodden in favor of cosmopolitan cities.
Your ideas on manufacturing are equally naive and wrongheaded. Why on earth should we be funding “can’t do — teach” programs to provide workers for industries which in a tight labor market should be training workers?
I wish what you hope for was the actual outcome. You will reap some cash as it takes time for your golden geese to fly away to lower tax states. In the end you will have a state with poor people and the extreme rich who are able to make money without having a taxable income.
Tax Flight Is a Myth
Higher State Taxes Bring More Revenue, Not More Migration
https://www.cbpp.org/research/state-budget-and-tax/tax-flight-is-a-myth?fa=view&id=3556
Your comment betrays either misunderstanding of just how extreme our income disparity is or how little you care about actual facts.
The amendment in question raises taxes on those with incomes of over a millions dollars. The hockey-stick in incomes is so extreme that:
1. A tiny fraction of the state’s residents will be subject to this
2. The $1 M threshold is a small part of the actual income this tiny fraction actually receives.
If these few “golden geese” fly away — to states like Arkansas, Mississippi, Kansas, and so on — then I say “good riddance” By your own admission, these wealthy people will not move to NY, CT, or NJ.
I invite you to look at some actual data about how income is distributed in Massachusetts. This data is about five years old.
You’ll find that the 95th percentile for Massachusetts household income was $239.2k. The threshold of the fair share amendment is almost four times that. That means that 95% of Massachusetts households make less than $239.2k.
The average (mean) of the top five percent is $404.3k. The wide spread (nearly a factor of two) means that in this rarified group, the highest incomes are very much larger than the threshold of $239.2k.
The mean income of the top quintile (top 20%) is $229.8k. Again, we see this extreme spread between the mean of the top 20% and the mean of the top 5%.
The only way to produce this distribution is to have a tiny number of households receiving an extraordinarily high income.
Your argument that a significant number of people will flee this tax increase is groundless. It is groundless primarily because so few people are affected.
Today being a less-than-gorgeous day, I will share my mostly cloudy fear that the Fair Share tax gets knocked off the ballot by a ruling from the SJC, leaving the sales tax reduction on the ballot and, if it’s successful, leaving the state a billion dollars or so short.
Exactly — I should have mentioned that’s the real worry, in which case the defeat of the sales tax initiative becomes more urgent.
If only Democrats had any power to push progressive policy in the Legislature
At great length … “Democrat” =/= “progressive”.
I mean, Republicans could enact progressive taxation at the federal level, if they wanted.