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Thread: Repeal state income tax? (Ballot Question #1)

  1. #1
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    Default Repeal state income tax? (Ballot Question #1)

    Wayland eNews linked to this WBZ Joe Shirtsleeve article discussing the proposed fall Ballot Question to repeal the state income tax.
    One point was highly misleading:

    In WBZ's exclusive Fast Track survey 500 people were asked, should Massachusetts continue to have a state income tax?

    Forty-seven percent said "yes," while 45 percent said "no."

    The Massachusetts Teachers Association and a long list of other groups will spend tens of millions of dollars convincing tax payers to vote "no".
    The MTA voted "no" on the repeal, NOT on the WBZ survey asking whether the state should continue to have a state income tax. And the MTA is not alone. The "others" opposed to the repeal number more than 100, and include the following (a more complete list can be found here).

    • Catholic Charitable Bureau of the Archdiocese of Boston, Inc.
    • Jewish Alliance for Law and Social Action (JALSA)
    • League of Women Voters of Massachusetts
    • Mass Assoc of Councils on Aging & Senior Center Directors
    • Mass Chamber of Business & Industry, Inc.
    • Public Policy Institute
    • Stand for Children

    I'm interested to hear people's comments on the relative merits of the income tax repeal proposal (it will probably come as no surprise that I'm opposed to the repeal).
    Last edited by Kim Reichelt; 10-02-2008 at 01:59 PM. Reason: to add ballot question number

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    Default I'm on the fence

    I am not fond of knowing that a portion of our MA state taxes goes to "needy" cities. On one hand, I know that the poor who live in Holyoke, Lawrence, Boston, etc. need good education and social services. On the other hand, there is the possibility that that the tax dollars being raised in those cities are not being well or carefully spent. Knowing that even more money will come from the "rich"towns, could make them sloppy in spending. I believe in getting to the root of problems (assuming there is one). Sometimes problems don't need money. Also there is the "guilt" factor of those more fortunate. I am more fortunate and I like to donate lots of money to charities. However, I do not like to be told to donate to the state as I don't think they are a very efficient machine.

    Driving through New Hampshire this summer I stopped at a State Liquor Store. In line I mused how NH could possibly raise any money for some necessities. I realized out loud that NH doesn't have large poor cities like MA does. To me, that seems to be why we have this state tax: a kind of socialist tax - to help those who can't or won't help themselves.

    Think about how much residents of Wayland pay in tax income tax and realize how little actually comes back to us from the state. Does anyone know the numbers?

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    I don't know if it's still true, but back when I was on the Finance Committee in the second half of the 1990s, Wayland was receiving $0.10 in state aide for every dollar we paid in income tax.

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    Elizabeth, if the money doesn't come from the state, where should the money come from that funds local schools? If it all needs to come from the towns themselves, there are two problems:

    (1) some towns will simply be unable to provide adequate education, and

    (2) the only current allowed source of local revenue is the property tax. I'm pretty sure we don't want to require education to be solely funded by the property tax, as this would mean a shift from income to property in the mix of local revenue. If anything, I think we need to shift in the other direction, to protect people on a fixed income.

    My questions to you (and anybody else who cares to weigh in) are:
    would you simply eliminate the services for which this money is currently used?
    if not, how would you raise the revenue for the various things for which that money is currently used?
    Last edited by Kim Reichelt; 08-21-2008 at 09:40 AM. Reason: improve clarity

  5. #5
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    Arrow Another series of calculations...

    Quote Originally Posted by Jeff Dieffenbach View Post
    I don't know if it's still true, but back when I was on the Finance Committee in the second half of the 1990s, Wayland was receiving $0.10 in state aide for every dollar we paid in income tax.
    What Jeff said was interesting. One in ten dollars paid by Wayland state income tax comes back. Is this true of Lawrence or Lowell or Brockton? Perhaps its two in ten dollars for them? I have to believe that the bulk of the money is not returned to any town or all the towns in total.

    For Wayland, a very rough calculation might look like this:
    5,000 households
    $100K / household income
    Gross Wayland Residential Product = $500M / annum
    Tax Rate 5.6% is $28M and if 1/10th comes back then it would be $2.8M.
    The last override was $1.89M and these are occurring now every other year.

    If 2/10th's came back then there should be no overrides.

    The 2002 elimination of state income tax vote was 55% - 45% against.
    This margin is being handicapped to be even closer this time and with a fear that it may actually pass.

    One theory on why something like this is close or may pass is that the 'share the wealth' back to the cities are not high enough.

    So instead of having a debate as to whether to eliminate this tax - we should be talking about an upward adjustment in cash back to cities. Looks like the adjustment doesn't have to be massively changed to make a large difference.

    One other scenario to ponder.
    If the state income tax was eliminated.
    If Wayland took over the 5.6% tax directly.
    Then a $60M budget could be reduced by $28M (or about half) and the tax rate could go from $16/K to $8/K and we would have parity and the overall net tax would reduce.

    Half the tax levy would then be on direct income which doesn't put hardships on those with fixed incomes who would have to support taxation via real estate taxes. So a local income tax (to some degree) replacing a state tax might be interesting.

    Of course, the state still needs its money for many other things and I suspect that the motive behind the elimination effort is to put pressure on those many other things to see how much Mass state FAT can be cut.

    I bring up all these scenarios because that ballot initiative just might pass and we should be thinking ahead.

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    Alan, has it really come to this, you and I agreeing on taxes?! [grin]

    As you know, I'm an advocate for a local income tax (at present, legally prohibited) as a potential way to share the burden more fairly. You made the very interesting point that there might be unintended consequences relative to neighboring towns if Wayland were to enact something like this alone. I'd be interested to know if there are experts in this area who might have some light to shed.

    My recollection is that cities like Lowell were getting back on the order of $2 for each $1 they spent, but don't quote me on that.

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    Here's a summary of the $33.2B FY2009 Massachusetts budget.
    http://www.massbudget.org/FY09ConferenceMonitor.pdf

    • 40% Health Care (includes Public Health, Mental Health, Group Insurance)
    • 21% Education (K-12, higher education, early education)
    • 9% Human Services
    • 6% Debt Service
    • 5% Public Safety and Corrections
    • 5% Pensions
    • ...
    • 1% Environmental Affairs
    • 13% Other

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    Fascinating article in today's Boston Globe supporting the notion that small government doesn't necessarily lead to growth, and moreover, that good government, of whatever size, is what matters.

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    Default PU : GB Ratios

    Jeff,

    We talked before about calculating the PU : GB ratios for all the cities in Mass. My thoughts on this are partly solved with the cherry sheets cs2009.xls column W. On a per town basis one could filter what wasn't appropriate to measure across all cities (ie racetrack revenue on valid for some) and then this could be compared to a DOR list of (Avg Inc / HouseHolds ) * #Households per city. But the avg inc. / Household would be a gross number and the taxable portion would only be on that so we might assume a derating factor like %30 to get to taxable income? Then apply the 5.3%.

    The file cs2009.xls is too large for the upload on enews so you could get it at the DOR.

    This analysis might give us a glimpse at how we compare to other towns and how 'little' we actually GB (Get Back)... then one might play the thought experiment to what would happen if we doubled that GB?


    Alan

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    Default

    Quote Originally Posted by AlanJReiss View Post
    The file cs2009.xls is too large for the upload on enews so you could get it at the DOR.
    Alan
    Alan, some quick thoughts:

    (1) you can certainly provide a direct link to the spreadsheet - there's no need to upload the spreadsheet if people can access it directly elsewhere;

    (2) if you manipulate the spreadsheet, and eliminate unneeded data, the resulting spreadsheet ought to be small enough to post;

    (3) I can look at the size limits if you have a condensed spreadsheet that you cannot post - I'd be happy to expand the limits (within reason) if need be. The limits are there to protect against large uploads that use up the site's storage space, but if there is valuable information, I would certainly want you to be able to provide it to people.

    Kim

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    Excellent Boston Globe editorial outlining the myriad ways in which Question 1 (repealing the state income tax) is sheer, irresponsible, and dangerous lunacy (my words, not the Globe's).
    http://www.boston.com/bostonglobe/ed...ot_the_answer/

    Perhaps most dishonest is sponsor Carla Howell's ludicrous assertion that 41% of Massachusetts state government spending is waste. This bogus number resulted from a survey she conducted (no idea the sampling methodology or population) asking voters for their estimate of waste. That's right, there's no actual knowledge behind the number--it's made up!

    Conveniently, Question 1 sponsors and supporters won't answer the question as to how they'd reconfigure government spending based on their reckless slashing. "We'll leave that to the experts," they'll say.

  12. #12
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    Default Globe and Herald Actually Agree!!

    Could it be... The Globe and the Herald actually agree on something... that Q1 is a bad idea.

    Who else agrees? Sue Pope and Tom Conroy, Scott Brown and Sara Orozco.

    Oh, and me!

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    Well-written piece by the Boston Globe's Yvonne Abraham making the case for the income tax repeal ... or does she?
    http://www.boston.com/news/local/mas...s_state_taxes/

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    Exclamation The numbers are dismal...

    Quote Originally Posted by Jeff Dieffenbach View Post
    Well-written piece by the Boston Globe's Yvonne Abraham making the case for the income tax repeal ... or does she?
    http://www.boston.com/news/local/mas...s_state_taxes/
    The author did have a sarcastic slant to her point, not a criticism per se', but I would have liked the author to have also had more data in his rebuttal. In reading the blog postings below the article there seemed to be an abundance of people who seem willing to take this gamble and abolish the state tax. Given the state of our economy, both nationally and globally and given the voters general distrust of our government now, in general, I fear there is a real chance that this ballot question may actually pass this time.

    Two thoughts however...
    -- If it state tax is abolished then city aid will be chopped high on the list, the state worker jobs will be the lowest and last on the list to go. This will directly translate into immediate, larger and more frequent overrides. Real estate tax increases (albeit larger ones associated with overrides) are permanent increases in the tax burden of a given property which makes that property less desirable and less available to ever shrinking populations who could possibly afford them. In one sense we would be trading off a tax that is not compounded and not associated with our major asset for another which is on both counts. This is an unintended consequence of question 1.

    -- The state funds the lion share of tuition for state universities. If you have a child who will be attending a state university and you have budgeted for that state university (as opposed to a private college) then your budgeting may turn upside down because, again, workers will be cut last and services like university tuition subsidizing be higher on the list. Another unintended consequence of question 1.

    The income savings will translate into more RE tax and most probably higher tuition costs. Something I personally think about now.

    The article links to one amazing interactive map with embedded data, I urge you to look at this...
    http://votenoquestion1.com/towns.html

    According this this chart Wayland gets $9,873,404 in state aid for FY09
    or $8.19M for schools and $1.69M for the town. The cut for the schools would be 89% and for the towns 65%. And the total state aid would drop to $1.49M for FY09 which means that $8.386M would have to be made up either in cuts or by increases in property taxes.

    A first order estimation of this means that on a $60M Wayland budget we would have to make up %13.97 so if the tax rate is $16/k then the new tax rate (to compensate) would have to be $18.24/k. If the median property is $563K (as an example) then the tax would go from $9000 to $10,263. Now in Wayland's case this increase is probably less than the decrease in state tax but if we add to it hidden increases in fees and subsidies then (ie. the tuition example) then we would have to pay one way or the other.

    The worst case scenario is that if passes, RE taxes go up by 14% and then the state inc. tax is reinstated in a year or two and our RE taxes do not readjust downward.... but they won't. You almost NEVER see an UNDERRIDE anywhere in Massachusetts.

    Ironically, towns like Wayland, Weston, Sudbury etc... even though we get considerably less than Lawrence, Lowell Brockton... the projected % cuts due to this measure passing (for the schools) in those towns is considerably less. In other words the state would view the 'affluent' towns to *again* be on their own in the event of a dramatic decrease in revenue.

    Again, this question just might pass. I feel we have a 'perfect storm' at this time to actually have this happen.
    Last edited by AlanJReiss; 10-05-2008 at 09:54 PM. Reason: 'his' to 'her' since a lady wrote it...

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    Quote Originally Posted by AlanJReiss View Post
    The article links to one amazing interactive map with embedded data, I urge you to look at this...
    http://votenoquestion1.com/towns.html

    According this this chart Wayland gets $9,873,404 in state aid for FY09
    or $8.19M for schools and $1.69M for the town. The cut for the schools would be 89% and for the towns 65%. And the total state aid would drop to $1.49M for FY09 which means that $8.386M would have to be made up either in cuts or by increases in property taxes.
    I completely agree with most of your analysis, Alan. However, I feel compelled to point out (as I did in an email to the Vote No on 1 people) that their interactive chart includes Minuteman as though it fully resides in each of the towns it serves -- that is, I believe that 100% of the aid to Minuteman is included in Wayland's figures (and also in Weston's, and Framingham's, and everybody else who Minuteman serves). So the actual aid to Wayland schools is significantly lower, though the property tax impact you describe would still be very real.

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