A recent Boston Globe (9/27/2010) included an article on Question 3's proposed sales tax rate cut from 6.25% to 3%. The article reported on a poll showing that 46% of likely voters favor the cut compared with 43% who oppose it.

Proponents of the cut make the usual arguments about creating jobs and cutting waste. To my eye, however, these arguments don't hold up to even moderate scrutiny. Let's examine these arguments one at a time.

Quote Originally Posted by Rollback Proponents
* create 33,000 NEW Private Sector JOBS!
  • 1. Every tax cut stimulates the economy and creates new jobs.
  • 2. Every tax hike worsens the economy and eliminates jobs.
  • 3. A Beacon Hill Institute study in 2009 showed that increasing the sales tax from 5% to 6.25% would cause almost 10,000 private sector workers to lose their jobs. Applying that metric in reverse, voting YES on 3 to roll back the sales tax to 3% will create 33,000 new private sector jobs.
Points 1 and 2 are simply inverses of one another, and by no means established economic theory. Point 3 is an exercise in logic disaster on several fronts. First, the Beacon Hill Institute is a noted right-leaning think tank. That perspective isn't inherently wrong, of course, but it's hardly the voice of a non-partisan organization such as the Concord Coalition. Second, the study's predictions were never confirmed by the actual 5% to 6.25% increase. Third, even if that study's predictions had been born out, the reverse conclusion is entirely fabricated and in no way supported by the study.

Moreover, the Rollback Proponents fail to consider public sector job losses. If 80% of the $2.5B revenue reduction is in the form of head count (admittedly, a guess on my part), and if those jobs average $75k per year including benefits (again, an estimation), then we're talking about more than 25,000 lost jobs. If this estimate is high by as much as a factor of two, it's a jobs disaster.

Quote Originally Posted by Rollback Proponents
* give back an average of $688 – every year – to each taxpayer. Average of over $900 / family.
I can't fault the math here. What I can question, however, is the decision to use average instead of median, the latter likely being lower and far more representative of what a typical taxpayer/family would experience. The more important point is whether this typical taxpayer/family will be able to pay for the lost services with this relatively small amount of money.

Quote Originally Posted by Rollback Proponents
* force state politicians to cut government waste.
Ah, waste. No one likes government waste. Or corporate waste, for that matter. Or household waste. Yet waste is a fact of life. And almost certainly not nearly as high as people perceive it to be. Just how much does government waste? 1%? Perhaps? 5%? Unlikely? 41%? Ludicrous. Yet, the Rollback Proponents cite the latter. What rigorous study yielded that figure? No such study, actually. Rather:

According to a Fabrizio poll in 2008 of Massachusetts voters, the state wastes 41 cents on every dollar it spends. That would mean that politicians waste a staggering $21 billion of your tax dollars out of the $51.8 billion they spend every year — almost ten times as much as the size of our modest sales tax cut.

That's right, the Rollback Proponents cite a purely made up and wholly uninformed number.

Having paid careful attention to Wayland's budget and the financial pressures thereon for a decade and a half, I can say with confidence and experience that the boards and departments worked diligently to spend funds wisely. Is there any waste? Sure, but it's small, probably even vanishingly small. And not even the result of negligence, but simply, a cost of doing business and of trying things, a few of which don't work.

Quote Originally Posted by Rollback Proponents
* keep shoppers in Massachusetts– instead of driving them to New Hampshire’s 0% sales tax.
To be sure, some shoppers who drive to New Hampshire to avoid the Massachusetts sales tax will stay home to shop. How many? The Rollback Proponents fail to make an estimate. The fraction of Massachusetts residents who live at least 30 minutes from New Hampshire must be relatively large, however, and the cost of gasoline, wear and tear on automobiles, and time suggest that the Rollback Proponents overestimate the effect.

Quote Originally Posted by Rollback Proponents
* attract shoppers from Rhode Island, Connecticut, Vermont and New York – another boost for Massachusetts Retailers.
Similar to the argument above, there's no quantification of this "shopper influx" effect. And moreover, it's a double-counting when it comes to the jobs the Rollback Proponents claim in their first point.

Quote Originally Posted by Rollback Proponents
and so on and so on and so on ...
Elsewhere on their site, the Rollback Proponents cite $52B in Massachusetts spending. I'm not quite sure to what this number refers, as other sources put the Massachusetts budget reported elsewhere at between $28B and $32B.

Where do the Rollback Proponents propose that we cut the state budget? Their site promises to supply answers ... submitted by the public, apparently. As far as I could tell, no such cuts actually appear on their site. It's easy to make the claim that the cuts they propose--close to 10%--are easy to make, but much harder to actually suggest them.

It's worth considering the "other side" of the story--what do the opponents of the tax rollback say? Interested readers might take a look at the Massachusetts Taxpayers Foundation and the No on 3 organization.

The former is described by the Fall River Herald News as follows:

The Massachusetts Taxpayers Foundation is not a group of sky-is-falling liberals. Funded by business, its orientation is fiscally conservative, in the old-fashioned sense of accurate accounting, balanced budgets and the efficient delivery of vital services.

Here are the high points of the MTF's recently published white paper on the proposed tax rollback, "State Finances: Heading Over the Cliff?"

  • "Voter approval of Question 3 would result in across-the-board cuts of approximately 30 percent in virtually all state programs, including local aid, higher education, human services, prisons, courts, environmental protection, and state parks and beaches."

  • "... if Question 3 passes, state leaders would face a $4.5 billion dollar shortfall in the fiscal 2012 budget – an already existing structural deficit of at least $2 billion plus $2.5 billion of reduced tax revenues by cutting the sales tax from 6.25 percent to 3 percent. Because almost half of the state’s $32 billion budget is spending that is legally required, the $4.5 billion in reductions must be spread over the remaining $16.9 billion of “discretionary” spending, which would require across-the-board cuts of 28.4 percent. State programs have already been cut by more than $2 billion since the fiscal crisis began in 2009."

  • "... since the tax cut would take effect on January 1, 2011, the state would have to deal with the loss of approximately $1 billion in sales tax revenues in fiscal 2011, requiring large mid-year cuts across state government."

  • "... the cuts in local aid would result in thousands of layoffs of municipal employees, chiefly teachers, police and fire, decimating the core services of education and public safety and falling most severely on cities and poorer communities that depend so heavily on state aid."

  • "... even with last year’s increase in the sales tax from 5 percent to 6.25 percent, Massachusetts still ranks in the bottom group of states in terms of sales tax burden. Of the 45 states with a broad-based sales tax, Massachusetts ranks 43rd in revenues collected per $1,000 of income and 35th per capita. Massachusetts has a very narrow base on which sales taxes are collected (e.g. exempting food, clothing up to $175, and services), which is the principal explanation for its low ranking even with a rate of 6.25 percent.