Monday, August 23, 2010

Some Thoughts on Question #3

The flyer makes it seem so simple. Vote “Yes” on Question #3 and reduce the Sales Tax to 3% and all Massachusetts’ spending problems will go away. I’m a conservative—at least I am in this part of the country—and a registered Republican. I should be jumping with joy at the prospect of being able to vote to reduce a tax. But I’m not.

First, the budget for this year is already written, passed, and signed into law. So, if this passes, any relief to taxpayers won’t happen until next fiscal year at the earliest. Any shortfall in revenue at this point will have to be borrowed and later repaid, at greater expense to the public. But, it would reduce the tax, right? Only if the legislature enables it.

When Proposition Two-and-a-Half passed, it took another few years before the courts finally forced the Commonwealth to abide by it. In the meantime, cities and towns fought like tigers to keep the old property tax rates in effect. When finally forced to admit the proposition was the law of the land, how many people saw major changes in their tax bills? Not many; I think mine dropped by $40 for the year. A lot of jurisdictions simply re-assessed every property to have a higher value, and therefore the “new, lower” tax rate produced about the same amount of revenue.

So, second, if passed, we must expect extreme resistance to enabling this law, and we have every reason to believe they will replace the money from some other source. For example, we have no reason to believe the legislature wouldn’t simply extend the “new, lower” tax to cover the things now exempt (food, clothing, prescriptions, etc.) to collect the same amount they are getting now. Result? We’d be no better off than we are now, and possibly worse off, depending on what you spend your money on.

Or, perhaps, they simply raise the Income Tax rates. Only on the “rich,” of course. But rich and poor are only relative terms. How long do you suppose it would take to redefine them to the government’s advantage? Nationally, it is currently estimated that 47% of all Americans do not pay income taxes. That’s almost half of us. Do you really think every second person you meet is “poor?” Guess what? You’re rich! Or, perhaps it would be easier to leave the definitions alone, but make ALL kinds of payments—including from the government—taxable, like unemployment compensation is now.

To make up this much money, every income bracket’s tax rate would have to be raised. Which would make those paying the highest rates feel even less welcome than they feel now. Not being fools, they would take their money and go live elsewhere with lower—or no—income taxes. Such places can be found not too far away. The impact this would have on investment and jobs—which come from private industry, not government dictate—would be disastrous for the short to medium term, and consign Massachusetts to the bottom of the industrial heap in the long haul. Remember the way industry was abandoning the Commonwealth back in the 70s and 80s when we were famous as “Taxachusetts?” We used to be an industrial state that happened to have some fine schools and hospitals. We still have the schools and hospitals because they are generally tax exempt, and no other reason.

Third, every purchaser in the Commonwealth—with the exception of those tax cheats who would still cheat at the lower rate because they feel entitled to do so—pays the tax. This is the “fairest” tax in the state because every one of us pays the same rate. The “rich” pay more because they buy more expensive things and larger quantities of them. That’s as fair as fair gets. Every one of us gets to feel the pain when we reach the cash register. Although there are exemptions for certain educational or religious organizations, businesses do have to pay the tax unless it is merchandise bought for resale (usually from a wholesaler). So, other than cheats who will cheat anyway, this tax is as “democratic” as taxes can get.

I suppose they’ll take away my conservative privileges, and perhaps even ask me to confine myself to voting for libertarians, but I’m going to say it anyway: Vote NO on #3.

Wait two years, and attack the Income Tax rates, instead. And structure the rate change gradually enough that our budgeting authorities can work with it. They won’t like it, and will fight against it, but by phasing it in if passed, it won’t bankrupt us unless the pols do it on purpose.

Ron Pittenger

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