” The Third Rail of Massachusetts Politics” by John Edward
John Edward teaches economics at Bentley and UMass Lowell. He’s a frequent contributor of columns on economic issues.
The moment went by so fast it was easy to miss. Candidate for Governor Martha Coakley touched the third rail of Massachusetts politics. She quickly recoiled. She probably lost votes anyway.
Meanwhile, the majority of Massachusetts resident are losing out on a tax cut.
It happened during the Boston Globe/WGBH debate between Coakley and now Governor Charlie Baker. In response to a question, candidate Coakley simply said:
We are exploring ways to do a more graduated income tax.
As soon as the debate was over the backtracking began. Coakley said she was not saying she had adopted “any of those ideas.” She declared a graduated income tax system could be a “last resort” to raise revenues. Candidate Baker pounced, saying as governor he would do everything possible to not increase taxes.
They were both thinking about this the wrong way. They were both asking the wrong question. They were both pandering for votes.
Here is the bottom line – the “Commonwealth” of Massachusetts has a very regressive tax system. Low-income earners pay a much greater portion of their income in taxes than the top income earners. I refer to it as the reverse Robin Hood paradox. We are robbing from the poor to give to the rich.
The Institute on Taxation and Economic Policy recently came out with their latest analysis. Low-income earners in Massachusetts — families making $22,000 or less — pay over 10 percent of their income in state and local taxes. The top income earners – those making more than $860,000 – pay less than 5 percent.
Let me repeat that. The poorest people in the Commonwealth are paying taxes at a rate over twice as high as the one-percenters!
After paying their $2,000 in taxes, the poor have less than $20,000 left to pay for food, housing, utilities, and health care. The one-percenters may pay $2,000 or more to accountants and lawyers to avoid taxes.
Many conservatives declare that a “flat” tax – one where everyone pays the same rate – is the only “fair” tax. In Massachusetts we fail miserably to achieve fairness.
Massachusetts is one of only eight states with an income tax that is not graduated. A graduated income tax, as is true of the federal income tax, applies progressively higher tax rates to higher levels of income. A progressive income tax is necessary to offset very regressive sales and property taxes.
The state Constitution does not allow a graduated income tax. There have been attempts to amend the Constitution to fix the problem. Those attempts failed. The amendments were initiated by voters, such as the four ballot questions we had in 2014. I believe there is a better approach.
I am not going to blame the “the stupidity of the [Massachusetts] voter” (as Jonathan Gruber did with Obamacare – although he had a point) for the failures in the voting booth. I am going to blame our elected officials and candidates.
Martha Coakley was wrong to talk about a graduated income tax in the context of raising revenue. It should not be about increasing taxes. If a graduated tax is a method of raising revenue, organizations like Citizens for Limited Taxation and politicians like Governor Baker will have an instinctive negative reaction. A public policy issue that should be about fairness becomes the third rail and is destined for failure.
Citizens for Limited Taxation is a lost cause. Despite acknowledging the regressiveness of Massachusetts taxes, Barbara Anderson once told me she would not support a tax change that raises taxes on ANYONE. Even though taxes would decrease for most people.
That is the key point to emphasize. With a graduated income tax, the state could raise the same amount of revenue, yet most people would see their taxes do down. Let me repeat that. Taxes do not go up. For most people their taxes go down.
The title of my first Lowell Sun column was “Asking the Wrong Question on Taxes.” What is the right tax rate, 5.2 percent, 5.15, or should it be 5.0? That is the wrong question. For those paying too much in taxes, it will make little difference.
The right question is “Who Pays?” There will always be complaints about the size of government spending. That is a separate issue. The issue is who is paying the bill. The common wealth suffers because we do not have a progressive income tax.
Instead of yet another citizen initiative petition, our elected leaders on Beacon Hill should actually lead. They should initiate an amendment to the state constitution allowing for a graduated income tax and craft it to be revenue neutral. Voters would still have to approve it.
The goal is NOT raising taxes. The explicit purpose of a graduated tax should be to raise the same amount of revenue while adjusting who pays. Who pays? We should all pay, but we should all pay the same rate.
The Massachusetts legislature created a Tax Fairness Commission that released a report in 2014. The very first recommendation:
• Institute a graduated income tax through a Constitutional amendment.
As headlined in The Boston Globe, new Senate President:
• Rosenberg calls for fight against income inequality.
In his inauguration speech, Governor Baker touched on issues such as homelessness, unemployment, and underemployment. However, he clearly emphasizes a more efficient government. Perhaps the best summary of his view was when he said:
• We will hold the line on taxes, we’re already demanding enough from hard working people.
Actually, we are demanding too much from many hard-working people. Back during the Gubernatorial campaign, a Boston Globe Op-ed by Renee Roth suggested, “Coakley and Baker need to discuss a political hot potato – taxes.” She observed:
• Income inequality is widening in Massachusetts, We now have the eight-widest gap in the country between the top and bottom 20 percent of wage-earners. This is not just socially unfair, but economically unwise.
We are making already excessive income inequality even worse. How efficient can government be when we tax low-income earners too much and it increases the need for state expenditures on programs to assist them?
It should not be too much to expect our elected leaders to lead. It would not be demanding too much to expect our tax policy to be fair. It may be asking too much to expect politicians to touch the third rail.
I intend to find out. I will be contacting my elected representatives to ask them if they will support a graduated income tax – not to raise revenue, but to achieve tax fairness. If they will not I will ask why not. I suggest you do the same. Senator Rosenberg will be hearing from me. It would help if he heard from you as well.