Fox: Taxes Are Dues for Membership in Society
By John O. Fox
I don't get it. The Republican candidate for governor, Kerry Healey, argues that Massachusetts should lower its income tax rate from 5.3 percent to 5.0 percent. The Democratic candidate, Deval Patrick, argues that the 5.3 percent rate should be retained as a prelude to lowering residential property taxes. Yet town officials across the commonwealth know that we can't afford to lower either if we're to pay for state and local services that most citizens want.
It's time we faced two realities in Massachusetts. First, in spite of recent increases, state funding remains considerably lower today for many services (adjusted for inflation) than it was back in 2001. For example, funding for early education is down by 16.9 percent; public health is down by 15.8 percent, and local aid to cities and towns is down by 11.0 percent, according to the not-for-profit Massachusetts Budget and Policy Center.
Second, we've long passed the time when our state deserved the moniker "Taxachusetts." Try "Lowtaxachusetts." Taking all taxes and other revenues from state and local sources as a percentage of personal income, the burden on Massachusetts citizens is 43rd among the 50 states, according to the most recent (2004) U.S. Census Bureau figures. That's right: the residents of only seven states have lower burdens.
The "cutting taxes" theme of both camps reflects polls showing that a majority of Republicans and Democrats across the state feel overtaxed, in large part because most households have enjoyed only modest increases in income over the past decades. This has been particularly galling in light of impressive gains in the nation's economic productivity, huge profits for corporations and enormous compensation packages for top managers and executives. The theme also reflects the success of the anti-tax movement that became prominent nationally with the Reagan presidency and again with George W. Bush's, and that has strong roots in Massachusetts. The seductive message: "It's your money, and you can do better with it than the government can."
But you know that, on your own, you can't provide a state judicial system, state police departments, schools, libraries, health care for poor children, and much else that promotes our common welfare.
Moreover, if the state income tax rate were reduced by .3 percent, a household with $50,000 of taxable income would save only $12.50 per month; a household with $100,000 of taxable income would save $25 per month. On the other hand, that .3 percent reduction would mean a loss for the state of a whopping $610 million (over $50 million per month) in fiscal 2007, according to the Department of Revenue.
For much of the 1990s through 1999, Massachusetts' income tax rate on most income was 5.95 percent; but by 2002, it had been reduced to today's 5.30 percent. That drop of .65 points--an 11 percent reduction that is identical to the percentage drop in local aid to cities and towns noted earlier--has amounted to billions of dollars lost in state revenue over the intervening years. And it has come with a price for citizens across the income spectrum.
In the town where I live, Amherst, median incomes are relatively high, as are property taxes, which have had to fill gaps in state aid. Still, public schools struggle to maintain standards that we formerly took for granted. We've cut deeply into funds for textbooks, new library books, after-school programs and field trips. We've closed the high school library early, slashed funding for teacher training and greatly increased class sizes. The list goes on, with even further budget cuts likely in the absence of major overrides. Does the story sound familiar?
Yes, it's your money, and you've worked awfully hard to get it. But we need to ask ourselves: Are we really better off with a few extra dollars of saved taxes each month? Are our children?
Anti-government rhetoric has encouraged us to hate taxes. I'm betting that in the real world in the decades ahead, we will hate more the consequences of hating taxes.
We would do well to remember Franklin Roosevelt's counsel during the height of the Great Depression: "Taxes, after all, are the dues that we pay for the privileges of membership in an organized society." It was true then. It remains true now.
John O. Fox teaches U.S. tax policy at Mount Holyoke College and is the author of If Americans Really Understood the Income Tax and 10 Tax Questions the Candidates Don't Want You to Ask.