Over at our Left Ahead! podcast, we had on in turn Michael Widmer of the Massachusetts Taxpayers Foundation and Carla Howell of the Committee for Small Government. The subject of course was a ballot initiative that would eliminate the 5.3% Massachusetts personal income tax by cutting it half this coming January and removing it entirely the next.
Voters are understandably confused by very disparate numbers from the no and yes sides. Moreover, Howell's group has the advantage of emotional appeals in tight economic times. It couples that with strong accusations.
By the bye, Howell exhibits sangfroid. She knew she was coming into a pinko podcast and fairly graciously held her temper and didn't bolt. I said at the end I hope she didn't feel ganged up on. She chuckled and replied that she was used to it.
For a group that wants a fundamental change that could destroy or perhaps markedly improve the entire commonwealth, it is remarkably short on specifics. Instead, they seem to use the currency of voters' felt sense. — There's a lot of waste in the government. How much? A whole lot. I'm sure of it.
That sounds silly and underneath is even sillier. Each of the major figures the yes-on-1 folk use is questionable at best:
- 41% of the Massachusetts budget is fat and could be cut without any harm
- Massachusetts is fifth or eighth highest taxed in the nation
- The budget is really $47 billion, so the effect of removing these taxes is no so bad (more like a loss of 27% of the budget instead of 40%, according to Howell)
- Taxpayers would get about $3,700 to save, invest or spend
How Much Fat?
The 41% figure is absurd to the point of being meaningless. It comes from a poll of 500 likely voters in April via Citizens for Limited Taxation (CLT). That was in response to "How many CENTS out of every dollar you pay in state taxes would you say is WASTED by the state government?" Clearly that guess doesn't mean anything other than there's a general perception that government includes waste. Plus, that was a leading question.Interestingly enough from these podcasts, we found that both guests as well as the three of us agree that there is a crying need for greater transparency by the administration and legislature on budgets. We really don't know the ingredients before or after the meal.
Taxachusetts?
The yes-on-1 folk claim that we are still overtaxed here. They like to calculate this on straight dollars per resident figures. That, Howell says, places us fifth highest taxed in the nation. Few agree and many disagree strongly.The best numbers I found are from the fiscally conservative Tax Foundation in D.C. It places Massachusetts below the national average in combined taxes paid and set us at 23rd highest in the nation. We have also been dropping steadily from our 1980 high of number two in the nation.
These reports use percentage of total local and state taxes per capita as a percentage of income. Howell said she does not like adjusting for income.
How Much Blood?
The yes-on-1 people peg the state budget at $47.3 billion. They break it down into four budget categories:- statutory budgeted spending
- non-budgeted spending
- capital spending
- expendable trust spending
The state budget document defines these and other types of moneys on pages 41 and 42. In brief, budget funds are what we commonly call the operating budget. The non-budgeted ones are set aside for specific governmental activities "such as federal grants, funds related to the tobacco settlement and operations of the state lottery." Capital projects tend to run multiple years and are tied into bonds, federal reimbursements and other strictures. Among the class of trust funds, the expendable trust are limited to the benefactor's designated purposes, but both interest an principal can be used.
It is hard to swallow the committee's argument that these are all part of the budget for their calculation purposes. The operating budget is what the governor proposes and the legislator amends, proposes and votes on. They directly control the budgeted funds.
How Much Back?
Mean, median, and average are great concepts in middle school. It seems math teachers loved correcting our misuse and confusion. In this case, the committee seems to gamble that we have forgotten on their most repeated figure — on average, each taxpayer would get roughly $3,700 back.That is quite true on the shallowest level and pretty meaningless out of context. That average is for all taxpayers divided into the personal income-tax revenue. Unfortunately for the yes-on-1 supporters who can feel the extra weight of their share, for the vast majority of them, that is not their share.
The median income of our state is just over $50,o00 a year. In Massachusetts, over 65% of taxpayers make less than that. In this context, this means a couple of things:
- The richest citizens pay personal income tax in proportion to their incomes, but disparate in aggregate total — about 63%.
- The MTF calculates their current payment at $16,295 each. That's how much those making over $100,000 per year would get back on their average.
- In contrast, those making $50,000 or less would get back their average payment of $850 and those making between $25,000 and $50,000 would average $1,773.
Show us the cuts!
Perhaps there would be one or more advocates for this or that entry. Those would include legislators who think bringing home project funding to their districts will keep them in office. I think everyone else would love to hear them defend their add-ons, particularly in such tough times.
Nonetheless, this Question 1 asks for a fundamental reshaping of the operating budget and quite possibly a shift form the wealthiest paying the bulk of this revenue to property and sales taxes, which would hit the middle and lower classes disproportionately. That should require the research to 1) locate large amounts of fat in the existing budget and 2) propose at least a high level budget that would balance without these revenues. Show us the cuts.
That would be a lot of work for the committee, one time. However, not only are they willing to turn out state economy inside out, but they've been at this for about seven years. They've had the time to provide the background and back up their feelings. We asked Howell for examples, which she didn't have, but did not get to why they hadn't torn apart the budget to prove their contention.
There's seems to be a visceral distrust to the point of hatred by both Howell's group and by Barbara Anderson's C LT for Widmer and the MTF. In her podcast, Howell referred to the MTF repeatedly as unregistered lobbyists. Anderson has consistently called the group fat cats. They each refer to the government from the governor to legislature as wanting to keep their gravy train running.
From the outside, it doesn't seem logical that the rich guys on the MTF boards would fight to keep personal income taxes. After all, they all are in the higher tax brackets and pay the greatest number of dollars. Perhaps more meaningful is that the 76-year-0ld MTF has a reputation for, first, unbiased research and, second, not all that accurate financial predictions. They seem to fall in the meteorologist class for the future but have solid forensic numbers and analysis.
The MTF report on Question 1 released this week, The Enormous Consequences of Question 1, does not show what Howell would like. However, unlike Howell or Anderson, it doesn't draw unsupported conclusions or dwell in generalities. In fact, if the MTF is lobbying, they aren't doing the emotional appeals and one-sided presentations we might expect.
Personal income-tax revenue goes into the operating budget. The report analyzes the effects per area of government. It also lists the mandated expenses, such as debt service and Medicaid. Other features are the number and dollar amounts paid by income level, and comparisons of tax levels with states without personal income taxes.
Howell holds that the MTF is unfair in listing such areas as education in showing losses of this tax revenue. She said people are loath the cut these items and this is an emotional appeal.
The best possible outcome of Question 1 passing would be:
- Gov. Patrick's administration and the legislative leaders identify $13 billion they can cut from the operating budget
- Both houses of the General Court concur on every item and pass a new, skeletal budget
- The legislature vows to regularly report key budget changes and who votes for them
- The citizens invest their saved taxes in local businesses or buy local goods and services
- Life is good
Agreement and Not
Carla is slick and articulate. Reading her materials and hearing her, I don't think she has a lot to clarify the situation or back up her yes-on-1 stance.However, in the middle of our podcast, we all agreed on a few things, such as:
- We want and deserve a lot more transparency from the administration and legislature on our money
- We want and expect all concerned to use our financial doldrums and the more recent chaos as catalysts to identify and fix wasteful spending
- We would like a no-sacred-cows approach to the current expenses as well as future budgets
From my country upbringing, I see this as a classic pig in a poke. It may be a pig the committee is selling, but unless we can look inside the bag, we don't know. They tell us to trust them. I'm not convinced.
Libertarian Aside: Like there are Democrats and Democrats, the Libertarian party has range of members. Howell seemed disingenuous to me when she told us the committee was in no way related to the LP. I noticed that its two founders (Howell and Michael Cloud) had run for state governor and U.S. senator (John Kerry's seat) on the LP slate in 2002. The committee's chief counsel, Peter Kuntz, has been an LP board member, as had Howell, Cloud and the substitute podcast guest they offered us when Howell thought she couldn't make it. That was Rich Aucoin, who headed the tax-elimination vote in Waltham in 2003. He ran for lieutenant governor as a Libertarian under Howell. I couldn't find anyone that works for the committee that was not a Libertarian. Howell says they are non-partisan.
Tags: massmarrier, Massachusetts, Question 1, taxes, ballot initiative, Committee for Small Government law, Massachusetts Taxpayers Foundation, Carla Howell, Widmer
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