I got a lot of responses to my post from the other day about the pending ballot initiative to eliminate the State income tax, which was sponsored by former Libertarian candidate for Governor, Carla Howell. Both were along the same lines:
1) That ‘opponents are using scare tactics to convince people to vote against Question 1,’ and
2) The disingenuous claim that ‘we don’t know what the impact will be, and anyone who says we do is lying and trying to scare you’ (see item #1)
In that vein, “ncitizen” wrote that “No official statement has been made by the legislature that states where if any cuts will be made. It would make life easier for both sides if they did then we could argue the merits of the cut.”
Of course, the fact that the state hasn’t spelled out exactly what cuts it would make hardly means that elected leaders are scaremongering. If someone came along and told you that you were going to lose 40% of your income next year, you might not be able to say exactly how you’d tighten your belt, but you’d be able to paint a picture in broad strokes, which is where we are now and what we’re hearing from our elected leaders and other stakeholders (Chamber of Commerce, teacher and transportation unions, public health experts, librarians and legislators).
A chorus of warnings
In the meantime, lots of groups have come out with very detailed pictures of how the state might be forced to act should this ballot initiative pass. The Massachusetts Taxpayers Foundation (headed by our own Town Moderator, Mike Widmer) is just the latest. Their report concludes that passage of Question 1 would be a disaster for the state and its citizens. Then there’s the Massachusetts Budget and Policy Center, which has designed an interactive Question 1 Budget Game that lets you try your hand at eliminating 40% of the state budget without slashing existing programs like healthcare, education, and local aid.
As fed matching funds leave the State, a vicious cycle of cutting
One of the interesting revelations of the budget game is what a vicious spiral we would find ourselves in, were Question 1 to pass. Why? Because so much of the federal aid we receive is contingent on the level of state aid. For example, the Department of Early Education and Care (EEC) receives $590m in combined state and federal aid. Just so’s you know, this is money that’s used to provide child care subsidies for 69,000 low-income children and fund a Universal Preschool program that sustains 502 pre-school programs and 8,500 low-income children. Even if the Patrick Administration were to try to zero out EEC’s budget in a post-Question 1 world, it would only save the state $137 million, not $600 million. Why? Because as we cut state aid, we’d lose federal matching dollars as well. In other words, as we slashed programs to try to shrink our budget, we’d also watch federal dollars being sucked out of state and back to Washington D.C., in response to our lack of good faith, leaving Massachusetts poorer and more desperate than ever.
In search of hard numbers for Belmont
Always open minded, though, I went looking for some details on what Question 1 would mean specifically for Belmont. I spent some time perusing both the Vote No on 1Web site and the Vote Yes on 1site. To be honest, the differences between the two sites are enormous. The Yes folks at smallgovernmentact.org offer mostly fact-free, rhetorical arguments in favor. They score some good hits on their favorite strawman: profligate Beacon Hill lawmakers and bureaucrats, but anyone looking for a well researched, factual argument for how, exactly, eliminating our state’s progressive income tax will spur our economy and create jobs will be disappointed. Their argument boils down to this:
1) You’ll get $3,700 back! Woo hoo! (You’ll do even better if you’re rich!).
2) You’ll take $12 Billion out of the hands of Massachusetts Big Government. Woo hoo!
3) Those arrogant SOBs on Beacon Hill will finally have to listen to us! Woo hoo!
The “No” side has a much more detailed look at what the practical impact of Question 1 passing will be and what, exactly, it will mean for the State and for Belmont. Using Mass Dept. of Revenue figures, opponents of the measure estimate that Question 1 passing will result in a loss of more than $11m. (You can read about their methodology here.) Their estimates look like this:
| Municipal | State Aid | Estimated Cut | Percent |
| Public safety and other aid | $3,150,524 | $2,039,166 | 65% |
| Road/bridge construction and repair | $401,161 | $259,650 | 65% |
| TOTAL | $3,551,685 | $2,298,816 | 65% |
| School district: Belmont | |||
| General education aid (Chapter 70) | $4,603,815 | $4,603,815 | 100% |
| Special education | $857,481 | $555,002 | 65% |
| School construction and repair | $537,455 | $347,866 | 65% |
| Other aid, including grants (est.) | $700,764 | $445,388 | 64% |
| TOTAL (est.) | $6,699,515 | $5,952,071 | 89% |
In short, this would be a disaster for Belmont, making contentious budget debates in years past over $1m or $3m gaps pale by comparison. Its no stretch to say that our town would have to come up with an entirely new mechanism for funding its operations and schools. And remember, Question 1 says nothing at all about Prop 2 1/2, so any increase in property taxes would have to come by way of a Prop 2 1/2 override — with all the hew and cry that accompanies those. I see no reason to believe, either, that town voters will feel generous about passing local property tax overrides just because the burden of paying state income taxes has been lifted — we need only look to New Hampshire as an example.
In the past two weeks, we’ve seen what comes of clever tricks and too good to be true promises from the financial elites on Wall Street. Let’s not fall for it again. This is no time for gimmicks, or to toy with the educations and future of our children. No on One!
Ever notice that all the proposed cuts are in vital services. Where are the proposed cuts in waste and fraud. I guess there are none that the vote no people can see. The huge salaries for toll takers on the pike, The under the table deals to big dig construction companies, the 506 authorities in MA with members all drawing salaries but do no actual work. On and on pentions out of control, Health care that the private sector can only dream of. If you don’t see that you are bneng had then YOU are part of the problem not opart of the solution
It’s pretty funny that Q1 advocates cannot make up their mind about state government: is it the Evil Empire, or the only reliable source of information about potential budget cuts?
We’ve tried this experiment before on the national level — Bush cut revenues, but the spending cuts did not follow, and instead we just got huge deficits.
Wow Paul. Going all out are we? Having fun yet? Here, I’ll play:
I contacted the group operating the Web site about a month ago and they are exaggerating their case with their methodology. They even lump in millions that go to Minuteman Tech to Belmont’s share when we all know that if it closed, for whatever reason, Belmont kids put back into the regular system. Classes at Belmont High School might go up slightly. That is the entire effect on Belmont. In other words, it’s a total red herring.
If residents are really interested in how Question 1 would affect the town they can use the state’s own data. Here is a link to the state cherry sheet of the amount of money Belmont gets: http://www.mass.gov/Ador/docs/dls/cherry/09/cs09026.doc
Note: Belmont gets $7.8 million total even though it pays tens of millions into the state coffers. Only $6 million comes from the income tax. The rest is lottery money. $6 million … not $11.2 million … is in “jeopardy.”
Of the money Belmont gets, only $4.6 million goes to education. $235K goes to the Quinn Bill for police education reimbursement. No other monies go to police and no state money goes to fire protection. None at all. So all the stuff about police and fire departments being closed is total bunk, a total deception to get people to freak out. I don’t think I have ever seen such a relentless publication of playing loose with the facts in my entire life and I’ve been covering and involved in Mass. politics for more than two decades.
The only way police and fire will get laid off is if a town chooses not to come up with the extra money to preserve services. When 95 percent of the people of Belmont have $1,200 or more [much more] back in their pockets, does anyone really believe that they won’t raise property taxes by $600 to compensate? Of course not!
To be sure, the Yes people have done a terrible job of promoting their case. They have done nothing to show the positive net effects of thrusting $21 billion in to the private sector economy over two years. To be sure, tens of thousands of new jobs will be created. Even if they are “lowly” service sector jobs, there will be another two jobs created for every one of those jobs, leading to more job creation. This would more than balance out the job cuts on the state and local level. More charitable giving would occur. There would be more spending in the private sector, which means more sales, gas, and other tax revenue. Lottery funds might actually increase because folks have money to play the lottery. Who knows what could happen. You can speculate about what will happen either way.
If you want, I can comment later specifically on the deep, dark, scary situation in New Hampshire and how I actually pay the same amount in property tax as a Belmont homeowner despite the higher rate [Hint: the assessments are lower; it evens out]. The difference is that people in N.H. don’t pay income or sales taxes and yet get almost the same services, class sizes, etc. as folks in Massachusetts.
Paul,
So the numbers I glean so far are:
Belmont average household income is $100,000 ($5,300 in state taxes)
Belmont local aid could be cut $8.25m ($1,150 per average SFH)
Belmont Override for level services next year is @ $4.5m ($650 per SFH)
So we have 5 options facing the “average” household in town…
Option 1
Reject Q1 and pass override at a cost of ($5,950) to the avg. SFH.
Option 2
Reject Q1 and reject override at a cost of ($5,300) to the avg. SFH.
Option 3
Pass Q1 and reject override at a gain of $5,300 to the avg. SFH.
Option 4
Pass Q1 and accept $8.25m override at a gain of $4,150 to the avg. SFH
Option 5
Pass Q1 and accept $12.75m override at a gain of $3,500 to the avg. SFH
These numbers are averages and obviously we will see other tax increases on goods and services. Needless to say the passage of Question 1 is very attractive fiscally to the “average” Belmont resident and likely means the least amount of pain for Belmont.
Would you vote No on Question 1 knowing that it will more than likely cause a level services override to fail meaning the elimination of HS Sports and Music programs, garbage collection, class sizes soaring to 30, and other services and town employees being cut. That’s the reality and IMO the best way to keep the Town functioning at level services is by providing tax relief by passing Q1. Reality is you can’t raise taxes in a recession. That’s the gamble you are taking. Option 1 will not happen so remember this post come Springtime if Q1 fails because you were warned of the consequences in advance and ths may be the only opportunity we get to change the unfair bias on local aid against Towns like Belmont.
If you didn’t catch the SC meeting 10/7 then watch it on BMC replays. That’s the future and an override is not feasible. So Q1 is a gift and not a trick and should allow us to reshape unfair taxation on Towns not “connected” to the Power elite on Beacon Hill. Just my 1.5 cents
PJ — I’m concerned that your view of “what’s good for Belmont” doesn’t extend much beyond the end of your nose, much less the boundaries of our small town. If I die when the Longfellow Bridge collapses into the Charles with me on it, does it really matter that my family saved $2,000 a year in state income tax? Its worth it to me to pay higher taxes for safe and well constructed roads and bridges, safe streets, excellent schools and the like.
You’re also assuming that the town would just pass overrides to replace the local aid, when that may well not happen, throwing our town into financial chaos.
Bottom line: Question 1 replaces a progressive tax system in which the wealthiest members of society pay a bigger share of the costs with a regressive one in which someone making $500,000 a year pays the same (in the form of increased fees or property taxes) as a family struggling to get by on $40,000 or $50,000 a year. Clever arguments aside, you can’t get around that, PJ.
Paul–Thanks for continuing to make the case against this short-sighted, economically foolish idea. I’m horrified at the prospect of replacing a progressive way of collecting taxes with measures like unbearable property tax, higher sales taxes, and increased fees for everything from the Turnpike tolls to fishing licenses. Vote no on 1!
Jessie- The topic was is “Q1 good for Belmont”. I just told you that the average $800k or so home would see either $1,150 or an $1,800 increase in property taxes. They would also see an average $5,300 increase in their income. Do you consider an $1,800 increase unbearable when someone hands you $5,300 most wouldn’t. But if someone asks you for $650 on top of today’s average $8,600 you better be standing at least an arms length away
Paul- First I have a long way too look to find the end of my nose. Second, You are against Q1 which as I have said will almost certainly result in a failed override for Belmont. So how are you going to cut $4.5m from the budget. What fees will be instituted and how many cops, firefighters, and teachers will you lay off in Belmont. Is 30 kids about right per classroom? Will you eliminate METCO (that’s only $750k) what else. It doesn’t matter if you support the override because the majority of voters are likely to say they are tapped out so start cutting. I guess drowning in the Charles isn’t preferable to your house burning down unless you are in it
As for the progressive tax… the issue isn’t with the 5.3%. The issue is with the unfair algorithms for distributing local aid. Lawrence Ma. is an extreme example where they have 3 times the population of Belmont averaging 1/3 the income of Belmont and they get $166m in local aid to Belmont’s $11m. We are paying for their Pools, Libraries, and $150m high School while our facilities crumble. The only way to change that is by killing the Income tax and designing a new income tax and local aid structure that doesn’t overly burden Towns like Belmont that have minimal revenue streams beyond residential taxes. I’m open to other ideas about how Belmont can get a significantly greater piece of the Income taxes it pays to the State but cognizant that the power elite could care less about “tony” Belmont. Eliminating the Income tax is like electing Obama. You are getting change and hoping it will be for the better. (clever again
so now will you reconsider?
“. I guess drowning in the Charles isn’t preferable to your house burning down unless you are in it”
In the Charles or in my house?
First, I reject the whole “vote for 1 if you want Wellington/a budget override, etc.” argument. As I’ve written before, there’s absolutely no quid pro quo here, and no evidence I’ve seen that taxpayers will feel any more charitably towards local tax increases in the absence of a state income tax. In fact, getting rid of the tax will just exacerbate the already nasty inter-generational wrangling that is already happening in our local communities. Nobody is proposing doing away with Prop 2 1/2, meaning local voters will, in effect, have a line item veto on every single program affecting citizens in the Commonwealth, because local aid will disappear and local taxes will become the primary source of revenue for everything. Regardless, the Wellington and the structural hole in our town finances are problems of our own making and have nothing to do with Question 1. Voting for something that is so obviously wrong, just in the hopes that you’ll be rewarded later by the anti-government libertarians behind Q1 is a hopeless fantasy. We’re going to reject Question 1, get the Wellington funded and patch up the hole in our budget because we’re going to convince voters in town that its absolutely necessary and the right thing to do for our kids and for Belmont’s future, not because we’ve done some horse trading with extremists like Carla Howell who want to abolish government altogether.
I’m also interested in your suggestion, PJ, that we need a “new income tax” — so it sounds as if you’re not opposed to an income tax, per se, just the way local aid is distributed. I’d have to say that I’m with you on that, and folks like Will Brownsberger have done a great job getting that formula changed and introducing more equity into the way local aid is allocated. But making the equation used to calculate local aid more transparent and fair is a very minor, incremental change that could really benefit Belmont. That’s a far far far cry from abolishing the state income tax. Again, its the sledgehammer versus scalpel approach. If your real beef is with how local aid is allocated, I don’t follow you leap to supporting Q1, PJ.
Do you think there’s a coincedence that NH has had massive population growth due to people from Mass going north? Was it because the winters were so much nicer? The services so much greater? No. It was due to the tax burden, and the much better way of life in NH where people get to decide more on a town-level what is done with their tax money.
I personally don’t see the wisdom of sending money to the state, only to have it given back to my town for police, fire, schools, roads, etc. Why not have my town decide what needs doing, and administer it right there? The state needs people to administer all of these things which are redundant to what the towns on this. Voting yes on #1 allows for more efficiency, and for cities and towns to better determine their fate and their budgets.
VOTE YES ON QUESTION 1.
Hi Paul,
I tried to post some comments when you first posted this but it didn’t seem to post. I’m trying again. Here is they gist of what I was saying:
I contacted the group operating the Web site about a month ago concerning the $11.2 million figure and they are exaggerating their case by lumping in millions that go to Minuteman Tech. If the Minuteman closed, for whatever reason, Belmont kids who go there would be put back into the regular system. Classes at Belmont High School might go up slightly. That is the entire effect on Belmont.
If residents are really interested in how Question 1 would affect the town they can use the state’s own data. Here is a link to the state cherry sheet of the amount of money Belmont gets:
http://www.mass.gov/Ador/docs/dls/cherry/09/cs09026.doc
Note: Belmont gets $7.8 million total. Only $6 million comes from the income tax. The rest is lottery money. $6 million … not $11.2 million. And what does Belmont pay in again???
Of the money Belmont gets, only $4.6 million goes to education. $235K goes to the Quinn Bill for police education reimbursement. No other monies go to police and no state money goes to fire protection. So all the stuff about police and fire being laid off is total bunk. The only way police and fire will get laid off is if a town chooses not to come up with the extra $6 million to preserve services, less than 9 percent of the current town budget. But when so many people in Belmont are going to get back much more than what they would pay in higher property taxes, why would they not vote to preserve local services?
To be sure, the Yes people have done a terrible job of promoting their case. They have done nothing to show the positive net effects of thrusting $21 billion worth of money into the local and private sector economies over two years. Tons of jobs will be created, there will be more consumer spending which will mean more gas, sales, etc. taxes, more lottery spending, more charitable giving, etc. You can speculate about how bad it will be and you can also say it could be beneficial too. We just don’t know.
On New Hampshire’s property tax burden:
Before you go tarring and feathering New Hampshire, you need to look at the reality of the situation. Here is some data for your readers to ponder, from someone who lives there:
New Hampshire assessments are much lower than Belmont and many Massachusetts communities but we end up paying roughly the same amount.
I have a small three bedroom on almost 2 acres of land in a southern N.H. city. The house and land are assessed at around $190,000 and charged a rate of $19.63 per thousand [$3,700-plus; $4,800 annually when the school and county taxes are thrown in]. If my home were plopped down in the middle of even the least expensive Belmont neighborhood, it would probably be assessed at around $500,000 or maybe more since land is a premium in Belmont [$500k x $9/$11 = $4,500/$5,500].
So, essentially, I pay the same – or less – in property taxes in New Hampshire as someone in Belmont does with a similar house even though the assessment rate is higher!
The long-term difference financially is that New Hampshire residents don’t pay income and sales taxes [I do, because I work in Mass. and commute ... but when I worked in N.H., I didn't]. So the whole “we don’t want to be New Hampshire … gasp … horrors …” is totally wrong [As an aside, the rooms and meals tax is 9 percent compared to 5 in Mass, so that changes things a bit].
Without comparing the assessment value of homes, the tax rate issue is moot and New Hampshire gets a bad rap.
We also don’t have Prop 2.5, unfortunately, so the increases fluctuate quite wildly sometimes. Our increase for FY09 on the city side alone was 5.6 percent and that was only after the city manager floated an 11 percent increase and folks went wild about it. I think he was pulling the old Kevin White trick – float a high number, cut it in half, which is what you really wanted in the first place. We were supposed to have a property tax cap question on the ballot which would limit increases to the CPI, currently 4.1 percent, but the city council delayed it until next year.
Now one could argue a lot of different social and economic arguments about what state is best to live in and there are a whole lot of factors. Better high edu system in Mass.; better air quality in NH. Similar school systems as far as class sizes, buildings, and per capita attendance to ivy league schools, according to studies. N.H. is also much older, age-wise, [not necessarily wiser though] so the state has tons of retirees and not all the cultural benefits Mass. cities have. Many of us have to commute to Massachusetts in order to make a bit more money or stay employed in our fields. Glass half-empty vs. glass half-full?
Frankly, I like knowing that my son’s class size in elementary school next year will be smaller than the class size in Belmont and yet my wife pays no income taxes on her freelance business and we pay no sales tax on the items we purchase – which are often cheaper in price than Massachusetts. Ignoring the negatives of being stuck in a car for eight to 10 hours a week, I can easily say that the glass half-full, for sure, and it’s not a bad way to live your life.