Tax Revolt in Tea Party Zone

Taxachusetts needs a new nickname

Massachusetts must have been a terrifying place in 1995. A relatively recent arrival in the commonwealth myself, I had no idea that the mid-90s was a time when health care was unobtainable. I didn't know about the washed out bridges and unplowed roads. Nor do I recall seeing bands of feral children roaming the streets from 8:00 am to 3:00 pm due to the lack of public schools.

But a popular ballot initiative to eliminate Massachusetts's income tax—thus bringing the state budget back to 1995 levels—is being greeted with howls of protest and predictions that the state will degenerate into underfunded chaos.

Gov. Deval Patrick sees trouble ahead should the flow of income tax revenue be dammed up: "Just as it is the people's money it is also the people's bridges and the people's roads and the people's schools and the people's broken neighbors, in some cases."

Massachusetts Senate President Therese Murray says she understands that people would like to have their money back—the average taxpayers would pay about $3,600 less in taxes—"but when their child has no school to go to and they can't get out their door to go to work because the street hasn't been plowed in the winter, I think the public would be back here really quick saying, 'Please, fix this.'"

New Hampshire, Texas, and Florida are doing fine without an income tax, but the Bay State (or Taxachusetts, as its citizens fondly call it) has a current rate of 5.3 percent on income.

The initiative is brutally simple: A 50 percent decrease in the income tax rate effective January 1, 2009, and the rest abolished one year later. That takes the state from its current revenues of about $28 billion down to the $17 billion it had in 1995.

The initiative process has three phases. Last fall, the Committee for Small Government gathered 100,000 signatures, well in excess of the 66,593 needed to push the initiative forward. Then there's a period where legislators can go ahead and pass the proposed law, thus skipping the balloting process. Needless to say, they didn't opt for that. Now the group must gather another 11,099 signatures and they'll be on the ballot.

"People think of us as a liberal state, but we're pretty good at [anti-tax] ballot initiatives," says Barbara Anderson, executive director of Citizens for Limited Taxation, a group that's been fighting taxes in Massachusetts since the 1970s. In 2000, her group used the ballot to win a rollback of a "temporary" tax increase still in effect from 1989. The tax rate was supposed to gradually decrease until it hit 5 percent. In Massachusetts, however, ballot initiatives are just for statues, not constitutional amendments (as they are, for example, in California). This means that the legislature can override them, which is exactly what happened. Lawmakers froze the rollback in 2002 at 5.3 percent.

This means that there is a chance the legislature could simply repeal the income tax elimination initiative as well. Given the popular support for the initiative, however, Anderson wonders if legislators might be feeling cautious. "If a few of them lose their jobs in November, I don't think the others are going to want to come back in and repeal right away."

In 2002, the Committee for Small Government snagged 45 percent of the vote with a similar initiative. "We found we could get a good respectable vote," says committee chair Carla Howell. The effort got almost no coverage, and every single one of the few editorial pages that took notice of the proposal opposed it, says Howell.

This time around, people are taking notice, in part thanks to a big campaign gearing up against the initiative. A far-from-ragtag crew of union members and city and town employees groups have brought in a hired gun in the form of former Blue Cross Blue Shield executive and civic leader Peter Meade to lead their Coalition for Our Communities. Howell is pleased to see the big guns arrayed against her. "The more they advertise, the more they will be helping us out. We don't need to sell our side. Our biggest challenge is just making sure that every voter in the state knows about it."

Howell also rejects concerns that the measure is too radical: "To be increasing the price of government continually where people in the private sector are dealing with wage freezes and job losses, that's radical!" Anderson echoes the sentiment: "It doesn't matter if you phase it in over 14 months, or 5 years, or 10 years, you're going to get the same rhetoric," she says, "It's the end of the world!" Might as well go whole hog.

Plucky though these small government campaigners may be, it's unlikely that Massachusetts lawmakers will actually stand by while $11 billion slips through their clammy fingers. Instead, they'll increase sales taxes, luxury taxes, and other fees. In fact, they probably won't even let the income tax phase out all the way. But having these kinds of fights in the past has at least staved off more increases, which would be better than nothing.

A statewide survey in April by polling firm Fabrizo McLaughlin found that Massachusetts voters think their government wastes about 41 cents [PDF] for every dollar of revenue. Elimination of the state income tax would reduce the state's budget by about 40 percent. As the kids used to say in the '90s: Coincidence? I think not.

Katherine Mangu-Ward is a reason associate editor.