Daniel Kanter

What Budget Crisis? Cut the Sales Tax!

While not yet set in stone, it looks likely that a measure will be on the Massachusetts ballot this November that would cut the state sales tax from 6.25% down to just 3%. The effort is being spearheaded by the Alliance to Roll Back Taxes, whose chairwoman, Carla Howell, parses no words about the intentions behind the tax cut. The Boston Globe Reports:

She called the latest campaign a “modest start to bringing the state government in line with the level of spending that’s appropriate.’’ The proposal, Howell said, would force state officials to cut spending by more than $2 billion.

“There’s only one way to create jobs, and that’s to cut government spending and cut taxes substantially,’’ she said. “And that’s what we’re doing.’’

Of course, Howell’s arguments are more complex than that. Aren’t they? Maybe? There’s the used-car-salesman-esque argument on her website that voting for the cut means an "across-the-board 3.25% discount on every taxable purchase you make" (isn't it just begging for a triple exclamation point?). Then there’s the magical math that predicts that for every government employee layoff the cut would force, two private sector jobs would be created! Of course, there’s also the standby assault on public workers thrown in for good measure, in which the budget cuts would be grappled with by dramatically reducing health care and pension benefits for public employees.

In some sense, Howell's sales pitch about the potential for consumers to save money is on the right track: after all, sales taxes are considered regressive-- they pose a greater strain for low-income individuals than wealthier ones. But at the same time, the broad budget cuts hurt the very social programs that help protect and serve low-income individuals. And as Amy has discussed on this blog and in The Nation, the "lavish life of the public worker" line of argument has little basis in reality. Not to mention that budget cuts could mean privatization, which often leads to higher costs for consumers.

The sales tax cut would cost the state $2.5 billion in fiscal year 2012. And despite that critics agree that the proposed cut would cause a financial crisis for Massachusetts, the most recent polling on the issue says that 49% of voters are in favor of the cut, opposed to 44% against it.

Of course, nobody wants to pay sales tax, but this type of aggressive cutting is pretty dangerous, especially in a state like Massachusetts. Let’s think about the numbers for a minute.

The recession didn’t treat Massachusetts very well. Governor Deval Patrick’s administration had to cut 2,600 state positions during the economic downturn. It left a $2.5 billion budget shortfall this year, which meant that the $27.6 billion budget Patrick recently signed translated to hundreds more city layoffs, a 4 percent cut to local aid, vast cuts to public education, health and dental care for the poor, developmental services for toddlers, and health care for legal immigrants. They also had to take a $100 million dip into the rainy day fund.

On top of it all, the Boston public school system is under federal investigation for violating civil rights laws for not properly serving the newly-revealed 28% of students who aren’t fluent in English. Fixing that problem might cost a pretty penny.

Ballot measures like this have failed before. But this year, a tax cut might seem extra attractive to voters who are still feeling the pinch of the economic downturn. But really, Massachusetts, is it worth it?

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Posted at 1:54 PM, Jul 08, 2010 in
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