Tax the Rich

Thus far during the gubernatorial race, the citizens of Massachusetts have heard a lot of talk about the high cost of living in Massachusetts, which is easy to understand, combined with a lot of talk about the state income tax and property taxes, which is not so easy for the average layperson to understand.

While property taxes have certainly risen in Massachusetts—as a resident of the City of Boston, I know mine have—I think it’s important to recognize a few basic things up front:

First of all, there is a cap on both the amount of property taxes cities and towns can raise and also on the amount property taxes can increase from one year to the next. It’s called Proposition 2½, and Massachusetts residents have been living with it for the past 26 years. Proposition 2½ places two constraints on the amount of property taxes a city or town can levy:

1. A community cannot levy more than 2.5% of the total full cash value of all taxable property in the community (called the levy ceiling).

2. A community’s allowable levy for a fiscal year (called the levy limit) cannot increase by more than 2.5% of the maximum allowable limit for the prior year, plus certain allowable increases such as new growth from property added to the tax rolls in that year.

I think it’s important to remember this when discussing taxation in Massachusetts. People talk about property taxes as if they’ve gone through the roof and will climb higher still as a result of Healey’s plan to roll back the income tax. In reality, Proposition 2½ limits how much property taxes can rise.

That’s not meant as a defense of Proposition 2½, which I suspect gives incentives to cities and towns to favor new housing developments (which often contribute to sprawl and eat up open space) over historic preservation and rehabilitation. The point is that in the conversation about what’s causing people to leave Massachusetts, we need to spend less time making false assumptions about property taxes and shift the emphasis back onto housing costs, the lack of affordable housing, and the lack of employment opportunities. These are the true factors in the exodus, not property taxes.

Nor do I wish to see the income tax rolled back. While it won’t produce the spike in property taxes that figures so prominently into Deval Patrick’s argument, we will see more cuts in state aid to cities and towns. With so many cities and towns in need of more state aid, we cannot afford to roll back the state income tax rate from 5.3% to 5%, as Kerry Healey has proposed. A rollback isn’t where the conversation needs to be. What we should be discussing is scrapping our flat rate income tax once and for all.

Massachusetts is one of only six states without a variable tax rate. Call me a socialist, but I think that’s a mistake (Oh wait, I am a socialist). California has six tax brackets ranging from 1.0% to 9.3%. Closer to home, Maine has four tax brackets ranging from 2.0% to 8.5%. I agree with Grace Ross: it’s time to overhaul our tax system in Massachusetts and institue a progressive tax. With so many of our cities and towns continuing to suffer from economic blight and high crime rates—have you driven through Roxbury, Lawrence, or Springfield recently?—we can’t afford more budget cuts.

It’s time to reverse the cuts to cities and towns that in recent years have had a devastating impact on our local schools, public safety, and basic services. In January 2003 Romney cut state aid to cities and towns $114 million below the amount that had been appropriated for the fiscal year. While a balanced budget is great, the answer is not to reduce the amount of state aid to cities and towns as the Romney-Healey administration has done. Rather, we need to tax the rich.