It’s (Not) Your Money

Some (many?) Massachusetts politicians simply refuse to leave your money alone.

State Senators Sonia Chang-Diaz and Jamie Eldridge now say it’s time to consider an increase in the state income tax. “It’s a difficult situation, and there are no easy solutions,” Chang-Diaz and Eldridge state. “But the tool to solve this budget crisis does exist, if we are willing to show the political leadership (emphasis mine) to use it: an increase in the personal income tax.

“Of course, reforms are still necessary, and it’s up to the Legislature to examine every expenditure and measure it against our priorities for public spending. Every bit of waste needs to be cut – but cutting alone will not get us out of this budget crisis.” (Really?)

Chang-Diaz and Eldridge then slip into sophistry. “…[Taxes] are the way that we, as a society, pay for the things we value: education, police and firefighters, and public transportation. Each day we rely upon government services, public infrastructure, and state regulation, paid for by our taxes, in order to allow us to work and raise a family. What’s so dirty about that – and why are we so afraid to talk about it?”

Everyone understands that we cannot have a society without any taxation whatsoever. The issue is the misuse of taxpayer dollars–and whether it’s a wise thing to give the state more tax money if the state has not demonstrated a willingness to use the tax money they currently receive wisely.

Despite their earlier disclaimer, Chang-Diaz and Eldridge don’t really address this issue. Instead, they assert that “…there is nothing more regressive than a budget cut, particularly to programs that help the most vulnerable among us. For that reason, we applaud the House on its tough vote to raise the sales tax, because any means of raising revenue right now (emphasis mine) is a better solution than drastic cuts to vital services.” Any means? Can we not reassess what government services are vital and what are not?

“Increasing the income tax by one percent would raise approximately $2 billion for the Commonwealth,” Chang-Diaz and Eldridge assert. “Cuts will still be necessary to balance the budget, but that revenue would go a long way toward protecting core services, such as schools, shelters, public safety, and hospitals.”

If the average Bay Stater believed that an increase in the state income tax would in fact go to “schools, shelters, public safety, and hospitals,” the average Bay Stater would in fact support such an increase. However, if the average Bay Stater suspects that an increase in the state income tax will be used for, say, pensions, the average Bay Stater would justifiably oppose such an increase. Can we be reassured that the state will not misuse this new money?

“Increasing the income tax is the one tool we have that could help close the enormous budget gap we face without overburdening those who can least afford to pay,” Chang-Diaz and Eldridge conclude. “In other words, if we put aside the political calculations for a moment and focus on the facts, raising the income tax is the best solution to our fiscal crisis.” In theory.

Perhaps Chang-Diaz and Eldridge overstate things when they refer to a budget “crisis.” As Beacon Hill Institute’s David G. Tuerck points out, “According to a [Boston Globe] article of Oct. 15, 1994, the budget ‘was a chronic source of anxiety for taxpayers’ and ‘a ticking time bomb on the verge of wrecking havoc with Massachusetts’s economy’ during most of Governor William F. Weld’s first term in office. That period of fiscal anxiety came to an end, however, with the FY 1995 budget, which was, according to the article, ‘in vintage ways, a vital Weld achievement,’ aided by ‘original thinking’ and ‘good fortune.’ Members of both parties praised the governor, who went on to easy reelection, for this fiscal accomplishment.

“Now fast-forward to the 2010 budget,” Tuerck continues. “How much, we might ask, would the state have to spend in 2010 in order to achieve what was seen as sound budgeting just 15 years ago? The answer, after adjusting for inflation and population growth, is $26.78 billion. Next let’s ask how much the state could budget for 2010, given the existing revenue outlook. If we take the average of the highest and the lowest forecasts offered at the Senate hearing, we get $18.35 billion in state tax revenue. Combining this revenue with various non-tax revenues already figured on by Governor Patrick in crafting his budget, the state could spend $26.79 billion in 2010, $10 million more than it would need in order to match what Weld accomplished with his vaunted 1995 budget.

“True, the state has come to spend more generously in recent years, but a return to the standards of 1995 can hardly be seen as ‘catastrophic.’ To argue otherwise is to engage in Chicken Little economics.”

Doesn’t it sound like Chang-Diaz and Eldridge are engaging in what Tuerck condemns?