Greg Roach's Berkshires Blog
Sunday, December 02, 2007
  A Really Bad Idea
Having lived in a state with no income tax (Washington) and understanding the basics of budgeting, I can assure you that the only folks who will come out ahead on this asinine proposal are the top 5% of all wage earners:
It’s the kind of ballot question that would seem irresistible to most voters — whether or not to eliminate the Massachusetts state income tax.

The radical change in tax law would put thousands of dollars back in the pockets of families, but critics say it would deal a dire blow to key services, from education to transportation, wiping out 40 percent of state revenues.
While some state spending will certainly be cut, other taxes (or "fees", as our former Governor used say, to hide his tax increases from Republicans in Iowa and New Hampshire) will most certainly go up to avoid draconian cuts in education, etc....

What's the problem with the idea of forcing gov't to spend less by cutting off almost half of all state income?

Well, for starters, no one on Beacon Hill is going to slash 40% of state spending so let's look at the more likely alternatives. How about raising the sales tax? (Or consumption tax some like to frame it.) Those of us who earn near the state average household income, or less, *spend* the vast majority of our paychecks on taxable items. Aside from food, you get dinged by the tax man on almost every penny in your take home pay. However, if I earned $200K/year I would probably be "saving" more and spending a much larger percentage out of state. Hence, lower tax rates.

Perhaps we could raise property taxes. Again, a horrible idea given that the average homestead in Massachusetts is already overvalued and being taxed way too much because of the recent housing bubble. And creating more disincentives to home ownership is the last thing you want to do in a bear-market like the current one.

The income tax hits most people pretty fairly. It can be argued that it is too high, or too low, but the idea that it should be replaced by other revenue streams is short-sighted and designed to play upon the passions and ignorance of a typical voter while only actually benefiting a tiny sliver of the wealthiest residents.

"Hey Bob! Do you want to stop paying state income taxes?!?!"

'nuf said.
Look those that run things can't do anything without money, lots of money. People for the most part believe that you should contribute to funding the government in the form of taxation. The problem is our tax system is not equitable for all. By replacing the income tax with a user tax system is also un equitable, but better than the existing system, as far as fairness goes. But then bread will cost you five cents and the tax will be three dollars. I have lived in "No Income Tax" States and the down side is that they clip you mercilessly at every turn with fees and cost add ons, more than making up for any lost revenue. My system would trash the current one with all it's loop holes and install one that simply put....YOU MAKE A DOLLAR YOU PAY A DIME! No deductions, no loop holes, no funny business. No complicated multiple tax forms or the need for a tax attorney, just one slip of paper...You made this much you owe us this much....Simple and fair through out the whole spectrum of erners.....
key services are wiped out now....maybe abolishing the income tax would send a message that government waste is no longer accepted.....

Chris - Aren't you doing finish carpentry with a sledgehammer with this approach?

Mass's income tax is pretty damn simple compared to many. Just transfer you Federal AGI and enter any state specific deductions and presto... done.

Also, I have not seen any Mass specific audits of state spending, but in other states when they've been made public, the "waste" is usually less than 1% or 2%.

Gov't does a decent job. Things like uniformed cops on all road construction sites can be debated, but in actuality things like that only rack up tiny, tiny percentages of spending.

Jack - I agree. Blanket Consumer taxes are the most unfair of all. As I said, someone who spends their entire paycheck just to get by will have a far higher percentage of their income go to the state than the wealthy. Fair? Hell no.
Jack--a flat tax is appealing on some levels, but what you do when you institute one is totally remove the power of the tax laws to incentivize and discourage.

Government uses tax law to encourage business growth, home ownership, charitable giving, personal savings, and green energy sources.

Under a flat system, money spent on business expenses and travel--vital business-building activities for small Schedule E businesses--would be taxable. Charitable giving would plummet because of the lack of tax incentive. Home equity borrowing would cost a LOT more, so fewer people would take them out: your housing stock deteriorates, fewer kids go to college.

People look at big companies and corporate welfare recipients as shining examples of why we "need" a flat tax--but it ain't so, Joe. Or, Jack. Sometimes, as much as you want to, you can't put a simple solution to a complex problem.
Ross, ross, ross....Are you saying that we need an unfair tax system in order for our government to function and stimmulate our economy? I find that hard to swallow. A flat tax system will still generate needed revenues, but in a fair way. Using the tax system as a political, financial hammer is not what it was meant for. In the first place the rate would drop considerably, why...because those that benefit most from the current unfair system will demand it to!
You are under the impression that the government will cease to function and the sky will fall if you revert to a flat tax. After the initial panic by the beneficiaries of our current system is over, all will be fine.
A well-designed graduated income tax system is the fairest of them all -- it's just that we don't necessarily comply with that "well designed" part.

Exactely.... that's why it should be trashed and a flat tax installed!
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