Patrick tax plan DOA, but it's a start

The Outraged Liberal ponders the governor's plan to increase the income tax but cut the sales tax:

As a practical matter, the proposal was dead on arrival. But it will no doubt launch a loud and raucous debate about the quality of life and services in Massachusetts and our neighbors. That alone would be debate worth having -- and may have been an underlying goal of Deval's Dream Speech.

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What shockes me

is no word from our Historic Senator (first women of color)! She ran on her BS platform, "The Middle Class is getting hammered", but hey i didn't vote for her.

It was evident from the beginning that she would follow suit and never criticize her fellow Democrats. "I'll be a bipartisan Voice for the middle class", well Liz what have you say?

Except for a few typos

...there's nothing particularly grammatically bad about the post, especially for an online post which people often do quickly or from a phone. I see TONS of glaring grammatical errors and typos every time I read respected media, let alone the more cheesy variety, even the NY Times. And they have well paid professional editors and others whose job is to catch errors made by usually professional writers and reporters.

Still an irritation to me

As much as I like Warren, I never quite got the Native American thing, or liberals' response to it. So, is she the first Native American senator from Massachusetts, or not? Is she still "proud of her Native American heritage?" I don't see how the answer can be both "yes" and "no". Did Warren ever acknowledge that she was not really, in any ethnic or cultural sense, a Native American? You can't just make up your own ethnicity.
But whatever. I'm sure she'll be a good senator, and I hope Scott Brown stays retired permanently.

More to the point of this post, why is Patrick's tax plan DOA? It seems pretty sensible to me.

Blown way out of proportion

Warren said that she believed he had Native American ancestry. Other family sources concurred. I found her explanation plausible.

As to whether she checked that box on the Harvard application to improve her chance of being hired, well, given her qualifications it seems very hard to believe that she was relying on that. Harvard said it had nothing to do with her hiring.

Neither Scott Brown nor you know why she checked that box. By the end of the campaign I had become highly irritated with Brown for pretending that he did. Can't we finally put this nonissue to bed?

as one who is..

a saver as opposed to a spender, I do not like this plan.
Also, how does an income tax hike affect those who have no earned income?

Taxes

Taxes discourage that which is taxed. Would we rather discourage income or consumption? Eliminate the income tax and jack up the sales tax accordingly.

Given that food and clothing is exempt from the sales tax, it's not AS regressive as it could be...

Will you work less because

Will you work less because you are taxed more? Common misinterpretation of the Laffer Curve, proved wrong. Before spinning falsehoods, look at what you are saying. ESPECIALLY with a fixed flat income tax rate. These aren't marginal rates.

Does the gas tax discourage you from driving? Do you drive up to NH to buy things? Gimme a break, man.

Sales tax marginalizes the low wage earners in the state. A larger percent of a low wage earner's income goes to consumption versus someone making $100,000. This banal argument that income tax discourages work is ridiculous. You just look uneducated if you say something like that.

Quick thoughts on the State of the Commonwealth

Those were some interesting proposals from the Gov. last night. Some brief thoughts:

1% increase on the income side is a non-trivial increase, and going over 6% is a significant psychological concern, particularly if you want to be selling MA to businesses out of state or trying to convice our startups to stay here. I think it might be better to aim for 5.95% if the income tax is going to go up.

Down to 4.5% on the sales tax is also an interesting idea, but if we do that, online sales must be subject to the sales tax, even if the merchant does not have a bricks-and-mortar presence in MA.

Devoting the sales tax to public infrastructure as its funding stream does not seem to me to be the right approach - after all, the 1% of the sales tax to the T idea has flopped. I would like to have dedicated funding for transportation, but the sales tax seems a little too unreliable to be that (and see below).

Further, I really dislike the notion of using a single bucket of funding for all "public infrastructure". Transporation infrastructure must be separated out, or we will have towns building $200M high schools (which are only for people in those towns) and draining money out of the fund which should really be used for transport projects that directly benefits a much larger group of people (I recognize that education is a positive externality that indirectly benefits all).

I didn't hear anything (I missed a portion of the speech) about increased user fees for transporation infrastructure (tolls, fares, mileage-based registration fees). Is that off the table? If so, why?

transportation fees

The plan that MassDOT put out there on Monday explains a lot more of the details, but as I understand it, there are a number of user fees that will increase. Fares will increase by smaller amounts than last summer and more regularly, as will tolls. Likewise RMV fees, but at a different rate. That's more like how other states do it, as opposed to our "punctuated pandemonium and outrage" model. Periodic freak-outs aren't great, but they do get people off their ass. The regular increases are a bit more of the "how to boil a frog" scenario - which means we're lulled into accepting regular increases.

The other thing to keep in mind is that this is the Governor's PROPOSAL. He does not expect it to pass. The idea is to put something on the table for the Legislature to say "hey man thas crazy." But then THEY have to propose some sort of solution. The important aspect of what MassDOT released on Monday (available on-line) was the proforma that was included. The numbers are solid and jive with what all the nonpartisan groups and reports have been saying for the past 5-6 years. So you really look like an idiot if you stand up and say "we need to do more reform before we raise additional revenue."

There is more reform to do but it's a piss stream in a raging ocean of red ink and crumbling infrastructure. Eventually a bridge will collapse or something critical will give out and people will die. Then the same assholes who say "no new revenue" will be saying "why didn't someone do SOMETHING???"

So the ball is in the Legislature's court. You don't like a progressive income tax set-up with a less regressive sales tax, well then what do you suggest beyond prayer and scratch tickets? Gas tax? (already a known dead-end with more efficient cars and less driving occurring in general -- the fed transpo trust fund fed by the gas tax has been in the red for years - we backfill from general revenue at the fed level) Payroll tax? (Yeah your business buddies love that one.) Quick-pick on the Megamillions?

service cuts

oh yeah, I forgot, service cuts are also planned for some additional savings. Check out ridership numbers for the buses and you should be able to guess which ones are on the block. In fact just go back to the shitty scenario they had proposed last year and that probably gives you the buses/train runs they plan to axe.

If one of them happens to be a favorite of yours, you might want to talk to your local elected yahoo.

Lame Duck

I'm a good kool-aid drinking liberal so I'm not opposed to taxes in theory.

But this makes no sense right now. Why - after a major recession that MASS is just starting to crawl out of and AFTER the payroll tax just went up 2% - would lame duck Deval propose this increase?

1% is not trivial, especially for higher earning middle class families. Boston and MA in general are expensive places to live so 100K households aren't "rich" relative to the costs of living in this area. A 1% increase - on top of a 2% payroll tax increase - is going to hurt.

I'd have more respect for this plan if Deval introduced it prior to him running for re-election. But now that we know he's not running again, this lame duck proposal seems a bit cowardly.

Without diving into a

Without diving into a graduated income tax idea, Patrick did the next best thing by lowering sales tax and raising income taxes. In the end, flat income tax will always be unfair to the lower wage earners, but the sales tax is also intrinsically bias towards low wage earners as well. Kudos for him standing up and telling the State that in order to be the best, we need to make investments.

I love how he is targeting direct projects for the additional funds, and not just appropriating them to general projects that end up taking years to complete, and end up being unnoticeable by the general populous.

I agree with a previous poster who said that putting all public works funds into one pot that is fueled by sales tax is a bad idea. Look at what Mitt did to the T.

All in all, Patrick wants to cement his legacy here and will do it in fine fashion, we need everything he is talking about, this isn't just dumping money into the same old shitty bureaucratic non-compete bid projects that this state loves to take on. I think most people agree that investing in our state is a good thing when we have targeted goals that our investment will be used for.

taxes

A graduated State income tax would require a change to the Massachusetts constitution. It's one tax rate for all, no brackets. However the exemption can be increased and that's what ol' gimpy duck did. He doubled the exemption. The Globe had a graph of the effect of this on the front page.

What that boils down to is people with taxable income below $32,000 (individual) and $64,000 (couple) would see their taxes go down under the proposal, and for people above that, taxes would go up. Now this applies to your taxable income, not to your salary. So if you go through your deductions (medical savings account, commuting expenses, student loans, mortgage deduction or whatever), a couple making $85,000 could still see flat or lower taxes in this scenario (if I'm understanding this right).

And as a friend pointed out to me, median household income in 2011 was about $66,000, so while the proposal does increase income tax rates, a majority of people would actually pay lower income taxes as a result of the plan.

When you add this to the reduction in the very regressive sales tax (the poors pay a larger percentage of their income than the toffs), then this is about as progressive as it gets.

The business community seems to have been convinced that something needs to be done about transportation investment, but we'll see what their proposal is on how to fund it. We wouldn't want to chase the "job creators" out of the state to ....I don't know North Dakota? This sort of explains why some folks with deep pockets have been pushing a gas tax. It's a user fee and makes sense in that way, but it's a dead-end. It should probably be part of the mix but realistically we should be getting transportation revenue from a bunch of different sources, like fares, tolls, fees, gas taxes, maybe even some sort of value capture tax on developments whose appraised values go up because they are located next to transit (transit oriented development). And of course automated tolling gets rid of the remaining toll takers and there are other little bits of reform that can bring in dribs and drabs here and there.

I don't see a graduated state income tax on the horizon.

It is an interesting post, and I will read it, and the cases, when and if I get the time this weekend. I think that one thing is clear regardless of the constitutional question, however: that there is little political appetite or popular support for a graduated income tax in view of what's happening at the federal level.

I think this because lot of people who will go along with an approach resembling what has been proposed by the Governor, are going to draw the line before a graduated state income tax, unless we start pulling back a lot more of what we send to Washington. That's not likely to happen anytime soon, although, the shenanigans with the Sandy relief funds have highlighted just how large the discrepancies are between donor (or in the parlance of the right, "maker") states and the recipient ("taker") states (which is a nice little irony since a majority of so many of the "taker" states are inhabited by people right of center, who are constantly beating the smaller government lower taxes drum - maybe they'll get their wish someday?).