and the
Citizens Economic Research Foundation


Barbara's Column
November  2003 #2

How lawmakers can help
before heading home for the holidays
by Barbara Anderson

The Salem News
Saturday, November 8, 2003

The Legislature is working on an "economic stimulus package." Gov. Mitt Romney, the House and the Senate, all have their own versions. May the best provisions win.

The Senate Ways & Means Committee originally proposed a sales tax holiday for one day in December and for Patriot's Day. But it hasn't been very well received.

I know how its proponents must feel. I suggested a December moratorium to Governor Weld in the early '90s and he didn't like it either. I don't know about Patriot's Day, but it still seems to me that it would be a good idea to learn the fiscal impact of a Christmas shopping tax holiday.

Maybe shoppers who normally go to New Hampshire would stay in Massachusetts; maybe if the holiday was advertised in neighboring states, their shoppers would come here and help jump-start our economy. For sure, people like me would do a little more buying than we'd planned, just to experience the joy of not being taxed.

But the best thing the Legislature can do for the economy is to cut taxes and get out of the way of economic activity. Our total per-capita tax burden is still fifth highest in the country. This doesn't encourage businesses or productive individuals to want to move here, especially when combined with high housing costs.

The Legislature has helped by refusing to raise the income tax rate this year, despite the pleadings of the usual suspects -- public employee unions, the municipal associations, and the so-called Massachusetts Taxpayers Foundation.

The big-business-backed MTF's latest news release reports that "cuts in state aid lead to higher property tax burdens" and that these burdens "are a particular problem for the state's poorer cities and towns." This concern would be heartwarming if MTF hadn't opposed Proposition 2 in 1980.

Sometimes I'd like to get even with the banks, insurance companies, utilities, law firms and consultants that want to raise taxes on working people like me by actively supporting taxes on them. If I knew some way to tax MTF businesses without hurting their employees, customers, and the economy, I would file the bill myself.

But business taxes are usually just passed along to consumers or employees in the form of lower wages. If a smaller business can't pass taxes along without being at a competitive disadvantage, they can be forced to lay off people, or even shut down.

Since business creates the jobs that provide all the revenue for all state services, it is usually counterproductive to raise its taxes. Yet one bill being debated on Beacon Hill this month is a change in the classification ratio, proposed by Boston Mayor Tom Menino.

Once upon a time, the state constitution required that all property be taxed at full and fair market value, with the same rate in each community for commercial, industrial and residential properties. Because this was before Proposition 2, when Massachusetts property taxes were the highest in the nation if not the world, some communities ignored the constitution and taxed businesses more by artificially lowering residential values.

A court ruling told them to stop this and ordered revaluation. This would have meant a huge property tax shift from business to residential, so the Legislature put a constitutional amendment on the 1978 ballot to allow different classes of property to be taxed at different rates.

Classification was supported by voters not because they were anti-business, but because they were afraid of losing their homes once they had to pay their full share of the burden. Prop 2 helped limit all property taxes, and most communities tax all property at the same rate; but in those that don't, a shift now occurs during recessions, when commercial property often has a lower value than residential.

I hate to see higher property taxes for homeowners, but business shouldn't have to pick up their share. On the other hand, our state tax dollars shouldn't be used to subsidize politically favored businesses or those obscure state agencies that supposedly service them. Both the House and Senate pass out government money like candy to these entities, with little oversight. Senate Republican tried unsuccessfully this week to remove corporate welfare provisions from the Senate package. The House has them as well.

Legislators should assist all businesses by reforming the unemployment insurance system before they go home in mid-November. I also like the proposal to reimburse bars and restaurants for renovations they made at the request of local governments to separate smokers and non-smokers, just before the community passed a total smoking ban. Erratic behavior like this makes reasonable people hate government.

Finally, the Legislature should seriously consider the many reforms and savings proposed by MTF analysts, the Pioneer Institute, Gov. Romney, and others. A tighter, more efficient state government would be very good for the Massachusetts economy, and its taxpayers.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem News and Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the Providence Journal and other newspapers.

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