Voters have a chance to cut their state income tax by
approving Question 4 next week. They should. It would send a much-needed message about fiscal discipline to Beacon Hill.
Question 4 proposes to cut the state income tax from 5.85 percent to 5 percent over three years. Now is the time to do that, with the state sitting on a $900 million surplus and revenues continuing to pour in.
The tax rate was raised from 5 percent to the current level on a close vote by the Legislature in 1989 during hard economic times. The increase was intended to be temporary, but it has become permanent.
The tax increase was needed in part because state government had become so bloated during the so-called "Massachusetts Miracle" of the 1980s that it couldn't weather the recession. Clearly, the best way to prevent repeating that mistake is to set effective limits on government growth. Controlling tax revenues is the most effective limit possible.
Opponents of Question 4 say it would cost the state more than $1 billion in revenue per year when fully implemented, severely restricting the state's ability to "invest in our future."
The tax cut would indeed reduce the amount of our money sent to state government, but projections of the Massachusetts Taxpayers Foundation, a respected, industry-backed, government watchdog, indicate that surpluses would continue. Its projections show that even with a slowing economy, the state could run surpluses through 2005 with the income tax cut to 5 percent. This requires that the rate of increase in state spending be reduced to about 4.5 percent per year. The budget for this fiscal year was 5.6 percent more than the previous year.
By backing Question 4, voters would be telling politicians that they favor smaller government. We would still need to ensure that our elected representatives control state government growth rather than reduce direct services or local aid allotments, but unless we send this message, there is little to deter Beacon Hill from bringing us more disasters like the "Big Dig."
Some legislators and opponents of Question 4 say the current surplus should be used to pay off the state's debt. That might be a reasonable expectation, but in fact, no plan is in place to pay off the debt and no public discussion about debt reduction took place until the tax-cut referendum was added to the ballot.
While opponents focus on the money the state would not get should Question 4 pass, they ignore the other half of the equation: $1 billion a year more circulating in the state. The money would not disappear. Some would come back to the state as other taxes. More of it would be invested in the state's economy.
Moreover, a lower income-tax rate would help make our expensive state more competitive in attracting and keeping business. The lower rate would also make the state more appealing to workers seeking to locate here.
Reducing the income-tax rate is not the end of the world, as some critics charge. Passing the initiative would not prevent future increases, but it would be the beginning of more thoughtful, prudent state government.