The tax no one wants to talk about
MASSACHUSETTS is facing a budget crisis of epic proportions. Based on current revenue projections, we are starting with $3 billion less in revenue than when we crafted the budget this time last year. Meanwhile, costs are going up, and more and more people are in need of temporary help from the state due to the recession.
It's a difficult situation, and there are no easy solutions. But the tool to solve this budget crisis does exist, if we are willing to show the political leadership 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.
"Taxes" is often thought of as the dirtiest word in politics. Yet 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?
A fair tax system asks residents to contribute to the cost of government services based on their ability to pay - and few people would consider a tax system to be fair if the poorer you are, the greater proportion of your income you pay in taxes. But that's exactly what more regressive taxes - such as a sales or cigarette tax - do. They ask those who can least afford it to pay more.
Of course, 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 is a better solution than drastic cuts to vital services.
Still, a better solution exists - and it's the role of the Legislature to find the best, most fair solution for preserving the things we believe in as a state.
Increasing the income tax by one percent would raise approximately $2 billion for the Commonwealth. 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.
At the same time, because the income tax is more progressive, it relies more heavily on those who can most afford to pay it. At a time when so many are facing unemployment, the income tax recognizes the difference between the person who has been laid off and the person who still has a job. The sales tax does not. Under such a plan, families making between $40,000 and $60,000 would pay, on average, less than $7 extra a week.
There are also ways we could modify the income tax to make it even more progressive. Over the long haul, an amendment to the Constitution would allow the Commonwealth to join 34 states and the federal government in establishing a tiered, progressive tax rate system. But even this year, we could raise the personal exemption, increase the state Earned Income Tax Credit, or expand the Property Tax Circuitbreaker, so that more of the revenue we raise is coming from taxpayers with higher incomes, while lowering taxes for those near the bottom.
Massachusetts is facing an enormous crisis, but we have the ability to meet this challenge. We are one of the richest states in the country - and, "Taxachusetts" jokes not withstanding, we rank in the bottom half of all states in terms of the overall amount of taxes we pay as a share of personal income.
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. 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.
Sonia Chang-Diaz is a Democratic state senator from Jamaica Plain. Jamie Eldridge is a Democratic state senator from Acton.