THIRTY YEARS ago, Massachusetts voters overwhelmingly passed Proposition 2 1/2, the ballot initiative to cut an unthinkable $1.5 billion from local property (and auto excise) taxes — almost 20 percent of all state and local revenues at the time. A riled-up populace voted itself this colossal tax cut by a margin of 17 points, ignoring the dire warnings of slashed services by pickle-faced politicians.
As Barbara Anderson, leader of the citizens’ movement behind Prop. 2 1/2, put it on election night: “We supporters were pushing the joy of sex, and the opponents were trying to sell the fear of pregnancy.’’
Now that the yowling infant is a respectable adult, most people feel fondly toward the tax-cap measure. Indeed, some supporters of Question 3, the sales-tax rollback on this year’s ballot, cite the success of
Prop. 2 1/2 t o defend their views.
But such voters forget the immediate aftermath of Prop. 2 1/2.There was panic in local government. Wall Street lowered or suspended bond ratings for dozens of cities and towns. Boston, cut to below investment grade, considered closing City Hospital. Unions and others marched, calling for repeal.
It was only massive infusions of local aid that stabilized municipalities and made
2 1/2 work . After some initial hostility, local officials teamed up with Anderson and legislative leaders to vastly increase state aid to the cities and towns. Aid amounts grew from $866 million in fiscal year 1981 (when 2 1/2 passed) to $1.6 billion in 1985, according to the Department of Revenue. By the 1989 fiscal year, local aid had tripled.
This had the effect of shifting the tax burden from local governments to the state. “The concept was the state sharing our broad-based tax revenues with the cities and towns,’’ Anderson said recently. James Segal, director of the Massachusetts Municipal Association at the time, agrees. “It was the state taking up an increased share, especially in education.’’
That kind of luxury doesn’t exist now. In the early 1980s state revenues grew an average of 12 percent a year; hardly parallel to today, when the state faces a $2 billion deficit. “There are very obvious differences,’’ said Michael Widmer of the business-backed Massachusetts Taxpayers Foundation, which opposes Question 3. “We’re in the middle of a fiscal crisis.’’
Many who initially decried Prop. 2 1/2 (and I was one) now concede it helped bring accountability to local government. And, because the property tax is the most regressive of all levies, shifting to state (sales, income, and corporate) revenues did have the effect of making the overall tax burden in Massachusetts fairer.
The trouble with Question 3 — which would slice the sales tax from 6.25 to 3 percent — is that the additional billions in lost state revenue will inevitably put pressure back on the property tax, shifting the balance again to the most unfair burden of all. Besides its other baneful effects, Question 3 would undercut much of the good
Prop. 2 1/2 accomplished. That hardly seems a proper birthday gift.
Anderson is concerned about the rollback forcing a proliferation of Prop. 2 1/2 override attempts, though she generally supports a yes vote on Question 3. “If the people don’t send a message, the little brains on Beacon Hill interpret that as ‘people just love taxes,’ ’’ she said. But Anderson would prefer a sales tax of 5 percent. “If I’m doing perfect tax policy, the sales tax isn’t what I’m going after.’’
As in their unsuccessful campaign to eliminate the income tax in 2008, the sponsors of Question 3 rely on some fuzzy math. Carla Howell, who chairs the Vote Yes on 3 campaign, says it would save the average family $900 a year; but to save that much the family would have to spend $30,000 just on taxable items (not food, most clothing, housing, healthcare, or utilities), which is a lot more consumption than most ordinary folks indulge in.
Since 1980, the state has taken over a bigger share of responsibility for local budgets, including the schools and county courts. Question 3 would make that continued commitment unsustainable. “You can’t cut revenue in half without some sort of alternative,’’ said Segal. “With 2 1/2, the alternative was to get state monies.’’
And if state monies are severely cut, it seems clear what the alternative will be.
Renée Loth’s column appears regularly in the Globe. 
