Tax cut: drawing the battle lines
Voters express passion on both sides of issue
As Tricia Tham sees it, public schools have the most to lose if voters next month approve a ballot question to repeal the state income tax. So she planted a "Vote No on Question 1" sign in front of her home in West Newbury.
"There are a lot of reasons why we need tax dollars," said Tham, 39, whose children, ages 6 and 8, attend the local elementary school. "And number one is the schools. Public school budgets already are tight. . . . It will only be harder on families if this passes."
Her children's school had no extra cash to buy picnic tables or balls for the school playground. A "wish list" of supplies, including pencils, notebooks, tissues, and other items, is sent home.
"And like every school, we're always raising money, selling wrapping paper," Tham said, seated at her kitchen table. "There just isn't enough money to go around."
But Daniel Killoran of Lynn isn't worried about public education dollars. "Our educational system is a disaster," said Killoran, 41, who sent his three kids, ages 20, 17, and 15, to private schools. "If there is a problem, all we ever do is throw more money at them."
And so he's put "Vote YES on Question 1" signs and bumper stickers on his black truck. "I get a lot of looks, that's for sure," said Killoran, a sel f-employed Web designer. "I hope it makes people think."
At issue is the state's 5.3 percent income tax. At stake is $12.5 billion in annual tax revenues, or about 40 percent of the $28 billion state budget, according to the state Department of Revenue.
Question 1 would cut the income tax in half, to 2.65 percent, as of Jan. 1, and eliminate it on Jan. 1, 2010.
With the economy in turmoil and the Nov. 4 election just around the corner, organizers on each side are locked in heated battle. Dueling signs, bumper stickers, direct mailings, and websites make the case for voting "yes" or "no" on Question 1.
The income tax funds education, healthcare, transportation, and other statewide spending. It also is a key source of local aid for cities and towns.
"This is a dollars-and-cents issue," said Steve Crawford, spokesman for the Coalition for Our Communities, a group backed by labor unions and other groups, which is behind the "Vote No" campaign. "It requires a dollars-and-cents answer. People understand that if you cut one place, you need to make it up somewhere else."
Carla Howell, cochairwoman of The Committee for Small Government, which put the question on the ballot, counters that the state doesn't need any extra revenue.
The average taxpayer would save $3,700 per year if the tax is repealed, she said.
"We have to force the Legislature to cut the waste out of the budget," said Howell, a Libertarian candidate for governor in 2002.
"It's critical to the economy of Massachusetts, and the future of the state, that we end the income tax."
Income taxes are the state's single largest source of tax revenue.
In the fiscal year that ended June 30, the state collected $21 billion in corporate, sales, and income taxes combined. Income tax dollars were $12.5 billion, or about 45 percent of total tax collections, according to the state Department of Revenue.
The department is preparing an analysis of the impact of Question 1 that will be released before Election Day. "It will be a flat-out numbers analysis," said Bob Bliss, a department spokesman. "It certainly is within the job of DOR to perform an analysis of fiscal and economic impact of what a ballot question would be."
Two reports issued last week give a mixed view on the financial impact of Question 1. A study prepared for four business groups - Associated Industries of Massachusetts, the Greater Boston Chamber of Commerce, the Massachusetts Business Roundtable, and the Massachusetts Taxpayer Foundation - concludes that the repeal would deal "a disabling blow to state and local government services," which could harm the state's economy in the long term.
But a study prepared by The Beacon Hill Institute at Suffolk University, a nonpartisan think tank, concluded the state could adjust spending if Question 1 passes.
But it would require deep spending cuts, and raising sales and property taxes to make up revenue, according to the report.
Question 1 supporters are skeptical about the predictions of tax hikes.
"We have Proposition 2 1/2 to limit the property tax increase," said Killoran. "They can't just all of a sudden start raising taxes."
"Let them cut, cut, cut," said Joyce Toto, 57, of Saugus, who stood recently with a McCain/Palin sign in Saugus center. "Why do we have to put any money back into the budget? Get rid of the waste."
Income tax proposals have been on the ballot twice in recent years. In 2000, voters approved a gradual rollback of the tax from 5.85 percent to 5 percent. But two years later, the Legislature passed a law to freeze the rate at 5.3 percent, the current rate, according to DOR.
In 2002, another ballot question to eliminate the income tax nearly passed, garnering 45 percent statewide. Locally, the measure passed in 16 communities, including towns such as Saugus and Groveland, and cities including Haverhill, Peabody, and Revere.
Now, with the economy approaching recession, some "Vote No" backers worry the question could pass this time around.
"I think it could pass because of the economic situation right now," said Barbara Haack, 70, a retired teacher who runs a pottery business from her home in West Newbury. "People are scared. They're trying to hang on to all the money they have."
"I really am afraid it could pass," said Patrick Ryan, 50, a machinist at
"It's a scary thought. . . . It sounds simple to eliminate the income tax. But we all know that people are going to have to pay [for the lost revenue] one way or another. "
Ryan is helping his GE union to campaign against the repeal. "The fairest way to pay for programs or services is through a broad-based tax where we all pay a little," he said.
But others clearly find the repeal appealing.
"I've been working for 40 years," said Joanne Adams, 58, of Saugus, who works at her family's consulting business in Everett. "I struggle more, and bring home less."
Her 401(k) retirement plan has been hurt by the stock meltdown. She also is paying more for health insurance, Adams said.
"I bring home a little more than half of my gross," she said, standing in Saugus center. "I don't want to give the government any more of my money."
Kathy McCabe can be reached at kmccabe@globe.com. 