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What is Tax Fairness in Massachusetts?

Posted by Brad MacDougall on Dec 2, 2013 8:59:00 AM

Is the Massachusetts Tax Fairness Commission an oxymoron?

Tax FairnessIt’s difficult to conclude otherwise about a commission that appears to view fairness exclusively through the lens of redistributing revenue from the productive sectors of the economy to the government. When the primary conversation about tax fairness starts with “How progressive is the tax?” you know the analysis is fraught with bias and ready to veer from math towards politics. 

Put another way, commission debates seem to reflect the classic aphorism that a fair tax is one I don’t have to pay.

The Tax Fairness Commission has a broad charge to “review and evaluate the equity of historical tax rates and methods in relation to the changing income and wealth of residents of the commonwealth since 1990.”  The panel has already voted on guiding principles, discussed the definitions of a “fair tax” and “adequate” tax revenues, and digested tax data.  Those conversations will become the body of a report due by March 1, 2014.

The ideas put forward by the commission so far range from a graduated income tax, which has been rejected on multiple occasions by Massachusetts voters, to increasing tax rates and the personal exemption, to extending the sales tax to all business services and creating a “Household Income Tax Credit” available to taxpayers below a certain income who file a return.

The commission plans to discuss “remedies” to the tax system at its next meeting tomorrow at 1:30 pm in the Comptroller’s Office, One Ashburton Place, Ninth Floor. The meeting notice is instructive: “The Tax Fairness Commission is charged with making recommendations for how to make the commonwealth’s tax system fairer. The commission, thus far, has identified areas in the tax system that add to its overall regressivity.”

Employers fear that good intentioned but misguided tax prescriptions will sicken an economy already weakened with an unemployment rate that surged from 6.4 to 7.2 percent between April and October. Jobs and economic opportunity, after all, occupy the center of the tax debate because only a vibrant, private-sector economy creates opportunity that binds the social, governmental, and economic foundations of the commonwealth.

AIM stands for jobs, fiscal predictability, business formation, innovation, education and a government that acknowledges that the private sector has the unique ability and responsibility to create the common wealth for the people of Massachusetts. The creation of a job and a person’s ability to do it weaves together every important aspect of social and economic stability – the desire for a better life, the ability to support a family, the confidence to start a business, and the need to support efficient government management of services such as education, health care, and public safety.

But the Tax Fairness Commission’s definition of equity threatens to upend the delicate balance of person, employer and job and ultimately push job opportunities to other locations - or eliminated them altogether.

A flat world economy where capital is increasingly mobile leaves no room for miscalculation.  Excessive “Massachusetts-only” regulations and costs of doing business are unsustainable and put jobs at risk. And when the job is gone, the economic hope of the person and the prospect of economic security for his or her family go with it.

That’s tax fairness.

Here is an initial list of “remedies” compiled thus far by the commission:

Income Taxes

  • Raise the Commonwealth’s EITC match, which is currently 15% of the Federal EITC
  • Adjusting the different rates for various sources of income
  • Graduated income tax structure
  • Increase rates and increase personal exemption/standard deduction
  • Create more refundable tax credits/make more current credits refundable
  • Expand the Circuit Breaker to all homeowners and renters, not just seniors
  • Increase the dependent exemption
  • Increase the renter’s deduction
  • Create a “Household Income Tax Credit”, which would be available to taxpayers below a certain income who file a return. Credit could vary by income and family size and could be refundable.
  • Create a “Sales Tax Relief Credit” to offset sales tax burden on low income taxpayers

Sales & Excise Taxes

  • Selective sales tax
  • Luxury item tax
  • Taxing services
  • Graduated sales tax
  • Eliminate sales tax exemption on clothing, and offer an offsetting “Household” income tax credit to low and moderate income households
  • Online sales tax
  • Modernize the sales tax to treat all comparable products equally regardless of the manner or medium in which they are sold, ie. Expand base to include digital products
  • Eliminate sales tax expenditures that have only a few recipients
  • Recommend that the Legislature act upon CPAT’s recommendations on the TEB
  • Tax marijuana
  • Self-reporting sales tax on items over a certain amount

 

Property Taxes

  • Homestead exemption
  • Prop 2 ½
  • Extend work off program beyond seniors

Administrative Changes

  • Compliance fixes
  • Are there any taxes that bring in insignificant amounts and that also bring in less than they cost to administer? If so, recommend repeal.

Other Taxes Impacting Individuals

  • Raise estate tax exemption from $1M
  • Taxation of students
  • Wealth Tax
  • Vehicle miles driven tax
  • Higher education surcharge

Topics: Massachusetts economy, Massachusetts employers, Taxes

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