Ballot proposals raise and lower taxes
The tax paradox could emerge as an intriguing aspect to next year's election.
One initiative dubbed the "millionaire tax" — its sponsors call it the Fair Share Amendment — would impose a surtax of 4 percent on any portion of an individual's annual income that exceeds $1 million. It's estimated to raise $1.9 billion in annual revenue for the state.
The Retailers Association of Massachusetts filed several versions of a proposed ballot question that would reduce the state's 6.25 percent sales tax to either 5 percent or 4.5 percent. Some versions would also require the state hold a sales tax holiday each summer.
Since each 1 percent of the sales tax translates to roughly $1 billion for the state, the projected revenue loss would be $1.25 billion to $1.75 billion, nearly enough to cancel out higher taxes on the wealthy.
So could voters giveth and taketh away when it comes to taxes? Some very early polling suggests support for both measures, and not surprisingly. Consumers would welcome saving some cash at the mall and many struggling to make ends meet would feel little guilt over asking the rich to pay a bit more in taxes.
There is no certainty that any of the ballot initiatives will actually reach voters. The petitions could be withdrawn, ruled unconstitutional or fail to collect the requisite 64,750 signatures among other potential roadblocks. Historically, only a handful of questions make it to the finish line.
The millionaire tax amendment has already qualified for the ballot on the strength of successive votes by two Legislatures, though some of its provisions could face legal challenges.
Still, should both make the ballot and pass, the ramifications would go well beyond a simple tax trade-off.
By law, fixed portions of sales tax revenue are dedicated to the MBTA and the Massachusetts School Building Authority. They would continue to receive the same share even if the tax rate was reduced, leaving an even smaller portion of revenue for the state's general fund.
Under the millionaire tax proposal, all newly-generated revenue would be dedicated for education and transportation purposes. However if the state loses nearly as much overall revenue from sales, the implications for other budget priorities such as health care could be serious, analysts worry.
Eileen McAnneny, president of the Massachusetts Taxpayers Foundation, said the dilemma points to the hazards of letting voters decide complex tax issues.
"More often than not a ballot question is written by its proponents," she said. "It's very one-sided and it's not a good way to make policy."
Raise up Massachusetts, a coalition of labor and community groups backing the millionaire tax, was focusing on its own campaign and for the moment not worrying about a potential sales tax question, spokesman Steve Crawford said recently. He added that he had faith in voters' ability to sort out conflicting arguments.
Jon Hurst, president of the retailers association, said he was sensitive to the impact a tax cut could have on the state's already tenuous fiscal situation. He noted his group took no formal position on an unsuccessful 2010 ballot question that would have reduced the tax to 3 percent.
But in a blog posting this week, Hurst declared retailers were running out of patience.
"Over the past several years, our members have become increasingly frustrated with the lack of urgency in addressing the very real challenges they face over unfair competition from online sellers and tax-free New Hampshire stores," he wrote.
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