Our Opinion: Tax initiatives have a sales job ahead

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Ballot questions can change the landscape dramatically in Massachusetts, as approval last November of recreational marijuana in the state is sure to should a law fully making it reality be passed by summer. We're a ways from November of 2018 but a couple of possible ballot questions could have a major impact on state finances.

Democrats and liberal groups have been advocating for passage of a constitutional amendment calling for a 4 percent surtax on household income above $1 million. Advocates project that it would generate up to $2 billion a year, with some proponents maintain should be targeted specifically for education and infrastructure.

A constitutional amendment is required because the state tax system currently calls for only a flat rate of 5.1 percent. For it to make the ballot it must be approved by the Legislature in two sessions. It passed the first in May of last year and a second would have to go through in the 2017-'18 session for it to make the ballot.

That additional revenue would address a multitude of financial problems, but the hike could cause others. According to a report last year by Americans for Tax Reform, the majority of small businesses file under the individual income tax system and the IRS counts that more than 3,000 small businesses in Massachusetts with reportable incomes over $1 million. An additional tax hit that reduces profit margins and results in layoffs would negate to one degree or another the benefits gained from the tax.

Massachusetts has been burdened by a clever nickname — Taxachusetts — that may have been applicable 25 years ago but isn't now with the state usually ranking in the middle of the pack nationally by organizations that assess all forms of state taxes and fees. The so-called "millionaires" tax, however, could revive the Taxachusetts moniker and send an unwelcoming message to small businesses considering setting up in the state.

The State House News Service reported Monday that the Retailers Association of Massachusetts is considering beginning a ballot initiative to lower the sales tax from its current 6.25 percent to potentially in the range of 4 to 4.5 percent. In 2010, voters rejected a ballot question calling for lowering of the sales tax incrementally to 3 percent by a vote of 57 percent to 43 percent.

Governor Charlie Baker told the News Service that while he opposed the ballot question seven years ago he has been receptive to reducing the sales tax to 5 percent. Nonetheless, he is withholding any judgment about reducing it via ballot initiative next year. With tax revenue growing sluggishly while health care costs increase along with demands for more spending on education and other worthy programs, the governor knows first hand how much more difficult it will be to fund these programs if sales tax revenue is reduced. (The governor expressed skepticism about the "millionaires tax.")

The governor mentioned pressure from "our colleagues north of the border," presumably New Hampshire, which has no sales tax. It has no income tax either, but it has, according to SmartAsset.com, the third highest property tax rates in the nation. The property tax is notoriously regressive, hitting hardest those with the least ability to pay.

Massachusetts has a found a balance among taxes that it should be cautious about tinkering with. Both the proposed "millionaires' tax" and the tentative effort to reduce the sales tax face a tough job of salesmanship in the year or so ahead if they go forward with the process of getting on the ballot.

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