Chang-Díaz proposal gets some votes; ‘local option’ approved
The state Senate last week followed the House in recommending sales tax increases to help deal with the almost $5 billion structural deficit the state is facing heading into the new fiscal year.
While she voted to approve the Senate budget, the sales tax increase was not local Sen. Sonia Chang-Díaz’s first choice for revenue generation. The freshman senator led an ultimately unsuccessful charge to increase the state income tax.
The income tax amendment would have raised the income tax rate to 5.95 percent, raising an estimated $1.4 billion in revenue.
“We wanted to widen the debate around revenue,” Chang-Díaz told the Gazette, to ensure the state is deal-ing with the deficit “in the most fair and progressive way possible.”
The income tax was always a long shot. At a May 7 community forum on the 2010 state budget, state Rep. Liz Malia said most state officials “look at you like you stood up in church and yelled ‘sex’ at the top of your lungs” if you even mention it.
State Rep. Jeff Sánchez said he had proposed an income tax increase in 2005. He said he recalls represen-tatives from Wenham and North Attleboro sitting behind him laughing—“Saying, ‘Ha, ha, ha, you got five votes.’”
At the forum, Chang-Díaz had responded to Malia’s quip by saying “We need to start yelling ‘sex’ in church,” but she did not explicitly call for an income tax increase at that time.
Her proposal did do better than Sánchez’s 2005 effort, garnering 11 of the Senate’s 50 votes, and four from members of the Senate leadership, she told the Gazette.
In the end, the Senate followed the House’s lead, increasing the sales tax from 5 percent to 6.25 per-cent. The Senate version of the budget also includes a repeal of the sales tax exemption on alcohol—with the proceeds slated to reduce cuts to public health programs—and new “local option” taxes intended to help cit-ies and towns raise new revenue in the face of reduced local aid from the state.
While the House in April projected the sales tax would bring in $900 million, that projection has been revised down in the Senate budget to $633 million because of still-darkening economic projections for the coming year.
Locally, the rallying cry was for more new taxes at the May 7 forum hosted by the Ward 11 and ward 19 Democratic Party committees at English High School.
Doug Howgate from the non-profit Massachusetts Budget and Policy Center told the audience of about 50 that the income tax is more “progressive” than the sales tax. Progressive means that people with higher in-comes end up contributing a larger percentage of their incomes under the tax.
People earning less than $34,000 a year spend between 3 and 4 percent of their income on sales tax, whereas people who make more than $97,000 a year spend less than 1.5 percent, he said.
Income tax, Howgate said, functions in the exact opposite way. While the state constitution prohibits a graduated income tax, subsidies—like earned income tax credit, personal exemptions and “no-tax status” for individuals earning under $16,400 a year—make it effectively progressive. People making less than $34,000 a year end up contributing about 2 percent of their income, and those making more than $94,000 a year pay about 4 percent.
That sounded good to many forum attendees.
JP resident Dale Mitchell, executive director of the non-profit Ethos, which provides social services for senior citizens, expressed tax angst during one of the evenings question-and-answer periods.
There was the possibility, he said, that “horrible cuts were going to be made to the services my agency provides.”
Ethos’s state budget allocation is on safer ground now, but only “with a tax that is very regres-sive…What’s to be done?” Mitchell asked.
JP resident Nancy Sableski said she was surprised that the income tax is such a hard sell. “Isn’t Massa-chusetts supposed to be blue, progressive and wealthy?” she asked.
Responding to that question, Sánchez chalked the issue up to the urban/suburban divide. “I have been to communities that do not look like ours,” he said. “Where there are spaces between the houses and tree-lined streets and they do not have 2,500 people living in a housing development down the street…and 10,000 young people living in a one-mile radius.”
He concluded, “People come from different experiences. What we are most proud of is lacked in other com-munities…They don’t know the value.”
Malia and Howgate emphasized that a large portion of the state’s structural deficit?about $2 billion of it—is attributable to the gradual reduction of income tax rates from 5.95 percent in 1999, and the decision to tie the tax rate for income from dividends and interest, which had been higher, to the standard income tax rate.
The income tax reduction was supposed to be off set by corporate capital gains taxes, Howgate said, but that is not an effective revenue strategy in a down economy.
“Yes, the economy is bad…[but] a series of decisions over the last 10 years affected how the state was positioned to deal with this,” he said.
The evening also featured a presentation by Judy Meredith of the tax policy advocacy group One Massachu-setts. That group has been hosting and participating in forums across the state to attempt to “rebuild pub-lic confidence in government,” Meredith said.
Most people’s view of government is as a “dimly understood but vividly imagined bureaucratic blob,” she said. According to popular perception, government is devoted to scandals, pension abuse, waste and fraud, and the goal of the workshops is to remind them that things like parks, schools, safety and public arts are “all government institutions.”
Locally, One Massachusetts is working with Hyde Square Task Force (HSTF) youth organizers on a campaign for the state to allow cities and towns the option to raise revenue through meals and hotel taxes. Versions of those “local option” taxes, allowing a 2 percent tax for meals and hotels, are included in the senate budget as part of a municipal relief package.
“Woo-hoo, we are one step closer,” HSTF youth organizer Samatha Brea said in a Gazette interview.
The local option taxes could raise up to $70 million for Boston. Another piece of the municipal relief package that would also allow city’s to start charging property taxes for utility poles owned by telecommu-nications companies, could mean an additional $1.5 million for city coffers.
Brea said HSTF’s hope is to see at least portions of that revenue go to public schools and anti-violence and youth jobs programs.
A One Massachusetts presentation this spring also led the Jamaica Plain Neighborhood Council to offi-cially endorse the local option taxes.
Chang-Díaz came under some criticism on the editorial page of the May 22 Boston Phoenix for her leader-ship as chair of the Joint Committee on Tourism, Arts and Cultural Development. The Phoenix said a proposed 57 percent cut to the Massachusetts Cultural Council (MCC) budget would hurt the state’s tourism industry and applauded the restoration of $4.3 million to its budget.
But it said that Chang-Díaz should have led the charge for the funding, rather than state Sen. Robert O’Leary of Cape Cod.
Chang-Díaz told the Gazette she sponsored a “long list of amendments that I could not, in good con-science, say no to” and that she “sought out” O’Leary to help with the MCC funding.
According to a press release from Chang-Díaz’s office, she sponsored amendments to restore funding for emergency food assistance, violence protection programs, rental voucher programs, youth summer jobs programs and to support primary care health workers and community health centers, among others.
The state budget now heads to conference committee to reconcile differences between versions put forward by the Governor, the House and the Senate. The new fiscal year starts July 1.