Ballot Question 3: Sales and Use Tax Rates

[rcweir]

The text of the question is here: http://www.sec.state.ma.us/ele/elepip10/pip103.htm

If approved, this would reduce sales tax to 3% (from 6.25%). Proponents appear to subscribe to the "starve the beast" philosophy of curbing big government.

I guess I wonder this: How much is the state sales tax revenue already reduced by falling discretionary consumer spending brought on by the recession, job loss, declining home values, declining retirement savings, low consumer confidence, etc.? We're probably already starving the beast purely by reduced spending. The Commonwealth, unlike the Feds, cannot just go into a deficit to prop up Big Government.

[Robo]

The text of the question is here: http://www.sec.state.ma.us/ele/elepip10/pip103.htm

If approved, this would reduce sales tax to 3% (from 6.25%). Proponents appear to subscribe to the "starve the beast" philosophy of curbing big government.

I guess I wonder this: How much is the state sales tax revenue already reduced by falling discretionary consumer spending brought on by the recession, job loss, declining home values, declining retirement savings, low consumer confidence, etc.? We're probably already starving the beast purely by reduced spending. The Commonwealth, unlike the Feds, cannot just go into a deficit to prop up Big Government.

For sure tax revenues are down just like many of our incomes. The problem is that government keeps on spending and doesn't genuinely look for ways to cut out waste and/or indulgences (lucrative health plans and pensions come to mind as an example). I would have been happy with a 4 or 5% sales tax but I will vote for 3% because I do believe that govt will spend all that you give it. We need to get politicians in office that will genuinely use our tax dollars as efficiently as possible. These votes, as have been demonstrated in the past, are non-binding so the final rate could be some compromise position should this question pass. I don't believe union fear mongering that the only cuts that could be made are teachers, police and fireman.

[rcweir]

OK. I was almost persuaded by the "cutting the sales tax will lead to massive cuts to local aid" argument, but then it struck me: Westford almost certainly sends more to Beacon Hill in sales taxes and income taxes than we ever receive back in local aid. So the state-imposed taxes are just a money-pump out of Westford. Let's cut 'em to 0%, I say.

[ggreenma]

OK. I was almost persuaded by the "cutting the sales tax will lead to massive cuts to local aid" argument, but then it struck me: Westford almost certainly sends more to Beacon Hill in sales taxes and income taxes than we ever receive back in local aid. So the state-imposed taxes are just a money-pump out of Westford. Let's cut 'em to 0%, I say.

Thoughts on a few of the previous posts...

Reducing the sales tax to 3% would reduce state revenues by ~$2.5 billion a year. State revenues totals are around $50 billion, so this is around a 5% reduction in the total state budget and is equal to about half of the state's local school aid budget.

What does this mean to Westford? I would guess this could result in a few million less to Westford in aid (out of a local aid package of around $20 million). The reduced state aid would have to be made up by cutting the school budget and raising real estate taxes. The good news is that the increase in our real estate taxes would be offset with decreased taxes paid when we buy things. Also, might mean some more service jobs in the area as local businesses could compete more effectively with NH.

Also note that this is not a referendum. If it passes, it is the law. In order to find a happy medium rate, the state legislature would have to pass a new law increasing the tax rate. I believe all the candidates stated that they would not stand in the way of implementing the 3% law if passed by the voters. I spoke 1:1 with Charlie Baker on this ballot question. Although he would implement the 3%, he said he would prefer a rollback to 5%. Unfortunately, we only have the choice of 3% on the ballot.

As to government waste, although I think we need pension reform (in fact, I wonder why public workers aren't moved to a 401k type system), pensions account for around 4% of the budget. So you could totally eliminate all pensions from the state budget and still not cover the lost revenues.

For a good analysis of state budget woes particularly as to the impact of pensions, check out: http://crr.bc.edu/images/stories/Briefs/slp_13.pdf

[Robo]

Thoughts on a few of the previous posts...

Reducing the sales tax to 3% would reduce state revenues by ~$2.5 billion a year. State revenues totals are around $50 billion, so this is around a 5% reduction in the total state budget and is equal to about half of the state's local school aid budget.

How was the reduction in revenues computed; was it simply cut in half from the present value? Reducing the sales tax would likely bring back some business to MA which is now spent in NH by people trying to avoid the high MA sales tax. This would partially offset the sales tax reduction due to increased purchases in MA that would be subject to the sales tax as well as MA revenue for the businesses involved. This might also spur some increased jobs if enough business shifts back to MA.

What does this mean to Westford? I would guess this could result in a few million less to Westford in aid (out of a local aid package of around $20 million). The reduced state aid would have to be made up by cutting the school budget and raising real estate taxes. The good news is that the increase in our real estate taxes would be offset with decreased taxes paid when we buy things. Also, might mean some more service jobs in the area as local businesses could compete more effectively with NH.

I am not convinced that cuts can not be made at both the state and local levels to eliminate waste and inefficiency in the current budget instead of focusing on fear mongering with the usual teachers, police and fire need to be cut. Look at the school staff and you will see an over abundance of administrators and countless aides for them who never seem to be cut. The threat is always your child's teacher will be cut.

Also note that this is not a referendum. If it passes, it is the law. In order to find a happy medium rate, the state legislature would have to pass a new law increasing the tax rate. I believe all the candidates stated that they would not stand in the way of implementing the 3% law if passed by the voters. I spoke 1:1 with Charlie Baker on this ballot question. Although he would implement the 3%, he said he would prefer a rollback to 5%. Unfortunately, we only have the choice of 3% on the ballot.

I am not sure how locked in we are if this passes. Did we not pass a reduction in State income taxes that was never implemented?

As to government waste, although I think we need pension reform (in fact, I wonder why public workers aren't moved to a 401k type system), pensions account for around 4% of the budget. So you could totally eliminate all pensions from the state budget and still not cover the lost revenues.

For a good analysis of state budget woes particularly as to the impact of pensions, check out: http://crr.bc.edu/images/stories/Briefs/slp_13.pdf

I don't believe any single line item will cover the lost revenue from sales tax but I do believe pension and health insurance reform would go a long way. There are so many other opportunities for cuts as well but it will take a strong governor and legislator to take action.

[Ghostdog]

Because if we do we will have to lay off all the teachers, police and the entire fire dept. All the schools will have to close, all the roads will soon be covered with pot holes and all the bridges will crumble and fall. Locusts and other pestilence will swarm over the land in such great numbers even Billy The Exterminator will not be able to rid them. Its best that we keep that tax in place and make sure Bill Bulger keeps his quarter of a million dollar pension.

[Amber]

No administration ever makes cuts where they count, only where they hurt the little guy.