A few facts about Gov. Deval Patrick’s property-tax relief package, which he unveiled yesterday. (Globe coverage here and here; Herald coverage here.)
1. The plan would reportedly provide property-tax relief for as many as 100,000 Massachusetts homeowners. According to the U.S. Census Bureau, there are about 2.45 million households in Massachusetts, and 64 percent are owner-occupied. I’ll take that as a rough approximation that there are 1.57 million homeowners in Massachusetts. (I’ll concede that there may be an apples-and-oranges problem in here somewhere. Among other things, the 100,000 figure apparently includes “families and individuals,” so it’s really more than 100,000.)
Anyway — using my admittedly imperfect methodology, fewer than 7 percent of homeowners would benefit under the Patrick plan. In other words, something like 94 percent would not benefit. This from a guy who made property-tax relief a major part of his gubernatorial campaign.
The people who’d benefit are obviously those who need it the most. But Patrick would do nothing to prevent the flight of middle-class families to lower-tax states — at least not with this plan.
2. Patrick would pay for the $75 million annual cost of this proposal with business-tax increases that would eventually total some $500 million a year. Now that doesn’t add up, does it? Indeed. He would use the leftover money to pay down a budget deficit that, as Joan Vennochi has pointed out, he knew about as early as last September — back when he kept insisting he had “no plans” to raise taxes.
3. Massachusetts Taxpayers Foundation president Michael Widmer, a pro-business moderate who regularly skewered Patrick’s Republican predecessor, Mitt Romney, is outraged. “This adds significantly to the competitiveness disadvantage facing Massachusetts businesses,” Widmer told the Globe.
4. State Rep. Daniel Bosley, D-North Adams, a liberal who nearly joined Patrick’s cabinet, is dubious, telling the Globe, “I applaud the fact that he wants to standardize our corporate tax policy and have everyone pay their fair share, but you can’t entice businesses here if they don’t know what our tax policy is going to be next year. Every year we’re closing loopholes, and good, bad, or indifferent, those loopholes are part of the business balance sheet.”
5. Article 44 of the Massachusetts Constitution prohibits a graduated income tax. The most recent effort to change that went down to defeat in 1994. Could Patrick’s proposal be construed as a backdoor effort to establish a grad tax? Maybe not. The constitution does allow for exemptions and credits that benefit low- and moderate-income taxpayers. But at what point does such tinkering begin to run afoul of the flat-rate constitutional mandate?
It’s going to be interesting to watch this play out, that’s for sure.
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Anonymous
The property tax scheme is available for someone earning $70K and owning a house worth up to $684K. Middle to wealthy people by many measures.Sounds like a supply side tax cut. Some irony there.
Rick in Duxbury
Best example of how we got to where we are is at http://www.telegram.com/apps/pbcs.dll/article?AID=/20070222/MEGANEWS/702220777 (tip of the hat to Michael Graham).Wonder why the Globe didn’t find this just as incendiary? Afraid of crossing their “sources”?
Anonymous
Funny, here I thought the reason for businesses not coming to Massachusetts was … EXTREME HOUSING COSTS.In other words, the Taxachusetts MYTH is just something business likes to repeat and repeat and repeat and repeat and hope the repetition means we will buy the bullcrap and believe it is true. The White House seems to think the same thing.
Don
Well, duh, he’s a Democrat. What did you expect?
Tony
Dan wrote: 3. Massachusetts Taxpayers Foundation president Michael Widmer, a pro-business moderate who regularly skewered Patrick’s Republican predecessor, Mitt Romney, is outraged. “This adds significantly to the competitiveness disadvantage facing Massachusetts businesses,” Widmer told the Globe.Widmer is not a bad guy. He does good work on the Belmont Warrant Committee. But in his work with MTF, he is a corporate hack. What is so foolish about his statement here is that it isn’t accurate. Widmer has been promoting and working to preserve these sweetheart deals for businesses in Mass. while the ordinary taxpayers get screwed. Many of these same businesses fund his foundation … they basically pay him to do their dirty work. For example, most banks in Massachusetts, like Citizens, pay as little as $456 a year in state income tax on hundreds of millions of dollars in profit. This, while at the same time, workers in the state, who make as little as $20,000, pay twice as much as that, before some minor deductions. So, who’s taxes should go up if need be … the bank which makes hundreds of millions of dollars and pays little, or the regular guy who is getting creamed?
Peter Porcupine
Dan – my understanding of the Constitutional amendment is that it requires a flat INCOME tax. Other forms of taxation – corporate, excise, etc. – may not be part of it.Is there a lawyer in the house?
Anonymous
Two points.One, there already is a “backdoor” graduated income tax, via the exemptions and so forth, in MA, which apparently have been given approval by the MA state courts.Two, the stranglehold by the state on local (city and town) mechanisms for raising revenue is ridiculous. I’m from the midwest, and local-option taxes (income tax, sales tax, etc.) are the primary means by which they raise revenue, not the property tax. I can only conclude that the stranglehold that the state has over means by which cities and towns raise revenue is a vestige of the anti-city (primarily, of Boston) attitudes by wealthy suburbanites and cow-owners decades ago. At some points, the wealthy suburbanites and cow-owners have to be put out to pasture.–raj
Tim F-W
What the business lobbyists are upset about is the ability (limited but not disallowed by recent state court decisions) to have a file cabinet in Delaware or Montana or Nevada serve as the source of income to a corporation.A bunch of companies have affiliates in states with no corporate income taxes that hold the trademarks and the like of the corporation, then charge royalties to other affiliates. (For Toys R Us, it’s Geoffrey, Inc.; for Home Depot it’s Homer TLC; for Dunkin Donuts, it’s DD IP Holder LLC.)What states from California to New Hampshire have realized is that to stop this nonsense (as well as the larger nonsense of having, a la Tyco or Ingersoll-Rand, nominal headquarters of a company in a tax haven like Bermuda) is to force taxation on a company’s actual earnings within a state.(What is depressing about this is the idea that low-corporate-tax states are somehow reaping major benefits from this sort of chicanery. They’re not. Folders in file cabinets only mean a few paralegal jobs and a few hundred bucks in filing fees per folder each year.)Yes, big companies would rather not pay that much in taxes. How else will they afford all of their executive perks?