While
it’s no laughing matter, attempts to implement a Massachusetts graduated income
tax feel like the Bill Murray movie “Groundhog Day.’’ In the movie, Murray’s
character is trapped in a time warp, doomed to relive the same day over and
over. Similarly, in 2018 voters may once again have to relive efforts to change
the state Constitution to allow a progressive income tax rate.
Article
44 requires taxes “be levied at a uniform rate throughout the Commonwealth upon
incomes derived from the same class of property.” Clearly, the Constitution’s
framers understood a uniform tax rate means those earning more pay
correspondingly more. Taxing at higher rates punishes success while doing
little to help the less fortunate.
Proponents
want to “modernize” the Constitution and implement a progressive tax on those
earning over $1 million annually. I contend the Constitution has it correct,
for several reasons:
First,
$1 million is an arbitrary number requiring regular updating to reflect
inflation. Presently, it is about 30 times the per capita average. In 1780 when
per capita income was $400, the cap would’ve been $12,000. How often would we
have had to amend our Constitution to “modernize” it since then?
Second,
not all income is created equally. Many small-business owners operate as a sole
proprietorship or as an S-corporation. From a tax perspective, their business
revenue looks like income, so an owner with $2 million in revenue and $1.95
million in expenses would be taxed at the higher rate despite profiting only
$50,000. This is inequitable to small-business owners, who create two out of
every three jobs in Massachusetts.
Finally,
if the objective is to close an income inequality gap, let’s consider the
earned income tax credit. The fiscal 2016 budget increases the Massachusetts
credit from 15 to 23 percent of the federal credit, allowing 400,000 qualifying
residents an annual credit of up to $1,412. This has an immediate impact on
reducing income inequality, can be easily updated by the Legislature, and
doesn’t require a constitutional amendment.
Voters
rejected previous graduated tax efforts in 1962, 1968, 1972, 1976, and 1994. I
trust that groundhog day will repeat at the polls in 2018.
