Why Deval’s tax increases will be a failure

Why Deval’s tax increases will be a failure

Mass. Gov. Deval Patrick gave some details of his plan to allow cities and towns to levy taxes in addition to property taxes.

Under the “Municipal Partnership Act” filed yesterday, cities and towns could approve adding up to two percentage points to the 5 percent state meals tax. Local governments also could add one percentage point to the state’s 4 percent hotel tax.

Cities and towns would keep 75 percent of the additional tax revenue, while 25 percent would go to reimbursing local governments for property tax abatements to senior citizens.

“I think this will help lower property taxes,” Patrick said following a meeting with municipal and legislative officials in Watertown.

He’s either naive or a cynic. Why would local officials raise one tax to lower another? They all want more revenue to increase their budgets, not less. So we’ll end up with higher meal and hotel taxes and high property taxes too.

Another problem is that such tax increases ignore everything economics knows about human nature. If you raise taxes, behaviors will change. Certainly, waiters and waitresses will see fewer tips. People might start going out to eat less or go to a different town if one place has higher meal tax than another. Same thing with hotels. If Salem raised its hotel tax, that would just drive visitors to Peabody.

I heard a story years ago about a US Senator’s office that asked the Congressional Budget Office to prepare a study on how revenue would be raised by creating a 100% tax on all income over $1 million. In other words, you pay normal taxes on anything under $1 million, but anything you make over that much—whether it be $1 or $100 million—would be confiscated by the government. I can imagine that Senator had visions of billions being siphoned from the rich leaving all those regular folks free of an increased burden. The CBO’s conclusion? The proposed tax would raise ... zero dollars. The Senator assumed human behavior is unchanging, but the CBO recognized that if all income over $1 million was confiscated,  then no one would take it. Why should they? Just so that it can be given to the government? Obviously the Senator was disappointed.

If Deval Patrick and municpal officials with dollar signs in their eyes think that local taxes are the solution to their problems, they’re sadly mistaken.

Oh and once again, Deval reveals that the taxing authority giveaway is just another bribe for cooperation like his promise of legislative pay raises.

In return, Patrick expects support from local officials with his plans for economic growth, new housing and improved transportation.

“I’ll be looking for greater cooperation in return for the greater authority and flexibility we’re trying to get you,” Patrick said.

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1 comment
  • And politicians wonder why people are leaving Massachusetts in droves. Here’s a hint. Its not just the high cost of housing as the reason why people are leaving Bay State. Liberalism and corruption are two major factors.

    As a conservative living in the commonwealth, I just don’t get it. Why people voted for Deval is beyond me! His support of criminals rights and lack of a financial plan for the state before the election should have been a warning. But no, not for the citizens of the Peoples Republic of Massachusetts. Here’s the liberal way of thinking. “He supports abortion, gay marriage, protecting criminals who rape and murder, and won’t support the reduction of the state income tax THAT THE PEOPLE OF MA VOTED FOR. Great! Let’s vote him in!!”

    Just a month in office and what has he done already:

    —Is pushing for higher taxes.
    —Told the legislators to ignore their constitutional duty regarding the marriage amendment.
    —Bought himself a new car to use that cost 42 large when he could have bought one that cost 28 large (crown vic) and then lied about it saying “they don’t make the crown vic anymore”.
    —Already taking helicopter rides that the previous acting governor got slammed for doing.
    —Told legislators that he will support raising their pay if they support his programs. Nice.

    Who and why do people vote for a guy like this?? I just don’t get it?!?! Argh! Sigh. Nice going Massachusetts! I wonder what it would be like to live in Maine.