Governor’s Tax Increases Raise Eyebrows of Massachusetts Taxpayers Foundation Head

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The size of Governor Charlie Baker’s proposed tax increases has the head of the Massachusetts Taxpayers Foundation concerned.

“I would say we’re not anti-tax, which is an important distinction. But we do want to make sure that your tax dollars are spent appropriately and efficiently. And I have to say I was surprised by the size of the tax increases. In total it’s about $600 million in new revenue that’s proposed in the governor’s budget,” said Eileen McAnneny, president of the pro-taxpayers organization, during an appearance Sunday on Keller at Large on WBZ-TV Channel 4 in Boston. “… These are $600 million in new taxes that come on the heels of tax increases last year, as well.”

Some of the tax increases may make sense, she said, mentioning a proposal to tax vaping products at the same rate as cigarettes.

But others have drawn the ire of tax skeptics. The tax watchdog group Massachusetts Fiscal Alliance, for instance, has heavily increased the governor’s new proposal to increase by 50 percent the current state tax on real estate deed transfers (meaning property sales). The governor, a Republican who in the past has campaigned against tax increases, has said the money is needed for a state fund that will help address problems state officials project will be caused by climate change.

McAnneny didn’t focus on the deeds excise tax, but she highlighted new state taxes enacted last year. She noted that property owners who offer short-term rentals through Airbnb will be hit with a new tax they haven’t had to pay before thanks to a bill the governor signed in late December 2018, and that the new paid family and medical leave program approved in June 2018 comes with a new payroll tax increase to pay for it.

Since mid-December lawmakers on Beacon Hill and the governor have proposed (all told among them) at least eight new taxes, which are described in a January 27 story in New Boston Post.

One of them is the so-called Millionaires’ Tax, which would add a 4 percent surtax to individual incomes more than $1 million a year. The Massachusetts Supreme Judicial Court shot down a proposed ballot question last year on constitutional grounds, but supporters of the idea have crafted a new proposal that might pass court muster. The earliest it could go to voters in a statewide referendum is November 2022.

Supporters say the surtax would generate $2 billion that state government needs to provide vital services, and that it’s fair to hit rich people harder than everyone else. Opponents say the surtax would harm the economy by driving rich people and their money out of the state, and that a flat tax is fairer than a graduated income tax.

The Massachusetts Taxpayers Foundation has opposed the Millionaires’ Tax in the past, and Keller asked McAnneny if she still has a problem with it. She responded by pointing out practical problems with the tax.

“We do continue to have a problem with it,” McAnneny said. “And the reality is that a lot of the money that would be coming in from that income surtax is derived from capital gains and dividends, and all the things that are cyclical and tied to the stock market. And so they’re not a great revenue source to build a budget on, and we’re concerned about that. And that we may be double counting it – because a lot of that money is right now targeted to go into the stabilization fund, which is the state’s savings account.”

Earlier in the interview Keller asked McAnneny about slowing tax revenue in Massachusetts.

McAnneny said she agrees with economists who see an economic slowdown on the horizon.

“It’s really important to remember that we’re at the late stages of the economic recovery. By historic standards we’re on borrowed time. We seeing signs that we’re in the late phases of that,” McAnneny said.

The Massachusetts Taxpayers Foundation is a nonpartisan organization that provides research and analysis on state and local tax policy with an eye to promoting good financial practices and a strong economy. The interview was broadcast Sunday, February 17.