Thursday, September 23, 2010

Question 3: Rhetoric versus fact

There is no doubt in my mind that 90% of the rhetoric we’ll hear regarding Question 3 on the Massachusetts November 2nd ballot will reference teachers, police and firefighters. Just go to and you’ll see their opening line starts with “We all want good schools, police and fire protection…”

It is very effective to argue that your “Yea” vote will overcrowd classrooms, requiring the fire marshal to be called (who just got fired), necessitating a police officer to respond to the commotion (who is in line at the DUA with the teacher and fire marshal).

What is Question 3?

Question 3 is Carla Howell’s latest attempt to control the bloated state budget. Remember Question 1 from the 2008 ballot? That one asked for voters to eliminate the personal state income tax. It didn’t pass. In 2002, a similar petition also failed.

This time, we’re being asked to roll the state sales tax back from 6.25% to 3%. Here’s the secretary of the commonwealth’s summary that you’ll see on your ballot:

Do you approve of a law summarized below, on which no vote was taken by the Senate or the House of Representatives before May 4, 2010?

This proposed law would reduce the state sales and use tax rates (which were 6.25% as of September 2009) to 3% as of January 1, 2011. It would make the same reduction in the rate used to determine the amount to be deposited with the state Commissioner of Revenue by non-resident building contractors as security for the payment of sales and use tax on tangible personal property used in carrying out their contracts.

The proposed law provides that if the 3% rates would not produce enough revenues to satisfy any lawful pledge of sales and use tax revenues in connection with any bond, note, or other contractual obligation, then the rates would instead be reduced to the lowest level allowed by law.

The proposed law would not affect the collection of moneys due the Commonwealth for sales, storage, use or other consumption of tangible personal property or services occurring before January 1, 2011.

The proposed law states that if any of its parts were declared invalid, the other parts would stay in effect.

A YES VOTE would reduce the state sales and use tax rates to 3%.

A NO VOTE would make no change in the state sales and use tax rates.
Impact on local aid

Since teachers, police and firefighters are on the payrolls of our cities and towns, the effect of the sales tax rollback on these professions would be seen through a reduction of local aid from the state.

This reduction in local aid has been calculated by the Mass Taxpayers Foundation in their white paper entitled “Heading Over the Cliff,” released yesterday. In it, they project a local aid reduction of $473 million in fiscal year 2012 if Question 3 passes. That extrapolates to $3.9 million in lost aid for the four towns in the 5th Barnstable District.

I have calculated the impact of this reduction in local aid on an average taxpayer whose home is assessed at $350,000 if we voted for an override to replace that lost aid. It amounts to $66/year, ranging from $21/year in Barnstable to $116/year in Sandwich. This ignores the fact that there are probably other ways to replace the lost aid without resorting to an override.

See my analysis here.

Those are relatively modest numbers compared to claims by the proponents of the rollback that each family, on average, would save over $800/year. Click here for their FAQ page. I’m skeptical of claims like this, but if your family spends $10,000/year on taxable goods, then you’d save $325, which is still well above the amount we’d pay in additional property taxes to save the jobs of teachers, police and firefighters.

Other impacts

Opponents list the following areas of pain (those in italics are related to local aid cuts):

Public educationPublic schools and colleges would absorb a huge share of the cuts.

Health care – Cuts will hurt community hospitals, school nursing services, public health initiatives, and community health centers.

Quality of lifeLocal aid to cities and towns would be slashed.

EconomyLaying off teachers, firefighters, police officers, social workers, and others could halt the economic recovery.

Property taxesCities and towns would be forced to raise property taxes and seek overrides simply to maintain basic services.

I think you get the idea that the opponents are angling to generate a visceral reaction by focusing almost exclusively on cuts that the average taxpayer would not support.

The rest of the cuts

The Mass Taxpayers Foundation estimates that we’ll be dealing with a $4.8 billion shortfall in fiscal year 2012, $2 billion already attributed to the state’s structural deficit, $2.5 billion resulting from a successful sales tax rollback, and $300 million in federal aid cuts.

The MTF projects that $470 million would come out of local aid, less than 10% of the necessary cuts. The rest of the $4.8 billion would come out of spending for health care ($1.3 billion), human services ($1.3 billion), public safety ($630 million), and other cuts ($1.1 billion).

My position

I believe that we should roll back the sales tax to 5%. However, given that the 5% scenario is not one of the choices on the November ballot, I have to ask you this fundamental question:

Do you want Beacon Hill to tell you how much of your money they are going to spend, or do you want to tell Beacon Hill how much of your money they get to spend?

It’s time to send a message to Beacon Hill that we are tired of our legislators not listening to the electorate. Remember the 5% income tax we voted for in 2000?

I support the rollback because it will force the legislature to get serious about real reforms, cost cutting, and restructuring. Reforming the pension system, giving cities and towns control over health insurance plan design, and restructuring the myriad of state agencies would be good places to start.

The areas that we should protect from drastic cuts include local aid and public safety. Cutting local aid is like tossing the hot potato over the fence. And our district attorneys’ offices, sheriffs’ departments, and state police are already under attack from a funding standpoint.

Finally, the MTF ignored the boost to the economy that $2.5 billion in the hands of consumers would generate, not to mention the improvement in sales that New Hampshire-bordering businesses would instantly enjoy.

Your position

Everyone needs to assess their own position on the tax rollback, but please don’t fall for the rhetoric that involves less than 10% of the cuts. Think about your reliance on state programs, how your family is likely to be affected, and keep in mind that $66/year would keep your teachers, police and firefighters in place.


  1. Since Sandwich tends to be 'left behind' with regard to local aid, I see your point. Towns that receive a larger portion of their revenues from local aid should worry and aren't these some of the towns that are least likely to be able to pass an override (not that I'm convinced that Sandwich can pull that off)?

    Also, what are your thoughts on the impact to public higher education in Massachusetts? How deep will we have to cut MA state universities and colleges to reduce the sales tax from 6.25% to 3%?

    I understand sending a message to the legislature , but if you think that 5% is more reasonable, then why vote yes for 3% which seems a bit too drastic?

  2. What fire marshall is looking for a job?

  3. First Anonymous: You are quite astute in your observation about towns that receive little local aid being best able to handle the cuts, and the corollary of that for cities which are heavily dependent on local aid.

    We have argued for years that Cape Cod has been on the short end of the stick because of relatively healthy property values but a much lower income per capita than the South Shore and Boston metroplex.

    Higher education, in the MTF analysis, would lose $270 million.

    Regarding why I would support this question absent a 5% option is simple. The legislature, in its current overwhelmingly Democrat-controlled configuration, will NEVER put the 5% option on the floor for a vote. The only way we'll get something like this done is through the citizen petition process.

    Carla Howell, as has been the case for years, doesn't seem capable of proposing a petition that is the best compromise. In 2008, she didn't propose reducing the income tax to 5% to force the legislature to honor the people's wishes, but instead, proposed to completely eliminate the personal income tax.

    She is somewhat self-destructive by seemingly having to push the issues to the limit.

    For me, however, it comes down to the electorate jumping into the driver's seat versus being run over by the bus.

  4. Second Anonymous: Thank you for making my point for me. These are scare tactics that we'll be seeing for the next five weeks.

  5. Randy....thanks for letting us know your position on this question. I fully support your reasoning. A vote in favor makes a statement that needs to be made. At the same time, it's not the end of the world for taxpayers despite what the big government spenders might be saying.

    The fact that the question is on the ballot, however, also creates a situation that could work against those of us who plead with the pols to reign in the spending. If the question fails, we can count on the result being used to justify even more tax and spend policies.

  6. In Sandwich, as in most towns, we have
    Sandwich Police

    Massachusetts State Police

    Evironmental Police

    Department of Natural Resources

    Barnstable County Sheriffs


    did I miss any? All covering the same piece of turf. Now, the argument to vote against Question 3 is what?

  7. But isn't the beauty of "sales" tax that so much of it is paid by tourists? I know that a full one third of our revenue is derived from tourism, so doesn't it stand to reason that at least a third of whats collected is coming from that source (tourists). Does your reasoning still stand up when we take them out of the equation?

  8. Anonymous 10/3/10 4:53pm: The fact that some portion of the sale tax is paid for by tourists doesn't change any of my calculations nor my conclusion.

    You're working on the assumption that we would replace all of the reduced revenue. We should not. We can choose to spend less.

    One-third of the tax revenue coming from tourists seems high, by the way. We double our population on the Cape for 3 months and have some shoulder season visitors outside of those months.

    And tourism dollars spent includes you if you take your visiting friends on a whale watch, out to dinner, etc.

    I haven't experienced any vacationers coming down to the Cape to buy a car either. Buy one car for $20,000 and you've spent the same on sales tax as many visitors do on vacation.

    None of that has anything to do with the premise of this piece, which is to get the attention of our lawmakers before they run us over with yet more tax increases.


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