Tax Talk
It's a simple fact of Bay State politics: Taxes decide gubernatorial elections. Will this year be any different?
By 
IF ALL GOES according to the standard script for governor’s races in Massachusetts, there will be a moment this fall, probably in a televised debate in late October as voters are finally paying attention, when the candidates are asked to declare their true feelings about taxes. No candidate will have any plans for a tax increase. But who will make an iron-clad pledge? Who is most ardently, really-and-truly, against higher taxes no matter what?
Such moments have not gone well for Democrats in recent years. In 2002, state treasurer Shannon O’Brien, who had campaigned as a fiscal conservative, met Republican Mitt Romney in a debate at Suffolk University in Boston a week before the election. Romney made it clear from the start that he opposed higher taxes. And he turned to O’Brien and said, “Everybody knows that if you are elected, we’re going to have another massive tax increase.” Moderator Tim Russert put the question directly to O’Brien. Would she veto a tax hike if the Legislature passed one? She equivocated. Russert pressed her. She contended her position was identical to Romney’s: Both had declined to sign a formal no-new-taxes pledge.
Four years earlier, Democrat Scott Harshbarger had insisted in his campaign that “we will not spend one penny more than we can afford.” But when Harshbarger met incumbent governor Paul Cellucci in a late-October debate at Faneuil Hall, the two men ended up in a shouting match over taxes. “The problem with you, Scott, you’re in that old mode,” Cellucci said. “Raising taxes is in your blood, and you believe that every time there’s a new program you have to raise taxes.”
“Tell the truth,” Harshbarger retorted. “Tell the truth! Try that for a change. Instead of running sound bites, we’ll have a real debate.”
“Scott,” Cellucci boomed, “you can’t handle the truth!” Republican partisans in the hall roared, as it seemed Cellucci had momentarily morphed into Jack Nicholson in A Few Good Men. Everyone understood that Jack Nicholson would never take a soft line on taxes. (In Five Easy Pieces, he took an especially tough stand relating to a side order of toast.) In the 1998 election, Cellucci edged out Harshbarger by about 65,000 votes out of 1.9 million.
A TAX THEORY OF POLITICS
Political professionals know that elections are decided by multiple factors. Personality and “likeability” are important. A well-organized machine counts for a lot. Clever television ads can make a difference. All well and good. But I will argue here for a simple, one-dimensional theory. The governor’s race in Massachusetts, in these times, is decided by single-issue voters. Not the ones who vote on abortion, the death penalty, or same-sex marriage. I’m talking about those who tune in to the governor’s race in the fall with one question in mind: Who will hold the line against higher taxes? They don’t look to the governor to improve schools, to “create jobs,” to settle moral disputes, or to end traffic jams. They’re not looking for a visionary leader; visions can be costly. They want a governor who envisions lower taxes.
It’s not that the tax debate determines the outcome every time. Take 1986, for example, when Massachusetts last elected a Democratic governor. It helped that he was an incumbent. Then, just as Michael Dukakis’s reelection campaign was getting into gear, the leading Republican candidate was said to have been caught in his office with his pants down (literally). Party elders prevailed on him to step aside. Then he was replaced by a Wellesley legislator who, it turned out, had embellished his military record. Then he was replaced by the little-known and now long-forgotten George Kariotis, who got 29.6 percent of the vote against Dukakis.
So there is always the chance the governor’s race could pivot on matters of character, charisma, or comic ineptitude. But the one constant in Massachusetts politics since (at least) the 1970s is popular vigilance against higher taxes.
By 1990 the reaction to the Massachusetts downturn—and to Dukakis’s failed run for the presidency in 1988—was so vitriolic that Anderson pushed a draconian tax rollback and spending limit on the ballot that opponents said would have resulted in well over a billion dollars cut from the state’s then-$13 billion budget. Only an all-out effort backed by well-funded labor and progressive groups and led by Jim Braude (who was clever enough to make use of the slogan “It Goes Too Far”) killed off Question 3.
RISE OF THE ANTI-TAX VOTER
That Massachusetts has a vocal group of tax-averse voters is apparent to anyone who has been through an election cycle here. But are they the decisive group of voters in governor’s races? Can they really be seen as single-issue voters, moved primarily by the taxing-and-spending debate?
Democrats certainly don’t see it this way. They tend to see the party’s losing streak as a result of personality problems. John Silber’s loss to Weld in 1990 was attributed to Silber’s volatility—for example, he reacted rudely to questions from the much-admired TV news anchor Natalie Jacobson. When Weld trounced Mark Roosevelt four years later, it was conceded that Roosevelt just couldn’t match Weld in star power. Harshbarger in 1998: a plodding campaign and poor debate performances. O’Brien in 2002: same verdict. In each case, according to the pundits and professionals, Democrats lost due to deficient campaign mechanics and not-quite-ready-for-prime-time candidates. It was a problem of image, not ideology.
And there was another explanation that gained wide currency: Voters want a Republican governor to act as a check on the lopsidedly Democratic Legislature. Republican Lt. Gov. Kerry Healey made this a central theme in her speech accepting her party’s nomination this spring, and she’s sure to repeat it all summer and fall.
But why is this effective? The idea of checks and balances is an abstraction—a good-government ideal. It would be nice to think voters make decisions on the basis of democratic theory, but I don’t think they do. If voters worry about Democratic control of the Legislature, it is primarily because they fear taxing and spending will get out of control. Republican warnings against giving Democrats full ownership of state government pack a punch for one reason: They speak to the fears of anti-tax voters.
Perhaps this will be the year that changes everything. The three Democrats who are contending for the nomination in the September primary are each, in different ways, prepared to blunt the usual Republican arguments. Neither Attorney General Tom Reilly, nor venture capitalist Chris Gabrieli, nor former Clinton administration civil rights official Deval Patrick are easily portrayed as State House “insiders.” Reilly and Gabrieli, as well, decided early on to support a reduction in the state income tax rate from the current 5.3 percent to an even 5 percent, though Gabrieli has been circumspect about exactly when that should happen. Patrick doesn’t believe the income tax rollback is affordable and has been speaking instead of the need to reduce local property taxes, something he says will be impossible to do if state tax revenues are cut.
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| Independent Christy Mihos is proposing a property-tax cap even stricter than Prop 2½. |
If independent candidate Christy Mihos emerges as a factor in the fall, some of the typical electoral dynamics may be altered, as well. But the emphasis on taxes may be even greater for his presence in the campaign. He claims that high taxes are part of what is driving people and businesses out of the state, and is proposing a property-tax limitation that, in effect, says Prop. 2½ hasn’t been enough to protect homeowners.
The voting patterns over the last two decades in governor’s races are well known. As Robert David Sullivan put it recently (“Shifting Ground,” CW, Spring ’06), “If you were to take a map of the state and plot the 50 or so communities that voted most heavily for Romney in 2002, most of your pushpins would form a large ‘C’ around—and well removed from—the city of Boston.” Democrats over the years have run strongly in Boston and surrounding cities, in liberal outposts such as Amherst and Northampton, and in the western part of the state. Those are also the locales that are least tax-phobic. Elsewhere in the state lurk concentrations of anti-tax voters.
AS GOES LUNENBURG?
To get an idea of the sort of place I mean when I talk about tax-averse single-issue voters, consider the Worcester County town of Lunenburg. There are many suburbs in that “C” around Boston where the voting patterns are similar, but I suggest Lunenburg for its sheer middleness. It’s in the middlemost county, sandwiched between working-class Fitchburg to the west and upper-crust Groton to the east. With a median family income of $63,981 in 1999, it ranked 174th in the state—almost exactly in the middle of the 351 cities and towns in the Commonwealth.
The most numerous voters in Lunenburg, as in the state as a whole, are those who decline to choose a party affiliation. Out of almost 7,000 registered Lunenburg voters in 2004, 59 percent were unenrolled. About 20 percent were registered Democrats and 19 percent Republican. (Statewide, Massachusetts has about 49 percent independent, 37 percent Democrats, and 13 percent GOP.) So, as in many towns and exurbs, it’s the independents who decide elections. In 2004, the town gave majority support to Acton Democrat James Eldridge for state representative. (Rep. Eldridge is an active supporter of Deval Patrick in this year’s governor’s race.) Lunenburg also voted for Democrat Al Gore in 2000 and for John Kerry in 2004. But in governor’s races, the town goes Republican, turning out strongly for Weld and Cellucci in the 1990s, and giving Romney 60 percent of the vote in 2002.
On tax questions, Lunenburg leans toward the GOP positions, too. From a liberal point of view, middle-class towns should have been bastions of support for the proposition put before voters in 1994 to make state income tax rates progressive—allowing higher rates for the rich and potentially lower rates for the rest. Statewide, 65 percent of the voters said no to the graduated income tax. In Lunenburg, 68 percent voted no.
In 2000, Gov. Paul Cellucci pushed a ballot question requiring the state income tax to be returned, by 2003, to 5 percent. That question won statewide with a solid 56 percent of the vote; it carried Lunenburg with an even stronger 64 percent. And then in 2002 came the strangest tax vote of all—a libertarian-backed ballot question proposing the complete elimination of the state income tax. Not many non-libertarians took the proposal seriously. Yet 40 percent of the state’s 2.2 million voters that year said yes to junking the income tax. In Lunenburg, 48 percent voted yes and 44 percent voted no, with 8 percent (perhaps sensibly) leaving the question blank.
As goes Lunenburg, so goes Massachusetts? Not exactly. The town leans more toward Republicans than the state as a whole, and favors tax limitations more strongly. But the state is full of towns like Lunenburg. In fact, on the 2000 income tax rate rollback, 322 cities and towns voted yes and only 29 voted no. The combined vote of the state’s 10 largest cities was negative, with 241,444 against and 226,569 in favor (a 51.6 percent to 48.4 percent margin). But towns and suburbs voted heavily to cut the income tax rate. Even in the vote two years later to eliminate the income tax, there were 102 towns and cities that voted yes. Only 31 of these could be considered full-fledged Republican strongholds (by the standard of voting for the Bush-Cheney ticket in 2004).
One probably shouldn’t make too much of the fact that 40 percent of the voters expressed the desire to blow up the income tax. The vote was surely more a barometer of hostility than an actual public-policy preference. Still, when you look at the places with a majority of yes votes, you find small cities (Attleboro, Haverhill, Peabody), middle-class suburbs (Billerica, Danvers, Plymouth), wealthy Republican enclaves (Dover, Duxbury), and even the urban working-class Democratic city of Revere.
TO TELL THE TRUTH
The statements on taxes made over the years by Massachusetts voters do not add up to coherent tax policy. Only a third of the voters support graduated income tax rates? Progressivity makes the income tax fair and equitable. Kansas sets its rates at 3.5 percent for those who make up to $15,000 a year, 6.25 percent on $15,000 to $30,000, and 6.45 percent for income above $30,000. More than half the states—including Arkansas and Georgia—have progressive state income tax rates. Yet the question has failed at the ballot five times over the last four decades in Massachusetts, where it would require an amendment to the state constitution to tax income at different rates.
And how can voters think it’s sensible to cut the state income tax, when doing so results in less state revenue-sharing to cities and towns, which inevitably puts more strain on the property tax? I live in the town of Arlington, which comes close to rivaling Cambridge in lopsidedly Democratic voting. Yet Arlington supported the income tax rollback in 2000 by 12,141 votes to 11,240 votes. It’s true that Cellucci and others promoted the rollback in a flush year, before the 2001-02 economic downturn. But when the state cut back on local aid in 2003, Arlington and most other towns faced tighter budgets and had to consider raising property taxes. It took a couple of tries, but Arlington voters eventually trudged to the polls last year and voted to override the limits of Proposition 2½. A few dollars saved in income taxes is then traded away for higher property taxes. Does that make sense?
Maybe not—as a matter of tax policy. But what Republicans seem to understand better than Democrats is that talking about tax policy is not at all the same as talking about taxes. Traditionally in American politics, arguments about taxation have been about taking sides. That’s why politicians are so quick to resort to demagogic appeals. Republicans in recent decades have mastered the simple appeal to voter anger about government taking “your money.” There was a time when the Democrats had a perfectly effective demagogic appeal, as well. It was memorably expressed in novelist Robert Penn Warren’s masterpiece All the King’s Men. When the up-and-coming populist Willie Stark (a fictional version of Louisiana’s Huey Long) complained that his audience didn’t seem to be paying much attention to his tax program, his adviser Jack Burden said, “You tell ’em too much. Just tell ’em you’re gonna soak the fat boys, and forget the rest of the tax stuff.”
For all kinds of reasons, Democrats have abandoned blatant “soak the rich” appeals and have become disinclined to raise taxes on the business sector. So now when the subject of taxation comes up in the heat of a campaign, Republicans are the ones who connect on an emotional level, while Democrats are left droning on about tax policy and demands on the state budget. When Republicans promise they can hold the line against taxes, stimulate the economy, and protect important government programs, Democrats cry foul. “Tell the truth!” demanded Scott Harshbarger in his debate against Cellucci.
But what would it mean for politicians to tell the truth about taxes in Massachusetts? Maybe the truth that matters most to a middle-class voter in a town like Lunenburg has little to do with what politicians end up arguing about every four years. Can the state afford to cut the income tax rate from 5.3 percent to 5 percent? Who knows? That depends on whether you believe there will be a lot of extra revenue next year from the improving economy, and whether that revenue will be needed for this or that. But probably fewer than a hundred people in the entire state have enough mastery of the state budget to contribute intelligently to that discussion. The question that matters to an ordinary taxpayer is whether she will be paying more taxes next year than this year.
An intellectually curious taxpayer might wonder, as well: Am I really paying more now than I was 10 years ago, or does it just seem that way? And am I paying more in taxes than I would pay if I made the same income in New Hampshire or North Carolina? It does seems strange that, with all the attention to taxation in Massachusetts political debates, such basic questions are seldom addressed in a forthright way. Maybe that’s because there is no bell-clanging “truth” about the fundamental question: Are taxes too high in Massachusetts? It’s easy enough to say they are. But how high is too high?
Imagine paying about $10 out of every $100 earned to support state and local government. Is that too much for a middle-class family to pay in order to have decent public schools, police and fire protection, roads and sewers, and state services provided for the health and care of indigent children and elderly persons, the mentally ill, the disabled, and others who need assistance?
HOW HIGH IS TOO HIGH?
As it turns out, $10 out of $100 is what most middle-class people pay in combined state and local taxes in Massachusetts. In a 2003 study by the Washington, DC–based Institute on Taxation and Economic Policy comparing the tax systems of all 50 states, the national average for someone in the middle 20 percent of the income range is 9.9 percent of income for state and local taxes. The middle 20 percent in Massachusetts pays 9.2 percent, according to the study. That figure includes estimates of state income taxes, property taxes, and sales and excise taxes. (A millionaire in Massachusetts is likely to pay only about 6.8 percent of income in state and local taxes.)
I asked Cam Huff, of the Massachusetts Taxpayers Foundation, to calculate what a middle-class family of four in Massachusetts is likely to pay today in taxes. Assuming a family income of $67,000, two children under 12, and an average single-family property tax bill, Huff came up with a combined tax rate of 9 percent. He did not estimate sales taxes and excise taxes which, of course, depend on how much such a family spends on items like toys, electronics, cigarettes, beer, and gasoline (clothing and groceries are exempt from sales taxes here). But it’s easy to assume a figure of about 10 percent, reducing that $67,000 income to about $60,000 after state and local taxes.
That hardly seems to prove that taxes are too high in the Commonwealth. And in fact, as other figures produced by the Massachusetts Taxpayers Foundation show, Massachusetts overall is not a high-tax state, in terms of how much of our income goes to taxes. In fact, when all state and local taxes (including other revenues from fees and assessments) are taken into account and measured against personal income, Massachusetts ranked 46th in the nation in 2000. (Anti-taxers such as Barbara Anderson prefer to use a per capita measure; by this standard, Massachusetts ranked second in the nation in 2000—right after New York—in personal income taxes collected, and eighth in all state and local taxes. But the per capita measure can be deceptive. It tells us how many dollars government collects relative to the size of a state’s population. In expensive states such as Massachusetts, government needs more dollars to pay for the same amount of services as in a cheaper state. The per capita measure doesn’t tell us much about ordinary people’s tax burden. For example, the state that collects the most tax revenue per capita is Alaska—a state that has no personal income tax and has the lowest overall middle-class tax burden in America.)
Every state uses a different combination of taxes and fees to support government services. If you live in Maine, New Hampshire, or Vermont, you’ll pay a lot more in property taxes and less in income taxes. In Massachusetts you’ll pay more in income taxes but much less in sales and excise taxes than in most other states (though not New Hampshire, which also has low sales taxes). But overall, if you make a middle-class income, you’ll pay about $8 to $10 out of $100 in whatever state you choose (unless it’s Alaska, Delaware, Nevada, New Hampshire, or Wyoming, where you’ll pay $5 or less), according to the Institute on Taxation and Economic Policy.
Here’s the rub: When you add federal taxes to the mix you start to run into real money. As Huff points out, in 2003, federal taxpayers with incomes between $50,000 and $75,000 paid an effective tax rate of about 10 percent. On top of that, the employee’s share of payroll taxes (for Social Security and Medicare) is 7.65 percent. Add that $17.65 to the $10 in state and local taxes and you get close to $28 out of every $100 of income. Added to that, there are federal gasoline taxes and other excise taxes, etc. In fact, ITEP reports that total federal personal taxes on earnings—including both income taxes and payroll taxes for Social Security and Medicare—now average about 23 percent. So when local, state, and federal taxes are taken into account, it’s reasonable to estimate that the average person will pay $30 to $33 out of $100 in taxes.
At that rate of taxation, the person in Lunenburg making the median income of $63,981 sees only about $43,500 in after-tax income. In a state where the cost of living is so high, it shouldn’t be hard to understand why lots of voters, when asked, say they’d just as soon not see their own taxes go any higher.
it’s common in the state’s liberal and affluent enclaves to chalk up this aversion to higher taxes to people’s selfishness, or to an unwillingness among suburbanites to support services that they imagine benefit people in the cities, or to an unreasonable demand for more government services and lower taxes at the same time. When Democrats cry, “tell the truth!” they usually mean they want Republicans to stop promising better government and more tax cuts.
But when the debate goes in this direction it is almost impossible for Democrats to avoid a condescending note that doesn’t play well with the voters: Don’t be fooled by Republican promises. There’s no free lunch. If you want good schools and better health care and social services you have to pay for them.
Suppose, though, that the most tax-averse voters—the ones who may very well decide the governor’s race this fall—already know that. Suppose they don’t want to see severe cutbacks in state government and don’t want to see taxes creeping up, either. They want stability. They want about as much government as they’ve been getting, and no more.
Freelance writer Dave Denison was the founding editor of CommonWealth.