Voters Get Chance to Take ‘Tax’ Out of ‘Taxachusetts’

A ballot initiative that has received scant public notice could permit voters here to enact a revolution Nov. 5, banning state income taxes in the commonwealth once known as “Taxachusetts.”

Supporters, who hail mainly from the state’s small Libertarian Party, say the measure would wrest spending power from profligate bureaucrats and place budget control where it belongs: in the hands of the people. Detractors, including the entire state Legislature, say that passing the bill would paralyze state government by stripping Beacon Hill of its primary funding source.

Even by the standards of tax rebellion, the bill is so bold that few expect it to pass. But its mere presence on the ballot signals a triumph for the Libertarian Party, which has long espoused an anti-tax philosophy in Massachusetts and which collected about 13,000 signatures to place the proposal before voters. The initiative’s existence also reflects a creeping cantankerousness among some segments of the always unpredictable Yankee electorate.

Gubernatorial candidates Shannon O’Brien, the Democratic state treasurer, and venture capitalist Mitt Romney, the GOP standard-bearer, made no mention of the proposal last week in a fierce debate. But Carla Howell, the Libertarian candidate, has made ending state income tax the centerpiece of her campaign and “the focus of my life, absolutely.”

Stressing the potential effect of the initiative in a state that annually derives $9 billion--40% of its operating budget--from state income taxes, Howell said: “There probably is not a voter alive who has had the opportunity to vote on something like this.”

Her most outspoken foe is Michael J. Widmer, the president of a nonprofit, nonpartisan group called the Massachusetts Taxpayers Foundation.

He agreed that the ballot question is “far and away the most sweeping tax cut proposal ever to reach this state’s ballot--and perhaps the most sweeping proposal of its kind in any state.”

The bill is so revolutionary, Widmer added, that “it would repeal the 20th century.”

In particular, Widmer charges that the measure would destroy the state’s public education. Howell counters that abolishing state income taxes would “dramatically benefit schools in Massachusetts” by ending involvement from state legislators.

Just as important, according to Howell, banning state income taxes would force Massachusetts to reexamine what she considers runaway state spending.

“We need to take a close look at what we are already spending $23 billion on,” she said, referring to the state’s annual budget. “This is the only plan that will work.”

In a contentious state Legislature that normally cannot even agree on the weather, not one Beacon Hill lawmaker has endorsed the measure, which one state senator said would turn Massachusetts into “the Idaho of the East Coast.” The Legislature would have the power to overturn the measure if it passes.

Herman B. “Dutch” Leonard, a professor of public management at Harvard’s John F. Kennedy School of Government and a student of tax revolts, said the measure “is not the kind of policy proposal that serious people take seriously--and maybe that’s the problem.”

Although a late-summer poll showed 37% of voters supporting the initiative, Leonard called the proposed income tax ban “a sleeper” that has generated little attention. But with voter turnouts averaging less than 30%, the bill could entice cranky citizens sick of wondering what the state does with the money extracted from their shriveling paychecks, Leonard said.

States typically derive most of their revenue from sales and income taxes. Through counties and other jurisdictions, they also receive funds from property taxes. In the nine states that do not have personal income taxes, sales taxes tend to be higher than the national average. Because sales taxes are paid in small, steady doses, they generally meet little opposition--even in regions where the rate is 10% or higher.

As shown by California’s passage of Proposition 13 in 1978, “property taxes tend to produce the most resistance,” Leonard said. But income taxes also raise citizen ire, Leonard said, “because you file an annual return that shows exactly what you paid--and you wonder, what did I get for all that?”

Libertarian Howell, a 25-year veteran of private-sector work in management and engineering, made such disgruntlement the rallying cry of an unsuccessful bid for the U.S. Senate. As a candidate for governor, she blasts the “arrogance” of a government that assumes it knows best how to spend citizens’ money. She especially targets fat in state education budgets, such as “solid oak paneling being used [in schools] when pine would do just fine.”

After studying free-market economics, Howell concluded that “government central planning destroyed the Soviet economy, and the same principle applies here. Government spending is destroying schools in Massachusetts.”

The very simplicity of Howell’s proposal is why Widmer, for one, fears that some citizens may embrace it.

“The electorate is in a sour mood because of everything that is happening in the world--Sept. 11, the economy, corporate greed, the stock market,” Widmer said. “When people are unhappy, they often want to send a message.”

The rocky history of high tariffs produced the moniker “Taxachusetts,” an insult hurled at then-Gov. Michael S. Dukakis by George Bush when both were running for president in 1988.

Since then, Massachusetts has phased in a series of income tax reductions that have pushed it out of the ranks of the highest-taxing states, at least by some measurements.

But personal income taxes have been a fundamental revenue source for more than half a century, and eliminating those funds would carry enormous consequences, Widmer said. Sales taxes would skyrocket, and property taxes also would have to climb, he added.

The current 5% state sales tax exempts food and clothing, placing Massachusetts in the bottom tier nationally.

Public schools might have to close, Widmer predicted, because most major cities rely on state aid for as much as 80% of their school budgets.

All public programs would be at risk, he warned, from courts to prisons, public safety to prescription drugs.

“Clearly what would happen is that it would usher in a lengthy period of fiscal and political crisis, with all the impact of both--plummeting bond rating and economic harm,” Widmer said.

“It would be hard to fathom that large a shift in the state tax or expenditure structure in any short time period,” said Leonard, the tax historian. “At best, it would be incredibly disruptive.”

Stressing that he was not predicting that the bill would pass, he added: “Maybe people are in denial about this possibility, about what it would actually mean.”

If passed, the bill would take effect Jan. 1.