Taxes - III

I can't take time today to reply at length to Proof Reader and others about taxes, but here's a start.

There are moral reasons, religious reasons, reasons based on the needs of the majority of the people, historical reasons and political reasons for solving this economic disaster by taking back the money of the very wealthy through some kind of massive redistribution. However, all of these reasons can be answered; they all depend on your perspective, what you care about, who you care about and what your values and beliefs are.

However there is another dimension of this argument - the consequences of the two views, and whether we are willing to live with them.

What I will argue is that the state of affairs we have reached now is caused by rapidly growing extreme inequality, which is unsustainable and has led inevitably to a massive economic crisis and meltdown, a crisis which is far from done. And that - whatever your beliefs and values - this path leads to disaster for us all.

After looking long and hard at the logic of this conclusion and the economic data supporting it, you may have to conclude that wealth redistribution is a practical necessity, and progressive taxation is the most orderly, least disruptive, least dangerous - and least revolutionary - way of accomplishing it.

This may require readjusting your values, beliefs and commitments.

Some of us, faced with a moment like this, retreat and take a "facts be d* * * *d" attitude. We humans however have a remarkable capacity for rationalizing necessity, so I remain hopeful. 

Patrick's Tax Proposal

To my surprise, Governor Patrick's tax proposal is a major step in the right direction, and deserves our support.  To the extent that Tim Murray was responsible for this proposal we should thank him too.

The whole package, if passed together, would mark a major shift of the tax burden away from regular Mass. residents and toward those with the most money, and generate a very significant overall increase in revenue.  It would take money from those most likely to park it in speculative investments and put it in the hands of those most likely to immediately purchase goods and non-financial services.  Those in turn would generate more demand - and employment - and revenue!.  By spending the revenue back into circulation on major projects and non-financial services, to the extent that it can be channeled into local hiring, still more employment - and revenue - would be generated.

A back of the napkin calculation suggests that this tax initiative might generate - directly and indirectly - roughly 50,000 jobs, a significant dent in unemployment in a state where the real unemployment rate is at least 20%, or at least 600,000 unemployed.  

Of course if you believe the endlessly-repeated mantra that "Government Doesn't Create Jobs, only Private Industry Creates Jobs", then these couldn't be real legitimate jobs - we would have to count them as imaginary jobs - building imaginary roads?  Generating imaginary paychecks that will get spent on imaginary food, fuel and housing?

I can say with confidence that very few of the unemployed will see it that way.

Property Tax Crisis

This latest looming crisis underscores the need to greatly reduce reliance on property taxes to fund city services.

(See Nick's column: http://www.telegram.com/article/20091206/COLUMN27/912060415)

Property taxes are the most arbitrary and regressive way of raising revenue. How property is valued often has only a loose relationship to people's ability to pay - witness the agony of retired workers who can no longer pay the taxes on their homes. Entire towns or regions which become unaffordable to the families who have lived in them for generations, because of "gentrification" leading to rising property values driving up taxes. For example, the families that had lived on Nantucket since the Vikings are largely gone now, driven out by the taxes.

And this crisis reminds us of how very unstable property values can be, and the chaos that can happen as assessors scramble to keep up with fluctuations - and owners struggle to cope with the unanticipated revaluations.

Studies over the years of who ultimately pays a tax indicate that landlords are able to (and must) pass along the entire burden of property taxes to their tenants, so that people in Green Island, who may pay half their income in rent, effectively pay a much larger portion of their income on taxes than people living in trophy homes in Princeton. This is invisible to them, but it is very real. Yet the inequity in the absolute amount of revenue per person between Worcester and Princeton means that the schools in the "hill towns" are much-better funded.

Revenue for schools in particular - the biggest local expense and the greatest source of social inequity - should rest reliably and securely on the state income tax, the fairest and most stable source. The use of property is a kind of income and probably should not be tax-free. But we need to get away from these periodic struggles to save our city services by squeezing more blood from the property-owners, which every few years produces a new disaster.