'Taxachusetts' Voters May Eliminate State Income Tax

For years, Massachusetts was known derisively as "Taxachusetts." But voters could help shed that label in November by completely eliminating the state's income tax in a single stroke.

If approved, the ballot initiative would wipe out 40 percent of state revenues and give back to each taxpayer an average of $3,600.

The Massachusetts proposal is the most notable of several tax-cutting questions that will appear next month on ballots around the nation.

Others include a North Dakota initiative to cut individual income tax rates in half and trim corporate rates by 15 percent; an Arizona measure to mandate that any initiatives requiring spending or tax increases be approved by majority of all registered voters, not just those casting ballots; and a Maine plan to repeal new taxes on beer, wine and soda.

In Massachusetts, critics say there's no way to chop $11 billion out of a $28 billion budget without decimating services, which could include closing schools and fire stations. Aid to cities and towns would also decline, placing enormous pressure on property taxes.

Gov. Deval Patrick has called the proposal "just a dumb idea" that would set the state on a road to fiscal ruin. He's the highest-profile member of a chorus of public officials, including the House speaker and Senate president, who have blasted the proposal.

Supporters of the idea say Massachusetts doesn't have to look far to see that a state can operate quite nicely without an income tax.

New Hampshire, Massachusetts' neighbor to the north, is one of nine states with no income tax.

"We're looking at New Hampshire and asking ourselves why not?" said anti-tax activist Barbara Anderson. "They have winters too. They have roads. They have schools."

Other states without an income tax are: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.

The Massachusetts initiative is being pushed by the Committee for Small Government led by Carla Howell, a Libertarian candidate for governor in 2002 who got just 1 percent of the vote.

Howell's had greater success with the tax initiative.

In 2002, she led the first effort to put the question on the ballot. At the time, lawmakers paid little attention to it and were shocked when the measure won the backing of almost 45 percent of voters, despite the virtual lack of a public campaign to support it.

Opponents say they are not taking any chances this time. They have organized a campaign committee — the Coalition for Our Communities — to persuade voters to kill the initiative again.

"Sure times are tough, but Question One would undoubtedly make it worse," said Steve Crawford, a spokesman for the group who also works as a spokesman for Patrick's campaign office. "We're trying to get the message out and build support for a campaign to fight this reckless proposal."

The group is planning to launch a series of television ads before the election, relying heavily on union money to pay for the campaign.

As of Sept. 22, the group had more than $1.2 million in its campaign account, including $1 million from national teachers unions.

Howell's Committee for Small Government had just $8,000 left in the bank, but Howell said the group will mount a barnstorming campaign across the state.

"It is David vs. Goliath. The good news is that we have the winning message," said Howell, who has been criticized for accepting tens of thousands of dollars in consulting fees from the committee.

The state's "Taxachusetts" label dates back to the 1980s, when Massachusetts had some of the highest tax burdens in the country.

Then-Gov. Michael Dukakis won the 1988 Democratic Party's presidential nomination on the success of the so-called "Massachusetts Miracle," but after his loss, the economy tanked.

Dukakis floated bonds to pay off the deficit, forcing lawmakers to hike the income tax rate from 5 percent to 5.95 percent in 1989, then to 6.25 percent in 1990. It later fell back to 5.95 percent.

Since then, Massachusetts has taken steps to try reduce taxes. During the 1990s, the state trimmed dozens of smaller taxes. It also created a rainy day fund — now more than $2 billion — to help avoid a repeat of the Dukakis-era hikes.

In 2000, voters overwhelmingly approved a ballot question that cut the income tax from 5.95 percent to 5 percent. But lawmakers froze the cuts at 5.3 percent.

A recent report by the nonpartisan Tax Foundation ranks Massachusetts 23rd among states for its overall state and local tax burden. In 1980, Massachusetts was ranked second behind New York.

Polls suggest neither side can take anything for granted.

A WHDH-TV and Suffolk University poll found 50 percent of voters opposed to the question, 36 percent in favor and 15 percent undecided.

The poll was conducted from July 31 to Aug. 3 with 400 registered voters and had a margin of error of plus or minus 5 percentage points.

A second poll conducted by WBZ-TV found voters split nearly even, with 47 percent saying "yes" and 45 percent saying "no" when asked whether Massachusetts should continue to have a state income tax. That result was well within the poll's 4.5 percent margin of error.

In North Dakota, the ballot question is being driven in part by taxes on oil production that are swelling the state treasury and could push the budget surplus to $1.2 billion by June.

Supporters say the surplus can easily absorb the effects of the initiative, which is expected to cut state individual and corporate tax collections by $415 million over two years.

Its backers include North Dakota Republican congressional candidate Duane Sand, who is chairman of the initiative's sponsoring committee, and U.S. Agriculture Secretary Ed Schafer, a former North Dakota governor.

Opponents of the measure, which include the North Dakota Farm Bureau and the AARP, say the tax cut could cause problems for state programs if prices for oil and farm commodities decline.