Risky tax cut

Boston Globe editorial, 10/19/2000

uestion 4 would cut the state's income tax rate from 5.85 percent to 5 percent. The reduction would be so large as to be risky, so indiscriminate as to be unfair, and - despite the claims of backers - not supported by a historical ''promise.'' It should be defeated.

When fully implemented (by 2003), the cut would drain $1.2 billion annually from state revenues. This would leave us in a perilous situation in the next economic downturn. A recent study from the nonpartisan Center for Budget and Policy Priorities in Washington cited Massachusetts as being more stable than most states now but facing a particularly risky future if revenues are cut drastically.

The Globe supports smaller, more targeted tax cuts for families and businesses. Proportionally, Massachusetts draws more of its revenue from income taxes than from sales and other levies, which is the fair approach. The income tax is more progressive, a tilt that should be preserved. The Question 4 cut favors higher-income taxpayers.

Governor Paul Cellucci, the lead proponent, argues that the tax to be cut was ''temporary'' - calling it a promise that should be kept. The record shows otherwise. There was a temporary tax increase in 1989, to 5.75 percent, but this was superseded by an explicitly permanent tax hike approved in 1990.

Voters may be tempted by the big revenue surpluses in recent years, thinking our economy can accommodate a hefty rebate. But over 10 years state taxes have been cut 40 times, for a total tax reduction of $3 billion per year. In 1998 the state raised the no-tax threshold for the poorest taxpayers; it cost $500 million. Add to this a cut in the capital gains tax, a cut in the tax on investment income, and a property tax cut for the elderly, among others.

There was indeed another surplus of close to $1 billion last year, and the first few months of fiscal 2001 look good. But even in these exceptionally flush times, the surpluses do not match the $1.2 billion this cut would take away.

Neither the Chamber of Commerce nor the business-backed Massachusetts Taxpayers' Foundation has endorsed Question 4 - for good reason. Many business leaders say they are less concerned about tax rates than by the potential instability of deep tax cuts followed by corrective tax increases. Many also prefer redoubled state efforts to educate and train a skilled work force.

There are other unmet needs: waiting lists for adult education, services for the retarded, drug treatment, affordable housing. Also, much of last year's surplus went to bail out the Big Dig, and more may be needed in coming years. Eliminating the tools to accomplish these goals would put the state at a competitive disadvantage. The Globe urges a No vote on Question 4.