My name is Joel Eigerman, and I am here representing the Jewish Alliance for Law and Social Justice. I am here to speak in favor of House Bill 2700.
JALSA is a special interest group. Our special interest is promoting the general welfare; safeguarding access to equal opportunity; and eliminating the legal, societal and economic barriers that stand between too many and the promise of the American dream.
Tax policy has a central role in these efforts. In order not to magnify the inequities inherent in our economic system, we believe taxation must be progressive: that is, the tax burden must fall disproportionately on those better able to pay. This has been recognized at least as early as the 18th Century, when Adam Smith observed that since the poor spend all they earn on necessities, and the rich do not, “It is not…unreasonable that the rich should contribute to the public expense, not only in proportion to their revenues, but something more than in that proportion.”
In this country, the basic engine of progressive taxation, the graduated federal income tax, came in with the passage of the 16th Amendment in 1913. Among its champions was Theodore Roosevelt, who felt it both the only just way to raise revenue as well as an indispensable tool in breaking the strangle-hold of private wealth and unregulated corporations on our economic and political life.
Despite its adoption a century ago, and despite the continued support for progressive taxation by a broad consensus of economists and political scientists of virtually all persuasions, recent decades have seen a concerted and far too successful attack on this principle. On the national level, our taxes have become increasingly regressive, while at the same time intentionally destructive deficit spending and the relaxation of critical regulation have helped lead us to the greatest economic melt down since the Great Depression.
At this juncture, state tax policy is of heightened importance. While the federal government can and does engage in the counter-cyclical practice of lowering taxes and increasing spending in bad economic times, the states are not permitted to do the same, and must both raise taxes and cut spending—acts that can only intensify the downturn. Within those limitations, we believe that it is incumbent on the Legislature to see to it that the maximum in progressivity be preserved in and restored to our tax system.
The most obvious way to make our tax system more progressive would be to eliminate the state constitutional ban on a graduated income tax. Indeed, there is one bill before you which seeks to do that, at least for those earning more than $1,000,000 a year. Sadly, that is probably a political non-starter, and would take years.
A far simpler method of achieving substantial and much-needed progressivity is to raise the personal exemption and balance the revenue loss by raising the flat tax rate on income above the higher exemption. I am here to speak in favor of House 2700, which proposes raising the personal exemption for an individual to $20,000 and for a married couple to $40,000. Those figures are now $3,300 and $6,600 respectively. To recapture the revenue loss, the basic state income tax rate on incomes above that figure would be raised to 7.5% from the present 5.3%.
We believe that this is, for once, a substantial and more than incremental change, and it will provide meaningful relief for our hardest-pressed citizens. I defy anyone to say with a straight face that a family in Massachusetts with an income of $40,000 a year is not at the edge of the financial abyss, and does not suffer mightily from the roughly $2,000 a year it now pays. That it will immediately recycle its savings into consumer spending, with the usual multiplier effect to benefit the economy, is a given.
By contrast, the increase at the other end is far less onerous than it looks. Again, looking at joint tax payers, the increased exemption means that even at the increased rate, only taxpayers with incomes over $140,000, approximately, will see any increase whatever. Thereafter the tax increase of 2.2% means that a family making $200,000 will pay $1,320 in increased taxes, but since this amount will be deductible on the federal return, the actual cost will be under $1,000. Only upwards of $250,000 will a family have a net increase of $2,000, equal to the tax break for the lowest earners. We will have shifted $2,000 a year in taxes from families making a total of $40,000 a year to families making more than six times as much. That hardly seems a confiscatory result. While we can expect moaning and gnashing of teeth, I do not think we should take it seriously.
There are numerous other bills before you today, many of which are worthy of consideration, and would be particularly so in more normal times. None of the others would have the broad impact that House 2700 would, and that is why we urge its favorable report.
In closing, I want to leave you with this thought. It is long since time we dropped the Reagan-esque mantra that government is wasteful and evil, that taxation is theft, and that government has no role in making our lives better. The events of the last few years have surely demonstrated that we must rely on government to channel our imperative need to help ourselves by helping one another. In the words of that dangerous radical, Theodore Roosevelt, “The object of government is the welfare of the people.” That object cannot be attained if we cut off the government’s revenues and deprive it of the power to act.
CLSA had a useful discussion with Boston Council President Michael Ross
