Shakey Economy May Weigh Heavily in Income Tax Vote

Originally published in The Boston Globe

October 8, 2008
Eric Moskowitz (Reporter, The Boston Globe)

As an MBTA employee, George Glidden knows the unions want him to vote against Question 1, which would abolish the state income tax. He's heard the fears that the ballot question would cause dramatic cuts to state and local services and probably trigger other tax increases to make up the difference.
But taking home an extra $54 or so a week - even, Glidden figures, if he has to pay half or more back in a property-tax hike later - would be worth it.
"It's about the pocketbook. It's about everything else going up," said Glidden, who is 40 and lives in North Attleborough. "If you can give me an extra $20 or $25 a week, that's a tank of gas - or part of it."
The last time the income tax question was on the ballot, in 2002, it received little attention but stunned political observers by collecting 45 percent of the vote. At the time, a gallon of gas cost less than $1.50, home prices were soaring, and the economy, if imperfect, was not the dominant issue.
That's a far cry from 2008. Voters for months have endured unemployment increases, flat or decreasing wages and home values, a rising cost of living, and, for the last two weeks, have watched with unease and even panic as stock prices plunged and the credit crisis spread around the world.
All of which means the economy, whether it's personal finance, the state budget, or global financial transactions, will weigh heavily on the minds of voters Nov. 4, those on both sides of Question 1 say. That has shaken the forecasting and for many increased the hope, or worry, about the result.
Carla Howell, the chief proponent of the tax cut question, thinks pressured taxpayers will see it as a "relief valve." It will "make the difference for thousands [of people] between paying the mortgage and not being able to pay the mortgage," said Howell, chairwoman of the Committee for Small Government and a former Libertarian gubernatorial candidate.
On the other side, those who believe fundamentally in the importance of the state income tax - as well as those who just don't want to see the economic rug yanked from beneath Beacon Hill and, in turn, the state in a time of crisis - have been engaging in an education campaign that they hope will win out over antitax reactions and pocketbook concerns in the voting booth.
"I am concerned that this becomes a vote of emotion," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, which this week issued a 28-page report, "The Enormous Consequences of Question 1," predicting that the loss of $12.5 billion in income taxes would be catastrophic to state services and local aid. The state's bond rating would plunge to junk status, and businesses drawn by quality of life and stability would look elsewhere, Widmer said.
"I think if anybody looks at the facts, it would lose widely," he said. "But I'm assuming it's going to be a close vote."
In late September, two polls indicated that to be the case. A Suffolk University/Boston Globe poll of 400 residents, taken Sept. 22 to 25, indicated that 40 percent supported the question, with 49 percent opposed. A Sept. 22 and 23 poll of 679 likely voters, conducted by Survey USA for WBZ-TV, indicated that 31 percent would definitely support it, 34 percent would definitely oppose, and 35 percent were undecided or leaning. But that September snapshot now seems like ages ago - the Dow Jones industrial average hovered at about 11,000, and the Bush administration was just introducing the bailout plan, which was ultimately revised and passed last week.
Interviews with more than a dozen voters Monday during the lunchtime rush in Downtown Crossing revealed a mix of opinions.
"Every day it's more expensive," Nadira Seguie, a 50-year-old city housing employee from Roxbury, said, explaining why she will vote for the question. "The food, the gas, medical bills, everything."
John Czajkowski, a heating and air conditioning worker who lives in Quincy, will vote against it, because he thinks abolishing the income tax would cripple a state government that is already envisioning substantial cuts because of lagging tax collections tied to the economy.
"If you get rid of the income tax, it will be even worse," said Czajkowski, who is 42. "Where will you get the money to pay for services?"
Several opponents said they worried that voters would consider the immediate paycheck gains but not the potential consequences. "I think the only thing they see is 'no taxes,' " said Dennis Hohengasser, a 59-year-old state employee from Taunton.
That's not unusual in studies bridging economics and psychology, said Edward L. Glaeser, a Harvard professor. "People very often fail to think that other people engage in complex thinking," he said.
Glaeser, who also directs the Rappaport Institute for Greater Boston, said a flagging economy could make voters feel poorer and want to expand their paychecks by abolishing the income tax. But the more dramatic news of late, about the credit crisis and stock selloff, could outweigh that impulse and make people think that this is a particularly risky time to vote for something drastic and unpredictable, he said.
"There are good reasons to think that the second view is actually the right one," Glaeser said. "If you ever wanted to experiment with something like this, this is a very, very tough time to be sending the state out to the credit market to be making up a cash shortfall" immediately, even if budgets could be balanced long-term.
The question, if approved, would cut the state income tax from 5.3 to 2.65 percent on Jan. 1, in the middle of this fiscal year, and abolish it entirely a year later. It would become law, but is not a constitutional amendment. State lawmakers, who have voiced bipartisan opposition to the question, could try to repeal it later or approve other measures to offset it, but would face procedural and political obstacles, especially in the first year.
Howell said eliminating the income tax would force officials to build a "lean and efficient government," not cause public schools, roads, and safety to deteriorate or other taxes to rise. She touts the $3,700 in income taxes the average Massachusetts worker would save annually.
Income tax supporters, who did not organize in 2002, are campaigning against passage. A union-funded coalition of civic, human services, environmental, labor, faith, and business groups has banded together for statewide canvassing, phone banks, and yet-to-run ads.
The Rev. Richard McGowan, a Jesuit priest and Boston College economics professor, said he thinks a majority of voters understand that the benefits promised in Question 1 are illusory, with consequences that will probably include lost services and the expansion of more regressive taxes.
"In some other states it might be [swayed by the economy], but I have a feeling that in Massachusetts it's just not the way it's going to go," he said, pausing briefly. "I might be very wrong."