Mary Tittman of the Massachusetts Budget and Policy Center came to Homes for Families’ community meeting on Jan 9, 2013 and gave a Tax Policy 101 lesson and an overview of state revenue. How do we take it in and how do we spend it? Considering a state nickname of ours is “Taxachusetts”, we should know what’s going on in that arena right?
First thing to know: There are three main ways that states raise revenue- 1) Personal income tax; 2) Sales tax; and 3) Property Tax and Massachusetts utilizes all three.
Second thing to know: According to Mass Budget, there are four principles of a good tax system
1) Adequacy- Is there enough money being generated by taxes to pay for the state’s programs?
2) Stable- Are the ways in which we generate revenues predictable or can it change?
3) Simplicity- Obviously, no tax system is simple, and this principle asks- Does the current tax system distort individual choices? If a tax is too high, people will make other decisions to save money, just a part of human behavior right?
And what is sure to be the topic of 2013…
4) Fairness- Are people paying what they are supposed to? There are three ways to answer this question.
- A regressive tax system- Those who make the most, pay the lowest amount of taxes. Those who make the least pay the highest amount of taxes.
- A flat tax system- Everyone pays the same percentage of their income.
- A progressive tax system- Those who make the most, pay the highest amount of taxes; those who make the least, pay the lowest amount of taxes.
Know that we’ve covered the basics, let’s get into the details.
Our income tax system is progressive. It’s supposed to be a flat tax rate, but instead, there is a personal exemption of $8800 dollars which brings low-income earners down to a level of extremely low to no taxes paid.
Remember how our nickname is Taxachusetts? That actually comes from a 1977 reputation, and since then, taxes have severely decreased for the tax payer– by 26%. We are currently ranked 32nd in the nation for the share of personal income a state takes.
So what happens when there is a tax revenue decrease of that volume? Programs lose funding, people lose services and the state suffers. Here is a breakdown of what has happened since 2001 in Mass:
|Chapter 70 Education Aid (K-12 Funding)||-8%|
|Early Ed and Care||-28%|
|Mass Health/Health Reform||+39%|
The numbers speak for themselves. But the next bit of information caused a big clunk in the room- the sound that a room full of jaws hitting the floor makes.
Housing and homelessness. Since 2001, funding for housing has DECREASED 33% and funding for homelessness programs have INCREASED 82%.
Can we say correlation?
What else do you need to know about taxes? Leave your comments and we will do our best to answer them. Taxes, while intense, are not boring…taxes are your education, your children’s future, your state’s stability…and you’re money.