Increasing the income tax
The governor’s plan includes a 19 percent increase in the income tax rate. According to the National Conference of State Legislatures, we already have the third-highest income tax per capita in the nation. Increasing this tax a full percentage point would result in us eclipsing New York and Connecticut on our way to the country’s highest per capita income tax.
Doubling personal exemptions
The personal exemption for single, head of household and joint filers would double, raising it to $8,800, $13,600 and $17,600, respectively. This idea will cost the state well over a billion dollars. A reasonable case could be made to index this number to inflation, but doubling is extraordinary. It also creates a very regressive cliff from non-participation to full participation at a substantially higher tax rate. For some measure of relativity, the federal personal exemption for 2013 is $3,900, up $100 from 2012.
Rolling back the sales tax
Though sales taxes tend to be regressive, in Massachusetts, our sales tax is actually more progressive than most states because food, clothing and medicine are exempt. In terms of revenue raised as a percentage of personal income, our sales tax is currently ranked a low 42nd among the states. Since revenue targets are driving the governor’s proposal, if this rate is reduced, $1.4 billion in revenue will need to be made up elsewhere.
The Legislature’s more modest plan reforms the transportation system by moving employees off the capital budget over three years while providing forward funding to allow for a capital plan. This closes existing gaps while still allowing for substantial, long-term improvements in our infrastructure, such as a Green Line expansion and new cars on the Red and Orange lines. The governor’s plan, on the other hand, implements a major expansion of the transportation system, delivering many projects to districts all over the state without first addressing current unsound fiscal practices.