Left In Lowell

State Rep Will Brownsberger, writing at Blue Mass Group, has an excellent idea on how to give tax relief to most of us reg’lar folks while maintaining the state’s revenue stream - in essence, faking a progressive tax scheme which most other states that have income taxes employ. In MA, progressive tax structures are outlawed in the state constitution, which commands a “flat” tax. (Bold red text my emphasis.)

Some in the legislature are discussing a proposal to dramatically increase the personal exemption, so as to provide complete income tax exemption for families who make less than the eligibility thresholds for major public assistance programs — housing, heating and health care. To pay for this exemption without net revenue loss, it would be necessary to increase the tax rate. The net effect would be reductions in taxes for families up to a fairly high level, with increases for families at the highest income levels ($150,000 and up).
…
The reform concept: Families that have incomes below a livable level — as judged by the legislature and the agencies responsible for the various subsidy programs — shouldn’t be paying income tax. Yet, they do. Under current law, a family of four with an income of $50,000 — eligible for housing, heating and health subsidies — pays 5.3% on a taxable income of roughly $30,000 ($50,000 less roughly $20,000 in exemptions and deductions) or roughly $1,500 per year.

Background — tax computations: The tax rate for most income in Massachusetts is 5.3%. Income tax liability is computed based on taxable income — actual income less exemptions and deductions. For a family of four, the personal exemption would be $8,800 plus $1,000 for each child; additional deductions might total approximately $10,200 if the family were living in rental housing. So, under current law, a family of four might have a total of $21,000 in exemptions and deductions which would reduce their taxable income.
…
Possible specifics for the reform: If a married couple’s exemption were increased from $8,800 to $40,000, and dependent exemptions were increased from $1,000 to $5,000, our family of four with income of $50,000 would pay no income tax and save $1,500 per year. Based on on DOR simulation of similar proposals, to pay for this relief, the tax rate would have to go to somewhere close to 7.5%. The combined effect of the increased exemptions and the increased rate would be to reduce taxes on families up to a breakeven level of approximately $140,000. Families above that level would see an increase which would work out to approach almost 2.5% of their income for the wealthiest families. For a tax impact calculator, click here. Exemptions for a single person would be $20,000 (for a head of household, $30,000) if we wished to preserve the current proportionality of exemptions. In a scenario along these lines, the vast majority of taxpayers would see a decrease in taxes paid — only the top 15 to 20 percent would see an increase.

Please click and read that tax calculator. Even a family making $100K would see their taxes drop $1053 under this calculation. Families making $150K would see their taxes go up only about $235. And do go read Rep. Brownsberger’s full post.

I think if this is truly found to be revenue-neutral or maybe even a slight revenue gain to the state (so we can stop bleeding from cuts to essential services, local aid, and schools), this is a good alternative to changing the state constitution (a years-long process), at least in the short run. It’s not truly a progressive tax structure, but it simulates one, given the circumstances of the state. Heck, my husband and I, with no kids and with a decent family income, stand to get a substantial tax cut under this plan as Rep. Brownsberger lays it out.

Unless serious caveats are found, count me as completely on board!