Taxophobia: The Poor Uphold a Rich Man's Tax

Tuesday the citizens of Massachusetts voted on an amendment to the state constitution which would have led to tax cuts for 85 per cent of them. For the fourth time, they defeated this measure, this year by a two to one margin.

Question two, the graduated income tax amendment, would have permitted the state to substitute a system of graduated rates for the present uniform of flat rates on personal income. If the "grad tax" had passed, legislation would have been approved reducing taxes for most families making up to $22,000.

Was the resounding defeat a surprise then? Not to the opinion pollsters and referenda watchers who had pegged the grad tax as a loser.

The two factors accounting for the amendment's defeat seem to be the large amount of money spent by groups opposed to the tax, and voter perception of the tax as an additional burden rather than a substitute for the present rates.

Diane Kessler, a representative of the prograd tax alliance Massachusetts Coalition for Tax Reform, pointed out last Friday that in referenda voting, money talks. Her group raised $5,000, as opposed to the opposition's combined total of $140,000. One might assume that advertising against a tax bill cannot cause people to vote against a measure that would lower their taxes. But when one takes into account "the powerlessness, anger, frustration, and fear that people feel confronting any issue having to do with taxation, it's really not that surprising," Kessler said. "The opposition has played upon that fear."

Last Thursday a WBZ-TV poll showed the grad tax behind by 41 per cent to 28 per cent, a solid margin for defeat. Another question asked in the poll, however, sheds more light on the referendum process. According to Bob Duboff of Decision Research, Inc., the company that conducted the poll, pollees were asked if they agreed or disagreed with the following statement: "The graduated income tax is an additional tax." The pollees were divided equally in their responses. Duboff says there is always so much confusion about the referenda that "you just don't know how much knowledge is going to sift through before the election."

This by no means proves that if all voters had been fully informed, the referendum would have passed. However, a cross-tabulated correlation of the grad tax poll reveals an interesting result. Of those who agreed that the grad tax was an additional tax, 18 per cent were for and 65 per cent were against. Of those who disagreed, those who knew what the grad tax really was, 52 per cent were for and 32 per cent against. While WBZ did not draw the conclusion on its news program, one obvious interpretation of this result is that if people had known what the gard tax really was, it might have won.

Ed King, a long time opponent of the graduated income tax, again led the anti-grad tax effort. In 1972, as the sole organized voice of opposition to a grad tax, King raised $120,000 and waged a highly visible campaign.

This year the pickings were slimmer for King's organization, Citizens for Limited Taxation (CFLT). A ban on corporate contributions and the creation of a rival organization cut the group's take to around $40,000, though their staff of 500 volunteers freed much of that money for other uses. Another headache for CFLT was that under House Bill 5020, introduced by Representative Piro of Somerville, 85 per cent of the people are below the cutoff point. The bill died in the Ways and Means Committee, but its tables were used as the basis for argument on question two.

CFLT representatives argued that a worker making $12,000 a year would have paid $1,000 more over a ten year period under the new bill assuming that wages and prices rose 8 per cent a year. The rise in the worker's money income, they said, would have put him in a higher bracket. But the argument is hardly compelling, since such wholesale inflation could never take place without occasioning a compensatory change in the rate structure.

There was another gun in CFLT's arsenal. According to King's office, "even the poor people are afraid," because Piro's bill would have provided $40 million less than what the legislature wanted. When the grad tax is in, watch the legislature raise the rates; so goes the story. The charge was echoed by CFLT's friendly competitor, People Against Increased Income Tax (PAIIC).

According to a State House source, PAIIC was formed by businessmen who found the vociferous King too radical for their tastes. He has taken strong stands against gun control and forced busing, and is identified with the conservative wing of the state's minority Republican party.

A spokeswoman for CFLT admitted that King takes "a more hard-line approach." Some businessmen believe that King's tactics were responsible for a hostile reaction by the legislature, leading to punitive measures, such as the extra tax on insurance companies passed in 1972. Another CFLT representative explained that PAIIC takes "softer, more intellectual approach," but that the two group still coordinate all advertising and speaking engagements."

Supervising the soft, intellectual approach at PAIIC was John Frenning '44. According to Frenning, PAIIC was not a group of businessmen but merely a "non-partisan citizens' organization." It raised about $100,000, most of which was spent by election day. It does not now and never has had any connection with CFLT.

Frenning attacked the $22,000 cut-off point, calling the figure "clearly a phony which most people will recognize as such." Frenning said the figures come from a table in a tax bill that was never voted on (House Bill 5020), and that the bill falls short by $150 million of what the legislature needs.

Speaking for the legislature's Committee on Taxation, Jerry Delaney '68 refuted the charge that the grad tax would fall short in revenues. The committee's calculations were based on modest estimates of growth till 1977, when the bill would have gone into effect. They showed the revenue gap to be at most $10-15 million on a revenue base of more that $1.2 billion, a gap of about one per cent. The opponents of the grad tax went back to the 1974 figures on state income to come up with the $150 million shortfall. "This is ridiculous, there's no reason for it," Delaney said Monday. "If they had gone back to 1970, the gap would have bee even bigger."

In their advertising, opposition groups charged that businesses would flee Massachusetts if the grad tax won. Owners of small businesses such as the 40 firms represented on PAIIC's political action committee would be the first to go, since larger firms lack the mobility. But now, due to a large-scale campaign against the amendment, red-flag reaction against the word "tax," and voter misinformation, this is no longer a threat. The 40 businessmen on the PAIIC committee can cancel their househunting trips to Connecticut and New Hampshire, at least until next election year.

Update will appear as a regular feature every Thursday in The Crimson.