A Modest Proposition

"All men are by nature provided of notable multiplying glasses--that is, their passion and self-love--through which every little payment appears a great grievance, but are destitute of those prospective glasses ... to see afar off the miseries that hang over them and cannot without such payments be avoided." Thomas Hobbes, 1651

Nothing, they say, is for sure except death and taxes. Past Tuesday you may not be able to count on taxes. Tax cut fever, first cultured by California political scientist Howard Jarvis in 1978, has spread through the air conditioning systems of corporation executive suites in the years since. Voters in 17 states will decide tax cut referendums in tomorrow's election, but nowhere are the proposed gashes as deep in Massachusetts, where Proposition 2 1/2, Question 2 on the ballot, has become the Bay State's hottest political issue.

Briefly, everyone who works for local government is against Proposition 2 1/2, arrayed against a large percentage of those who find employment elsewhere. The referendum would cut the permissible level of property taxation--the only form of tax a Massachusetts locality can levy--to 2 1/2 per cent of the total assessed value of property in the community. William C. Wheaton, an associate economics professor at MIT, assessed the magnitude of the cut in a report prepared late last month. Bay State tax revenues, Wheaton said in his under-publicized study, would fall from around a current figure of $3 billion to $1.8 billion in a series of graduated reductions. Cambridge, for example, would have to cut nearly $15 million from its budget next year, and trim similar amounts each of the next three or four years.

Older cities would be hardest hit--relatively low property values and large numbers of poor people mean that Cambridge, Boston, Fall River and New Bedford have been charging a higher percentage of property values as taxes so they can provide public housing and bilingual education. In the suburbs, where people own expensive homes and the major policy questions are how many swimming pools the new high school needs, many communities are already at 2 1/2 per cent. For them, the referendum means no pain, only a chance to publicly display their gleeful conservatism.

All the commercials urging support of the referendum begin the same way; angry sounding men reminding listeners that Massachusetts has "the highest property tax rate in the nation." True enough, but total state and local taxes in the state are actually lower than California, New York or even Minnesota, and are only 13 per cent above the national average, not bad for a state which supports social engineering programs like welfare.

"Hah," exercised homeowners interject. "They may not be that high now, but they're going up all the time. We've got to stop it somehow." Indeed, Cantabrigians, who got their tax bills during the last two weeks, must have been rudely shocked. The tax rate last year was near $188 per thousand. This year, it hit $230, a large jump, even though Bay State homes are notoriously undervalued. But the rise is an exception to the rule; even counting this year's jump, city taxes have increased far less than the cost of living (and governing) during the past decade. Wheaton's study confirms that the same is true across the state. "Real (inflation-adjusted) tax collections, therefore, have fallen by 20 per cent in the last three years ... back to the level they were in the late 1960's ....Local governments seem to be responding on their own to what they perceive as taxpayer resistance." Even with this year's big boost, budget season was unpleasant in Cambridge. "In one night I've wiped out every innovation I've introduced in the last five years," William Lannon, Cambridge superintendent of schools, said last spring after a final budget was approved.

Given the already-reduced spending levels, some may doubt the claims of 2 1/2 proponents that only "fat" will be cut from city government should the referendum pass. Cambridge taxes about 5 per cent of assessed values of city property--hence it will have to cut its collections in half. To lessen the shock, "2 1/2" proponents beneficently allow for a gradual phase-in--the city will only have to melt away 15 per cent of its fiscal cellulite a year until it reaches the magic level. So figure inflation prances along at 10 per cent next year; coupled with a 15 per cent reduction in city revenues that means about a 25 per cent budget cut for Cambridge. Or, in city manager Jim Sullivan's words, 100 policemen, 100 firemen, 250 or more teachers. The city's neighborhood health clinics. A score of administrators. All branch libraries. And then the next year, another 25 per cent. Except that you can only get rid of branch libraries once, so maybe 150 cops this time. Cambridge's police force, by the way, numbers about 300. By the time the measure is fully phased in, the city will be able to pay the interest on its debt, the cost of pensions, and nothing else.

The sugar-voiced deejays of 2 1/2 mania indignantly label Sullivan's charges "scare tactics." They provide two alternative scenarios: since 2 1/2 would allow the community to override the tax cuts by a 2/3 vote in a local election, they argue, residents will make sure there are still fire houses with the lights on. And anyway, they reason, 2 1/2 is only an attempt at tax reform; the state legislature can raise taxes and hand the money over to cities and towns, preserving services while ending the heavy dependence on property taxes.

Overriding the bill is certainly a possibility--the public employee unions in Cambridge are probably strong enough to win a majority in favor of continuing city government. But unlike other decisions in a democracy, a majority is no good; 2/3 of the city's voters would have to vote to override the limitation. And anyway the city could not vote on the measure until the next biennial election, two fiscal years and two budgets away. By that time, Cambridge will be lucky to have an election commission.

Voters determined to send a letter bomb to the state legislature seem to have been more swayed by the second argument, professing loudly their belief that the legislators will surely come through with the money needed to prevent layoffs and cutbacks. But the Massachusetts legislature acts in the public interest only once a year, and that's the day it votes to adjourn and return to their law offices for the summer. This legislature has never been a great friend of tax reform--they created the present system and they have maintained it ever since, for a very simple reason. Increased state taxes might anger voters enough to occasion their removal from office, returning them to a life of settling divorces.

Making up the difference between the current level of local revenue and the post-2 1/2 level would require the state legislature to increase the state income tax from 5 per cent to 8 or 9 per cent, or include food and clothing in the sales tax and raise it from 5 per cent to 7 per cent, or raise gas taxes to 80 cents per gallon. The state legislature will take one look at these figures, calculate the political costs involved, and run, not walk, the other way. But should the impossible happen, should they decide to save the cities and towns, the result would be just as disastrous. With no control over large chunks of their revenue, the cities and towns would have to beg individually from the state legislature for outlays, removing all local control and autonomy. Those who have compared state and local government know which is more efficient. Those who haven't need only contrast Gov. Edward J. King with, say, Cambridge Mayor Francis H. Duehay '55 and decide which is more responsible.

All the polls show Proposition 2 1/2 will likely pass, barring a last minute organizational jihad from the public employee's unions. Backed by the state's businessmen, especially the industrial aristocrats who rule the fabled domain of High Tech, the 2 1/2 campaign has promised taxpayers cash in their pockets and assured local residents that new industry will flood in once taxes fall. But Wheaton's data--and that of most others who have studied the question--show that "tax differences between metropolitan areas have no measurable impact on industrial development." Instead, the MIT professor writes, the level of demand for goods depends on total spending, public and private. "Balanced budget tax reductions, such as Proposition 2 1/2, contract public spending and expand private consumption by roughly equal amounts." In other words, the government city of Cambridge stimulates the state's economy just as much by buying videotape machines for the school as private citizens will by purchasing Betamaxes.

And the bulk of the tax cuts will end up not in the pockets of low and middle income taxpayers but instead in the bulging wallets of corporate executives and stockholders. Residential property owners would receive only 57 per cent of the benefits of the tax cuts, with the balance going to industry. And in older, poorer cities like Cambridge, which largely depend on industry for their tax base, only 43 per cent of the total reductions would benefit residential homeowners.

In the end, though, the statistics only fill in the dimensions of this argument. The real conflict is between those who are able to live without welfare, subsidized housing, and public schools, and those are less able to view those as luxuries. Those who walk through Roosevelt Towers--a city housing project--and decide society has done as much as it should should vote for Proposition 2 1/2.

In Cambridge's Rindge and Latin School, a block from the Yard on Broadway, newly arrived immigrants attend classes every night so they can learn to speak English. Once they've got the language down, they take citizenship class, learn the Pledge of Allegiance, study the American system of government. If 2 1/2 goes through, the schools will close at 2:30 in the afternoon and there won't be any more programs for adults, not even the immigrants. Which might be all right. You'd have to think twice about immigrating to a country that did something like that.