Debate on Massachusetts Ballot Questions 6 & 7 on the Graduated Income Tax

thank you for joining community newspaper company wlvi tv 56 and the institute for politics at the john f kennedy school of government for our pre-election debate on the graduated income tax my name is james hines i'm associate professor of public policy at the john f kennedy school of government and i will be the moderator for this evening before i outline the structure for this evening i'd like to give you the facts about questions six and seven and introduce the debaters and panelists beside me today massachusetts imposes a flat 9.5 excuse me 5.95 percent tax on what is called earned income question six on this year's ballot would change the state constitution which now requires a single income tax rate question six would replace it with a proviso that the state have graduated income tax rates question seven on this year's ballot is not a constitutional amendment but instead a law question seven would create three new tax brackets in massachusetts at 5.5 percent 8.8 percent and 9.8 rates of taxation with the higher rates applying to more income we have provided handouts that detail the proposed changes and i recommend that you refer to them throughout the evening take them home and enjoy them there now now on to our debaters to my left are the individuals promoting the passage of questions six and seven jim brody to my near left [Applause] is the campaign director for the campaign for graduated for guaranteed tax relief and he is executive director of the tax equity alliance for massachusetts beside him is mitchell kurtzman who is chairman and ceo of powersoft corporation which is located in burlington my far right represents the opposition to questions six and seven barbara anderson in the near right is the executive [Applause] are the same people clapping every time barbara anderson is the executive director of citizens for limited taxation and and beside her is mike whitmer who is president of the massachusetts taxpayers foundation [Applause] our panelists who will ask questions for the first half of the evening are members of the local media mark lessie to my right is political editor of the tab newspapers and state house bureau chief of community newspaper company and my left is vicki ogden who is publisher of cape cod community newspaper company [Applause] the format for our evening is simple we will begin with two minute opening statements from each side and then our panelists will begin to ask questions each campaign will have two minutes to answer the question from the panelists and then we will allow the opposing campaign one minute to respond in a this will then go back and forth with one minute responses uh counter charges and uh speeches from either side uh until i determine that it is appropriate to move on to the next question panelists from the media will also be given opportunities to redirect or focus their questions we will repeat this process until approximately 45 minutes have elapsed and then we will open the floor to questions from the audience at that time i will ask that you quietly form two lines behind the microphones on either side of the floor uh please be brief and to the point when asking your question if you're not i'll remind you to be and then return to your seat at the very end of the evening uh we will have two minute statements uh summing up from either side that being said i thank you again for joining us and i will now ask jim brody to make his opening statement i'm sorry it's uh gonna be mitchell kurtzman will make the opening statement for the four side for two minutes thank you for not cutting into my time with more of that wild applause i really appreciate that uh i'm mitchell kurtzman i'm the chairman and chief executive officer of powersoft corporation we actually moved recently to concord massachusetts we're uh probably the fastest growing software company perhaps in the world we employ about 700 people and are a publicly held company you might ask why i as a businessman and as a person who's probably in this year the top one percent of taxpayers in the commonwealth would be actively campaigning in favor of the graduated income tax which will certainly raise my own taxes quite significantly and those of most of my friends the reason primarily that i'm involved in this is for the fundamental issue of fairness it's i have observed over the course of the past a couple of decades as i have achieved a significant level of success uh in my life and as i've gotten the financial resources that go along with that that the uh past couple of decades have been very good to myself and my colleagues the rich have gotten richer that's great you know the rich should always get richer but what's happened is that instead of the great american dream which is the middle class moving forward the middle class has been standing still or usually moving backward and as a result the gap between the very wealthy and the rest of america is growing businessweek pointed this out in this cover story how the inequality of income is hurting the economy of the country and that reason of fairness is a is a significant issue but i would uh urge you i believe this is a two-minute opening statement yeah okay i would urge you to consider what you're going to hear tonight uh in the light of perhaps the environment we're in which is i think it's very much like the end of the cold war you're going to hear a lot of statements made that might have been appropriate to our political and economic environment a decade ago two or three decades ago but like the cold war there are no more communists just like the last communists can be found in a theme park in albania the last politicians who want to raise taxes can be found in the unemployment lines for the other side we will now hear from mitchell kurtzman thank you excuse me you know that's the dumbest thing i ever heard now it's time for questions i've been called a lot of things but never mind uh good evening i'm here tonight speaking on behalf of a broad coalition opposing questions six and seven our coalition includes civic leaders academics individual taxpayers and more than fifteen thousand small and large businesses who employ more than one million massachusetts citizens we're opposed to questions six and seven for many reasons but let me highlight the most important the economy and the state legislature first the economy paul songas summarizes our views when he calls questions six and seven economic stupidity and another thunderbolt of anti-business ideology massachusetts today is already losing jobs to other states principally because of the high costs of doing business here questions six and seven would make this difficult situation even worse they are direct assault on the job producers of our state for example they would impose tax rate increases of 50 to 65 percent on the very small businesses that are responsible for most of our job growth the most successful group of small businesses would pay the highest tax rate in the nation fifty percent higher than our large multinational corporations question six and seven would also impose up to a 65 percent rate increase on our entrepreneurs and investors whose decisions to create jobs or whose decisions either create jobs or not for our people the 9.8 percent tax rate in question 7 is higher than any of the states we compete with except california these are the very states that are already taking jobs away from massachusetts because of lower costs and a more receptive climate to job creation the second major issue is the legislature question six a permanent open-ended constitutional amendment would effectively give the massachusetts legislature new powers to raise income taxes and we already have one of the highest personal income tax burdens in the country the present requirement for uniform rates means that tax increases hit all citizens at once under the grad tax system the legislature can raise revenues one group at a time by lowering thresholds and creating new brackets they can do this without even raising rates obviously this is much easier to do politically than raising taxes on our entire population and given the proponents track record of pushing for tax increases this is obviously what this campaign is all about i'm afraid that your time is completed okay i will finish my last three paragraphs in a minute our first questioner is mark lesi thanks this question is for barbara and mike in your opening statement mike you called question six and seven a direct assault on job producers of our state 35 of the 42 states that have an income tax including some states in which business is growing successfully have a graduated income tax do you have any hard evidence an independent study economic statistics from another state say hard evidence that implementation of a graduate income tax will harm business and job creation in massachusetts let me put it this way we're in a position today mark where as a state as i mentioned in my opening comments we're losing business we're losing jobs to other states we're doing that principally because of the high cost of doing business here unemployment insurance workers comp health care and because of our regulatory framework not the standards so much with the regulatory processes so we are losing uh jobs and we're losing a lot of potential jobs that come out of our growing industries because the individuals who are making decisions where to locate are choosing to locate elsewhere most recently we hear that biogen has decided to move to north carolina so we're starting with with a playing field tilted against us we now take questions six and seven when we already have and i will come back to this later one one thing i didn't mention in the opening didn't get to is we already have a progressive income tax system today that is more progressive than most of the graduated tax states so what we do with question seven is impose tax rate increases of 65 percent on small businesses and others who are making the very decisions whether to create jobs here or not those job creators and in a situation where already they are choosing to go elsewhere it's perfectly clear that in that kind of environment when we're already losing jobs that we're going to lose more jobs the kind of jobs that we want to create in the years ahead would you like to reply uh yeah i'd be happy to reply i guess the answer mike is no you have no heart data because we didn't hear any uh in fact all of the evidence indicates that rates of personal income taxation and issues having to do with the personal tax virtually have nothing to do with citing locations and business locations if you look at all of the corporate headquarters locations that were done recently and there's how many of them jim 1100 manufacturing there we go manufacturing sites 69 of them were cited in states with graduated income tax it happens that that's about the percentage of the states that have graduated income taxes what mike mentioned as high cost issues in this state i agree with a hundred percent and those should be lower but the reason massachusetts has a higher income tax than most states is because it has a higher a lower level of other taxes than most states we have one of the lowest sales taxes of any state in fact our overall level of personal taxation is right about in the middle of all the states may i have a response too yes yes i have some hard data we did a study of all the other states that have graduated income taxes and the nine states that have a flat income tax and the states that have no income tax at all and what we found is for instance north carolina has a graduated income tax but it has built into its constitution a limit on how high the tax rate can go it can never be more than ten percent and their top rate right now is seven point seven five percent arizona allows the graduate income tax but requires a two-thirds vote of the legislature to raise taxes other states require a two-thirds vote of both branches of the legislature and ratification by the voters other states with graduated income taxes have built into their constitution other protections their question six their constitutional amendment has no protection no ceiling on how high the tax rates can go no limit on how often they can be raised no limit on how many brackets there can be and no protection for the taxpayers once our constitutional protection which we now have in the grant in the constitution against the graduated income tax is removed by question six and seven just a couple of brief things jim if i if i'm mitchell person as well by the way uh in the constitution would you support the graduate income tax we would not under any circumstances support a graduated income so i want to make that absolutely clear and i want to make it absolutely clear too graduated income taxes as paul song has said another thunderbolt of anti-business ideology which is the last thing this state needs fine but i would like to know why didn't you put some constitutional protection why didn't you put some kind of ceiling why didn't you put some kind of of rate structure why didn't you put indexing for inflation why is there nothing in your constitutional amendment would you support it if we did all those things no we wouldn't suffer but i'm talking to other people saying why should anybody support them that is no limit on how high you can raise money let's talk about how many tax breaks there can be no what do the legislature can do to us first of all you've had between you four minutes to respond to the question from mark about what credible evidence there is that this damaged the economy and so far we've heard none of let's talk about what this really does question six the constitutional amendment that's going to mean the end of western civilization as we know it says the following higher income taxpayers shall pay at a higher rate than lower income taxpayers the definition of graduate graduation that radical notion is embraced by virtually every western nation the federal government and as was said before 35 of the 42 states with an income tax let's look at question seven that imposes the rates my wife often says my personal motto should be borrowed from alice longworth roosevelt who said if you don't have anything good to say about anybody come sit right next to me in that spirit let's talk about bill well bill weld said no bill weld did an analysis of the graduated income tax in october of 1993. here are the conclusions of his department of revenue 92 percent of the public will pay less under the graduated income tax funded not by firing cops or taking teachers out of classrooms but by requiring the wealthiest eight percent of the population pay more period when this department of revenue group was asked to look at the economic issue 11 advisers to the department of revenue they decided not to build that issue into the model because their conclusion their bipartisan conclusion was that there was no negative impact from a revenue neutral moderate change in the income tax to graduation like virtually all of our competitors let me respond to that two things one the department of revenue said specifically that they did not draw any conclusions whatsoever on the economic impact the proponents for uh weeks and months now have been saying just the opposite what are your conclusions my conclusions based on the study we did on small business is that virtually every small business in this state that grows oh my god jim yes uh virtually every small business in this state that is going to grow and create jobs is going to be pushed into higher tax brackets under questions six and seven there is no way that a business can create the working capital necessary without getting above the 50 50 000 marginal rate and push them into a fifty percent tax increase that's that's what we're doing to the job creators of this state they've mentioned their study twice by just may uh we put out a study three weeks ago that said that 82 percent of small business owners would pay less under the graduated income tax the opposition michael widmer was quoted in the boston globe as saying quote that is a grossly deceptive conclusion two weeks later michael's organization put out a report saying what percentage of small business owners would pay less under the graduated income tax you know what the percentage was 82 percent it was grossly deceptive when we did it it was factual when he did but let me continue he went on to say a spokesperson said 80 000 small business owners will see their taxes go up as a result we will lose as many as 80 000 jobs because each of those people will have to fire one worker when we read further into mike's report we realize that after the federal deductibility of that income tax increase the whopping increase on that 80 000 at the top the whopping increase is 16 a week can anyone argue with a straight face that's gonna cost one job much less eighty thousand jobs and they never ever ever talk about the tax cuts for the four hundred thousand small business owners nor do they talk about the tax cuts for the ninety two percent because you believe mike with all due respect that the only engine of economic growth are the wealthiest people and the middle class don't invest wisely they don't create jobs they do nothing it's elitist then it's wrong let me take we're gonna i'm going to allow one more round well yeah there were several distortions i need to correct the first thing is i never said anything with the number of people was grossly distorted when i quoted when i talked to the globe i was talking about the conclusions that the citizens for tax justice was making the conclusions were that all of these people were going to get a tax break and this was going to help the economy you know what our analysis showed the 250 000 people they were supposedly small business owners it turns out they're self-employed or partly self-employed people who are doing some consulting on the side their average tax cut in our analysis their average tax cut is 43 dollars a year or 83 cents a week on the other side the very businesses that are creating the jobs are paying a 50 tax increase that's what our study showed and that's what i said was distorted in the citizens for tax justice study what kind of economic policy i might add is it if you undercut the small business sector that's creating virtually every job in this state and give tax relief of 83 cents a week well i get the feeling we're going to get an answer to that question gee my little question started all that yeah uh i guess my primary response is to feel badly for the voters of massachusetts who have to listen to this going back and forth and have difficulty figuring out what the truth really is the fundamental arguments on the business side of this is that uh i don't like the graduated income tax because it's bad uh it's bad for business that's why i'm against it it's bad for business no data to support it it's bad for business why is it bad for business well because i don't like it since i don't like it i will behave in ways that are inimical to the public interest i will move my company i will fire employees i will do less research and developments i'm still waiting to see any data there's a lot of theories but there's no data none whenever the proponents in this argument whenever the proponents get back to the corner around facts then comes this kind of this kind of rhetoric that pretends that all we're doing is saying oh no we don't like taxes we're going to move out that is simply not what we're saying the tax increases on those small business owners amount to 100 million dollars a year minimum that are going to be paid in taxes instead of reinvested in their businesses and creating jobs in the years ahead and the tax cuts for the middle class are 600 million dollars which will be spent in these very tax cuts are 83 cents a week for the population i'm talking about temporary which is the whole point here the tax cuts in question seven are simply statutory the constitutional amendment which is two sentences saying there will be a graduated income tax and the legislature will set the number and range of brackets that part is permanent as as it so happens we will have the opportunity to revisit the question of permanent versus uh temporary i think we should move on to the next question and for that vicki octane thank you um that actually it relates to the next question poll results in the boston globe on tuesday show that question six which mandates a graduated income tax may be approved while question seven which creates the specific new tax structure may go down i'm asking this to jim and mitch would you support question six even if question seven went down and what does that do to your promised tax cut for the middle class and the fact that this is supposed to be revenue neutral well first of all the promise tax cut is if the 50 percent plus one of the voters vote for questions six and seven we don't control the vote we just start two voters just like you were two or three votes would you support six without seven unequivocally the answer is unequivocally yes and i'll tell you why okay first of all our position continues to be despite horrible polls in the hurled uh counter-intuitive polls in the globe is that six and seven will both either pass or will both fail that's number one let's assume your your assumption though becomes real that six passes and seven fails our position is at least my position as our organization's position is the worst graduated income tax is fairer than the best flat tax and that's what we'd end up with mike talked about how fair our tax system is before let me give you a couple of numbers if i may which really are the genesis of this thing let's look at the total tax system for a moment total tax system you look at the a the bottom fifth of the population family of four averaging twenty thousand bucks a year they pay twice as much of their income to all state and local taxes and fees as millionaires do in massachusetts middle income family of four averaging fifty three thousand bucks a year one and a half times as much let's step back and look at the income tax mike put out a study saying we have the most progressive income tax in america well that's when one compares people paying no taxes to the wealthy when you look at that same study from minnesota comparing moderate income people to the wealthy we rank in the bottom quarter it is hard for me to believe with all due respect now i'm going to answer your question again it's hard for me to believe that anybody can defend a system where millionaires pay at the same rate that's our question isn't question seven part of part of the the charm of six and seven is six and seven together because at least you're saying we know what's what you're going to be taxed at we know what rate you're going to be taxed at at least for a year if six is approved but seven isn't doesn't that give the legislature whatever full power to create any any taxes we have no idea what it is that's a whole another question and i hope additional time no no it's a whole nother question the answer is if it turns out seven fails let me be unequivocally direct if seven fails would we have support six absolutely graduated system is better than a flat tax system but what's implicit in your second question is the major topic in this debate might touch upon it in the beginning that if the legislature is given this unbridled power to raise taxes they're going to go crazy well there's an assumption in there that's wrong the assumption is that the legislature is getting some new powers that it doesn't currently have their ad says the legislature will have unlimited power to raise taxes is that true yes they also currently have unlimited power to raise taxes well their response will be yeah but they'll pick off one bracket at a time well one of their heroes tom finner in the house ways and means chair last year under the current flat tax system tried to pick off 26 percent of the population by raising taxes on renters by 90 million dollars it was rejected by a 156 to zero margin including finer himself because people didn't tolerate the picking off it's difficult to raise taxes in any environment but let me finish the most galling part of this not coming from you but coming from there is i sat on the same stage with barbara four years ago when clt had a tax roll back on the ballot two billion dollars a year barbara's argument sitting on the stage was no state has raised taxes more steeply or more often than the state of massachusetts well that was under the flat tax that mike and barbara are now saying four years later is the great protection for the voters it's a fraud which is quite simply that's all it is it's hard under any system to raise taxes answer vicky's question which is vicky it doesn't matter whether question seven passes or not in the end the legislature will do whatever it darn well pleases question six is a constitutional amendment question seven is a statute we will either have the statute long enough for them to get question six debate in the trap or we'll not have question seven at all because people won't vote for it but in the end the legislature will do whatever it wants because call the constitutional amendment says is the legislature will set the number in range of brackets now jim has said he just said it a minute ago so i'm sure you all remember it that the worst graduated income tax is better than about the regular flat rate tax that we have now i have a copy here of the worst graduated income tax this is the legislation that was filed by the senate ways and means chairman in 1976 when the last time the graduated income tax was on the ballot as you all know it's been on the ballot four times has been defeated four times overwhelmingly by every working-class city in massachusetts and almost every town but back then they had legislation ready in case the graduated income tax passed this one started with a rate at six percent at eighteen thousand dollars went up once every thousand dollars went up one percent until it finally got to a top rate of 28 every 1 000 when people got a pay raise when they worked overtime when they worked two jobs or they just sat there and that inflation pushed him into another well he talked a lot longer than this push them into another tax bracket every time they would then raise the rate eight percent 10 12 14 16 up to 28 and that's the graduated income tax that jim brady says would be better than the 5.95 we have now on everybody you know what no one loves reading tax brackets more than i do but i'm going to ask people to stick to their one minute yes but if he wants to his two minutes why should i stick to my one minute i uh barbara all i can say is that was spoken like the true cold warrior that you are thank you mitchell once again you would prefer to fight the fights of the past than to fight the in the environment that we're in in the presence the current legislative environment has no room for tax increases i was at a a meeting of the business community i spent most of my public policy time with mike and my colleagues supporting business issues and i was at such a meeting when one of the leading lobbyists of one of the business groups that's financing the opposition to question six and seven raised on the legislative agenda for the rump session at the end of this year the possibility of lowering the tax on unemployment compensation or rolling back a scheduled increase uh because the tax fund the fund had gotten solvent faster than people thought and people asked him what are the chances of passage and he said it's virtually guaranteed there's nothing the legislature likes to do better than cut taxes this is the same group that's funding heavily questioned six and seven opposition the environment is not the environment that you fought so successfully in in the past barbara and for which the fight is over the communists are gone the enemy is vanquished there are no more tax increases in the legislature let's get fairness into the system let's bring let's um bring some facts back in into the picture we are talking about amending the constitution to give the legislature a graduated tax system with new powers now let me propose put out on the table the radical concept that i first learned back in middletown in connecticut in high school in my civic class and that is that if you are going to pass some kind of legislation that people are going to react negatively to it's easier to get it passed if you only affect a minority of the group not everybody presently if you are putting a tax bill through the legislature you are going to have to do it for 3 million taxpayers under the grad tax proposal to take one example if you drop the threshold from 50 000 to 45 000 you affect 100 000 taxpayers in this state including all those above that 45 000 threshold you ask yourself is it easier to raise taxes on a hundred thousand people or on three million people well you know the uh i'm surprised mike that you raised this point because it reveals either a serious misunderstanding of the way marginal rates work or a willful desire to to mislead people that the way marginal rates work you can't pick off people one bracket at a time it's a great sound bite but the way marginal rates work is that everybody some portion of everybody's income including the millionaires is taxed at the lower rates so if you create more brackets if you raise the taxes on those brackets as mike said there it raises the taxes not only on that bracket but on everybody above it therefore the only bracket that you can really literally pick off without affecting other people are the very wealthiest and as the federal government has found out most people have found out there aren't enough wealthy people to raise serious money if you want to raise serious money you've got to go after the broad middle class and the broad middle class is where the numbers are and if you raise the taxes on them you're raising the tax on the vast majority of taxpayers mitchell you don't you may understand how marginal rates and i assure that michael understand how marginal rates work you don't understand how the legislature works you have never sat through an all-night session in the legislature but i will tell you since i have how the legislature works they come in at four o'clock in the morning they stay all night at four o'clock in the morning they decide to change tax policy the press is gone you're all asleep ladies and gentlemen there's nothing you can do and people like us are sitting there helpless and then they change the rates and you're wrong it says in question six that the legislature will set the number in range of brackets they can choose to raise taxes for people in the forty five thousand dollar bracket as michael said and have an offset for people seventy thousand that year the next year they can come back and then take away the offset and come back and raise taxes at thirty five thousand it would be a legislation excuse me but you are extremely naive mitchell i'm going to be charitable about this you are very naive about what politics is all about and how the legislature to say that the legislature doesn't want to raise taxes the legislature lives to raise taxes the only reason they haven't raised tax in the last three years is because bill weld would veto it and they don't have the votes to override his veto i think they just and and let me say let me ask you let me add me out here we're still happening i still have this michael yeah 11 part of our minute let me just add that mitchell calculation the calculation that i mentioned the hundred thousand tax players includes everybody above i know exactly how the marginal rate works and so that still is only three percent of every taxes if i just make you know when you're in the middle of these debates and you get involved in minutia sometimes you have to remind yourself to step back and say wait a second is this the same graduated income tax system as i said before that every western nation the federal government and 35 states already have no it isn't of course it is no of course it is now let's look since they mentioned number we looked at the soaking of the rich they're talking about raising top rates in fact in fact here are the numbers in the flat tax states which provide the great protection eighty percent of those states have raised their rates in the last eight years in graduated tax states in terms of top rates forty nine percent of cop cut top rates only seventeen percent have caused them to go up now if we were disingenuous we would say that proves that taxes will always go down in the future we're not saying that what we're saying is the system is completely irrelevant graduated or flat taxes will go up sometimes taxes will go down sometimes in 1989 they went up income taxes barbara screamed in 1990 they went up barbara screamed in 1991 they went up and barbara screamed every single time it was under that great flat tax system that protects taxpayers can i go back to my original question though because i think in terms of of pushing this package six and seven were pushed as a team and the whole the sound bite in this is vote yourself a tax break that's the sound bite if six is passed and seven is not you have not voted yourself a tax break so how can you say you support six and because because i mean that's what i think because people are really confused and what they're hearing is vote yourself a tax break but if six goes and seven doesn't there is no tax break there is whatever happens but jim if you decide to pass question six and the voters decide to reject question seven what happens i don't i'm one vote on both these things if the voters choose to adopt a fair tax system wait let me finish the point right but you're the person behind the promotion the vote yourself a tax break voters are grown-ups who are free to do whatever they choose reject them both accept one or i mean i don't i'm obsessed to our side i don't quite understand i mean the question is are we still telling people that they should vote for both absolutely we spent a great deal of effort on both all of our message says vote for question six and question seven vote yourself a tax break the answer is now then if the voters pass question six and uh defeat question seven will we then not follow the constitution and not work to get a graduated income tax i think we've done a heck of a lot of work that will be very valuable to the legislature and my guess is we'd go right up and take the same bill that's question seven and suggest this is the appropriate tax rate we spent a lot of time and effort on it so far the wealth administration department of revenue analysis has characterized it as we have of revenue neutral they've they've characterized the number of taxpayers will get a tax break the same as we have we think that's a great starting point so if question six passes and question seven doesn't i think we'll come right back with question seven and urge the legislature to pass that and speaking of the two questions i think it's time for another question all right thank you um the department of revenue analysis that mitch just mentioned was done last year one of the things that department of revenue study determined is that question is that if questions six and seven are approved approximately 600 million dollars in tax savings will enter the state's economy will go back to consumers who being middle-income people will likely spend it in the state i don't understand how that a 600 million dollar infusion into the state's businesses isn't good for business for the economy and for job creation mark that's not what the department of revenue said i'm sorry the department of revenue said that there would be a transfer of 600 million dollars from one group of taxpayers to another group of taxpayers speaking of these great studies that uh that we hear about or want to hear about there is no study anywhere that says that that transfer of six hundred million dollars from one group to another is going to do anything to simulate our economy because it's only going to be a transfer if if it even managed to have any additional spending the spending is not going to do anything permanently for the massachusetts economy since the only way you're going to grow this economy is to build industries in which we export to other states and clearly the kind of uh consumer spending we're talking about buying cars refrigerators whatever none of them are manufactured here the only way to build our economy and the reason that paul sangus tom finneran bill well joe malone and virtually every editorial uh board in the state of every major daily newspaper has come out against question six and seven is that they understand that in order to build this economy you have to build the growth industries and this these questions undercut the very growth industries on which our future economy and our future future education and social programs depend a couple of things paul songas has been mentioned repeatedly i think one of the highlights of the campaign was the debate at the boston hurdle between paul songus and mitchell kurtzman and the reason it was a particularly wonderful moment is because mitchell kurtzman introduced paul songus at the kickoff of his presidential campaign a couple of years ago in a wonderful moment paul turns to mitchell and says mitchell you and i know that the second the graduated income tax passes the second it passes we know executives who are ready to move their companies immediately to north carolina there was a pause mitchell turned towards paul and said paul north carolina has a graduated income tax the reality is it's once again this notion we say it's bad for business it is in terms of the 600 million dollars mike there was a guy who's now secretary of labor who used to be a lowly harvard professor who once said robert reich the wealthy investor wherever in the world they can get the best deal taiwan the silicon valley mexico when 600 million dollars is put in the pockets of the middle class mike they will spend as bill weld said they will spend it quickly and locally helping the same small businesses that you were so concerned about a minute ago you said the 600 million dollars spent in state doesn't do anything for us because they're not a growth industries well two three minutes ago you said how important it was to foster the growth of small businesses where those customers were those middle class customers will be spending their money excuse me but this is from the same gentleman who took the 600 million dollars out of the middle class tax pockets in the first place i mean team you have to understand is made up of the public employee union leaders the human service advocates and the people who have always supported tax increases they supported the income tax increase from five percent to five point seven five percent to six point two five percent when we tried to put that money back into the pockets of the working class and middle class people they objected to it for them not to express concern about how wonderful would be to have 600 million dollars in the pockets of working-class people we say do it now we filed this same legislation that they have in question seven we filed it this year with the legislature and showed up to testify in favor of tax cuts for senior citizens low income working people working mothers and water and store rate payers and they showed up and said that this would just be throwing money away well believe it or not i should say this may shock some of you i did say it's throwing money away and ironically the senior citizen groups the middle income groups the groups representing workers all testified against those tax breaks because in the world according to our opponents the way one funds tax relief is by reducing public services that was the notion behind question 3 in 1990 the reason we opposed these tax breaks in the legislature and would oppose them again is because they're funded by cutting the services that these very same families depend upon we have a funding mechanism which is described as asking the wealthiest eight percent of the population to pay a little bit more and at the same time bringing our tax policy into the mainstream the irony that i find is i oppose tax breaks that these two gentlemen supported on the business front three of them over the last couple of years the argument for every single one was we need to move business tax policy into the mainstream where our competitors are well now that we want to move income tax policy into the mainstream where our competitors are once again it's the end of western civilization if it happens if you argue mainstream tax policy when you want it mike you've got to accept it when the income tax is it let's talk about north carolina north carolina why is business moving to north carolina first because of the cost of doing business we did a study a year ago that showed north carolina is in the bottom group of states in terms of the cost of doing business unemployment health insurance workers comp where's massachusetts we're right at the top so people are already gravitating there then let's look at the tax structure in north carolina and we said oh that's a grad tax state quote unquote right then we look at it and we find out that above the twelve thousand dollar income level which is about where we have no taxes at all in this state what happens there are only two rates seven and seven and three quarters percent so it's virtually a flat tax tape it turns out now let me tell you a story i'm driving home in the car the other night after debating laura barrett one of jim prouty's colleagues and mark roosevelt is on the uh on wbur and mark is giving this going well business is going to north carolina north carolina is a grad tax state therefore hey okay great tax so then a moment later a caller from georgia and he said mr roosevelt i just want to let you know i've just moved up from georgia he said georgia has a grad tax state he said but there's there's a problem the highest rate in georgia is six percent and this proposal question six and seven is going to go up to 9.8 percent mark roosevelt says i'm afraid well i've been i i have to say mark said i have been troubled by how high that rate is to coin to coin a phrase it's the rate stupid one more one uh well by the fact then that we have one of the very lowest sales taxes mike in the country then that says the businesses should be flocking in here if personal levels of taxation really affect people's business location decisions they should be flocking to massachusetts because we have one of the lowest sales tax in the countries but in the country but in fact they're not and the what that reveals is that personal taxes are not the issue in business location all the costs you mentioned are the issue and we're working together as you know to reduce those costs why don't we work on reducing those costs together the issue here should be separated from the debate over the size of government we can have a good debate i would probably vote for a lot of reductions in the size of our state governments but once we've decided how big our state government should be then the question is how do we go about getting the funds to finance it and all i propose is that we do it in an equitable way that's question six and seven when we decide how big the state needs to be we'll raise the money equitably we're going to show it's simply not accurate let me i gotta reply to the one and then if you could do so quickly it's simply not accurate to say that personal income taxes have no impact on business citing decisions i worked at a major corporation for 10 years i was involved in business deciding citing decisions around this country and a whole collection of factors coming including the cost of doing business and that's the only thing you and i seem to agree on but in addition clearly the tax structure has an impact and when you impose when we have all the disadvantages we have today and you impose on that the highest income taxes in the nation on small business and you're going to tell me that doesn't have an impact please mitchell you know there's an important but there's a very important issue i know jim you want to stop but you're creating that climate with all due respect mike there was a there was a wonderful piece in the boston globe that alex beam wrote before he sort of lost his marbles or whatever but alex beam wrote a wonderful piece in the business section in 1989 where he interviewed an ad hoc group of high-tech executives who were meeting and saying why is it that our colleagues across the country think this is such a rotten place to do business when we think it's actually a pretty decent place to do business and the conclusion they reach with all due respect howard foley sitting in the back of the room is the high-tech council had done such a wonderful job of bad-mouthing the business climate in massachusetts that it became a self-fulfilling prophecy you wanted a research and development credit you got it you wanted a tripling in the investment tax credit you got it you wanted the repeal of the estate tax you got it you can't continue to say if anything that some of your business colleagues don't like happens that the end of the business climate occurs because it may happen purely because you continue to say it this issue was raised with paul songus he was asked this question at the press conference that we held where he and governor weld and uh john silber and malone and celucci all joined together and hardly uh like-minded individuals all joined together to oppose questions six and seven somebody asked this very question of paul saunders and he looked after he said this is a little bit like telling somebody who's just gone into a hospital because he's got cancer or some other problem well just don't talk about it and the problem will go away thanks well on that uplifting note uh i think we should have one more question from our panelists vicki ogden um this is to barbara and mike if your campaign is so concerned about massachusetts business why have you spent nearly one million dollars in campaign funds on a los angeles political consulting firm to handle strategy and create advertising we didn't they did so they cannot we when this campaign began we interviewed 10 campaign consulting firms and out of that we then had a second round of interviews of uh six other firms six firms of the ten including four locally we made a decision we wanted to hire a local firm but we made a decision to go with the best this is the best ballot question consulting firm in the country in our estimation and we did that because there's a lot at stake it's very important for the economy of this state state that we win this question that the voters vote no and understand exactly what this is about so we went with the best and we're not ashamed about that and they didn't we didn't have anybody obviously of that caliber in massachusetts we should talk no one who has had anything like that experience they've been involved in something like 80 ballot question campaigns in massachusetts the most experienced people were in three or four well let's also i think what's relevant to this discussion is not just the million dollars that's been shipped out to california to protect jobs in massachusetts but also where the funding is coming from the opposition has so far raised close to three million dollars 94 of which comes from major corporations even though this will not raise corporate taxes by one nickel uh so why are they doing it well we hear the heads of major corporations saying they're very concerned about the mon pod grocery stores in downtown cambridge they're very concerned about small businesses in saugus let's look at one person who we've been criticized for for criticizing but i think that's the nature of the beast robert palmer is the head of digital equipment corporation fired twenty thousand workers last year twenty thousand workers this year his corporation lost two billion dollars last year in the middle of all that he got a 20 pay raise to a combined compensation package of 10.1 million dollars because of those losses we learned in the globe a couple of weeks ago bob palmer was unable to have digital contribute to the united way but bob palmer thought it was okay to contribute 50 000 corporate dollars mike to the campaign against the graduated income tax now in light of the fact just briefly jim if i may in light of the fact that virtually every one of his current and former employees would benefit from this plan in light of the fact that the only thing that bob palmer could come up with is what your california firm came up with forum that was going to hurt small businesses which i'm sure bob palmer is deeply concerned about what conclusion can one reach the other than the fact that the only reason the bob palmers of the world are spending three million dollars a million of which has gone to california is because they don't really care about the corporate bottom line but about their own personal bottom line excuse me if no excuse me no you may not follow up here let me take a follow-up here as long as we're talking about campaign finance the question i think needs to be asked jim is that more than three-quarters of your campaign's money has come from public employee unions 81 okay and um including the two largest public employee unions in the state asked me in the massachusetts association what does that say about uh your campaign in this proposal it says that virtually every one of their members is going to get a tax break and uh that's number one uh mark first of all virtually every one of those decisions was made democratically unlike when a corporation like 9x or digital or raytheon says i'm going to contribute 50 000 bucks and doesn't talk to its shareholders or its employees here there were democratic votes number one and number two is you know under supreme court law if any individual union member wants to opt out he or she may opt out of that contribution furthermore the primary reason the public employee unions and the people they don't mention the mass council of churches aarp mass senior action legal and voters support this is twofold not just because fairness is an end unto itself which we believe it is but you know the great line from lilly tomlin no matter how cynical i get i just can't keep up well that's what politics is like in massachusetts these days the relationship between the governed and those who govern is abysmal john oliver hired me in 1987 he's now a congress person said what you will learn jim is people support for what tax dollars do is directly connected to how fairly they believe those tax dollars is raised so we believe the benefit including the public employee unions believe the benefit is not just fairness and tax relief for their families but if we can deliver tax relief through the voters themselves we begin to rehabilitate this relationship between the people who are governed and those who elected me but as the organization that first started to rehabilitate this relationship and we did proposition two and a half in 1980 at a time when the relationship was just about non-existence nevertheless we did do proposition two and f we have never seen a tax cut that we didn't like and that's why it's obvious that this is not a real tax cut we'd be supporting it but all those organizations you just mentioned the league of women voters the aarp leadership by the way that is not the membership the aarp leadership if you can believe it was opposed to proposition two and a half which had 92 percent of all the seniors in the state voting for it all these organizations were opposed to us on proposition two and f and back then we were pretty much alone except for our friends in the high technology council thank god this year we have some help this time the business community has been willing to step up and help us fight back we have an average membership fee of 27 what our average membership pays to our organization we're a small grassroots organization usually have three employees added two more people for this campaign that's who we are we were formed to fight the graduated income tax in 1976 and we defeated 73 to 27 percent of the vote but this time we had the power of the public and poor union leaders against us and this time we needed help and all i want to say right now if he's listening is thank you bob palmer i don't care what your reasoning was but you have saved us the taxpayers of massachusetts and your employees from the tax trap and we appreciate it we can have one more round what what uh what this leads me to is to i think mourn what is the end result barbara of your efforts over the years uh which is in the short term uh i think they did help us to get a handle on some problems in the state but in the long term it's helped to fundamentally undermine the sense of community commonwealth and common good here it has resulted in the factions in the community fighting against each other that elders who don't have children in the school fight against school budget increases and four other things that set the community against each other in an era of limited resources the graduated income tax is designed to recognize that we have a common good and a common wealth those of us who are fortunate enough to be able to afford it have an obligation a responsibility and a privilege based on emergencies mitchell write a check to the government right now for whatever you think is your fair share but leave me and my members alone and and please mitchell spare me you guys you put this on the ballot you ran those ads against bob palmer the ads that that apparently even your supporters have uh have have disowned and it clearly created a class warfare mentality in this state and you run those ads and you put this on the ballot and then you have the temerity to get on your high horse and talk about education what what what is going to help education in the state mitchell it's jobs it's jobs and the only way we're going to get jobs if we defeat questions six and seven and get on with the cooperative cooperation in this state in order to produce the revenues that can support our social that's one of the most important lines so it's one of the most important lines in this campaign the only way we can get on with jobs is if we defeat questions six and seven precisely what do the two have to do with one another mike you talking we have just been discussing mike for the last hour talk about class warfare you've used that expression i knew it would take 45 minutes to get to it well you you're the one who ran the ad now let me talk about what exists now business week in this article cited the census bureau which has been looking at income distribution since 1947. do you know what year since 1947 we experienced the largest gap between rich and poor in america you know what year that is 1994 as we sit here that's class warfare mike what we are trying to do is undo the colossal gap that exists between rich and poor create a little bit of fairness and create a feeling as mitchell says that it's a joint responsibility to pay for the government services that all of us who is the person who are the people what class suffers if we don't have the jobs not the higher class not the wealthy it's the lower and middle income people of this state who suffer if we don't have money let me ask you one if we don't have jobs and we can't have the revenues coming into the state system right how are we going to fund our education and i assume that's why by the way since the grad tax is so bad for jobs that you can cite for us all 35 states if i may like thank you yeah why don't you tell us about to go over there okay if you can just tell us briefly since it's so horrible for power of your argument in the 35 other states that have a graduated income tax and this economy killing graduate income tax why don't you describe to people the efforts by your fellow business leaders to get away from the graduated income tax and move to a flat tax colorado arizona how about the other 33 is there one way let's talk about there's one single effort to eliminate aggression let's talk about the other states the so-called other graduate income tax states you want to know what our future you want to know what yes because we are a graduated income tax state we have a progressive system today more progressive than most of those states now you want to know what the future behold what do you think the top tax rate is for about 70 half of the grad tax state the top rate at which the the income at which the top rate kicks in 20 000 is where you begin to pay the top rate in those states let's take our neighboring new york in 1960 the top rate kicked in at fifteen thousand dollars what would that be equivalent to today seventy one thousand dollars what's the top rate kick in at now thirteen thousand that was that's what is the topic what is the top rate kick in in massachusetts eight thousand dollars because a millionaire and a poor person pays at the exact same rate so the poorest people in this state pay at the same rate that mitchell that is simply that true that is not true the department of revenue study that you love to quote jim all around the state hey department of revenue what does it say it says that the bottom group of taxpayers the bottom 20 percent pay 1.3 on average of their income and state taxes what's what are the top uh 20 percent pay 5.8 a four and a half times greater than the bottom mike i mean the bottom twenty thousand dollars last year i made fifty five thousand dollars last year i paid at five point nine five mitchell made probably about a hundred times that much he pays at five points jim you missed the point it's how much you pay when you write out the check and you haven't accounted for the major parts of our tax system that make it progressive deductions exemptions of one sort or another that make it very progressive especially at the lower end and those are the people that we're most concerned about so they pay on average 1.3 percent the top group pays 5.8 percent and i might point out that in the state of massachusetts the deductions that you get in federal government and the other states for mortgage interest charitable contributions property taxes you don't get them here so therefore a much higher percentage of the income of the wealthy in this state is taxed okay that's why we have a progressive system in this state today well i knew we would get back to a discussion of specific tax brackets uh hard though it is to believe it's possible that some members of our audience still have questions remaining about questions six and seven and so at this point what we'd like to do is ask people to line up uh quietly behind the microphones and to ask questions i'm absolutely going to insist that these be questions and not statements and so uh if you can ask a question in about 10 or 15 seconds that would be just terrific and we will start with the gentleman on my left hi my name is david yarkin and i'd like to say that i think you can tell a lot about an idea by who's against it and to ms anderson i'd like to help you in you're trying to rewrite history about proposition two and a half i want to know my question for you is what would you say to my parents who are both public school teachers have been for 20 years both have graduate degrees that are earning very very small salaries because things like questions like proposition two and a half have kept their salaries so low because they've cut the amount of money we can spend on important things like public education i don't know david what would you say to all the people all the senior citizens who before proposition two and a half were paying property taxes there were 81 percent above the national average and nobody cared about them we cared about them we went to the people and the people voted 60 40 for proposition two and a half because they thought that was the best thing for senior citizens and for the economy and it is our proudest achievement thank you my gentleman to my right jim browdy i sat in uh some debates last year or four years ago on question three where you stated tax relief was needed but it goes too far then you turned around that same year although you said you wouldn't and pushed for more taxes is that why you set no limits on this proposal well everything was factually accurate up to a point the specifically after saying during the campaign and i'll even make it better for you saying during the campaign that we would not have supported tax increase in the following year if question three was defeated we supported in 800 also said they should go down to finish we support an 850 million tax increase that may and you might want to know why because after the voters by that same 60 to forty margin voted to protect those two billion dollars in taxes the legislature in a bipartisan love fest with our governor proceeded to repeal every single one of the taxes that the voters had said they wanted to protect so we were doing in may is going back and saying to the legislature and our governor you should honor the mandate of the people from november asking that those taxes be restored was purely purely trying to enforce the voters will from six months earlier on my left mr woodman you have a tremendous spot on television this one with mr rita from new bedford which i found terribly interesting there's one thing i miss out of it though what is his tax bracket now and what is his income and what have has been his taxes before and what will he pay future for taxes he asked us not to divulge that would you please explain why since you're using him he he is concerned about the legislative powers that this would give the legislature under question six that is his message on television his principal nice message he is concerned regardless of whether he his taxes are raised or lowered under questions six and seven his message is the message that we want the people of this commonwealth to hear i don't know i just want to know that's all that we need from you thank you no no let me finish oh no i was asked a question let me finish please you haven't answered it yeah i asked for his taxes can you tell me sir we're really that's really quite enough thanks well all right can somebody else give me the information the message the message of that ad is the message of this of this campaign the central message one of the two central messages and that is that question six is a constitutional amendment a permanent change in the constitution open-ended requiring a graduated income tax which in effect politically will give the legislature new powers to raise taxes on everybody that's what that is what mr rita is concerned about and that's what in the poll of all the small business people that the herald did a week ago and in which several of the people several a large percent of the people who would get a tax cut under question six and seven still spoke out against it because they were concerned about question six and the powers that were given there's a very important point here i'm sorry in the commercial that we were talking about john reed is a lobster fisherman it says new bedford seafood company in the commercial in fact the new bedford seafood company is an oil and gas distributing firm not a lobster company in new bedford michael just said whether his taxes go up or down is not relevant well in the commercial mr rita says my taxes will go up 65 percent if for his taxes to go up 65 percent michael he would have to earn with his family at least 150 000 when the globe tried to find him for nine days he refused to return their phone call when your campaign was asked to document the fact that his taxes would go up not up or down 65 percent your campaign said incredulously we never asked him what he paid he has privacy rights we didn't invade him he does not say that his taxes will go up 65 percent i'm going to talk about i'm going to talk to you about the rate i'll read you your own commercial pretty significant i'm sure most of us will see the commercial in the next week or so perhaps we can move on to the next question the gentleman on my right yes my name is peter everett i'm the libertarian candidate for secretary of state my question is directed to mr browdy yes i kind of like the language of the second and third sentence in article 44 of the amendments of the constitution that say that if you raise my neighbors taxes you have to raise my taxes if you cut my taxes you have to cut my neighbors taxes and we're all in this together our society is already so divided along class lines along race lines these divisions seem to be getting worse why do we need bracketed rates so that our society will be further divided with different income groups politically fighting each other over who gets to the rates i i like the the flat rate where it creates a spirit that we're all in this state together we're all working together everyone's rates go up the things are doing badly everything everyone's rates go down when things are going well well that's a good question but with all due respect if you're going to be secretary of state you should understand the tax system a little bit better under the current law sir under the current flat tax i understand it very well under the current flat tax system were you saying we can't divide people i assume you know that if we decided to raise the unearned income bracket from 12 to 13 percent would affect 21 percent of the population if we attempted to eliminate the renter's deduction like thomas finneran tried to do we'd affect only 26 percent of the population if we attempted to end the dependent exemption we do the same the bottom line is while the opportunities will be exist with brackets under grad tax the opportunities exist now to get rid of deductions exemptions and change them so the only difference sir if six and seven pass is not the opportunity to pick off taxpayers but a mandate on the legislature a mandate when they raise taxes or cut them from the constitution to take into account the financial straights the pocketbook issues of the middle class it says higher income taxpayers shall pay at a higher rate than lower income taxpayers which ensures fairness in the future that doesn't address the question of the political division among i just explained you can divide it right now sir okay on the left uh my name is paul collier i'm uh i rehab old houses um first of all i just wanted to make a comment mr browdy when barbara was fighting all those taxes we all gasped not just her um we all gasped not just her when you were trying when she was trying to defeat those taxes um i'm 32 years old and i'm starting to creep into that 50 000 tax bracket and i work pretty hard and i can see my going to increase quite a bit um i think mr kurtzman has a little disingenuous when he says that only the the top two percent or whatever it is it's going to be uh have their taxes increased it's going to hurt me severely it's also going to hurt my business and i'm so i'm self-employed and i only employ one person that's myself um my biggest question because i'm a property owner and i'm a taxpayer and i'm going to direct this to mr widmore because it's in one of his uh little newsletters here that i have and it's in regards to question six and and one of the things is if this this is passed uh is it going to give the local communities uh the right to raise our taxes to raise our water taxes and to raise everything else that i'm paying daily and i am i'm paying a lot of taxes on the properties i own where i live uh i'm going to be paying another income tax if what you say is true what i'd like you to do is tell me is besides my income tax going to go up ah the rather taxes are going to be hit with this because it seems every time the legislature does lose your taxes are the taxes that hit with that you don't know about um and then i'd like you to respond if what he says is incorrect and that's pretty much it i also want to thank people for coming here because uh pretty much i've been able to form an opinion tonight which i wasn't after tonight the present constitution requires that uh taxes be uniform throughout the state and that means it's impos it's unconstitutional to have a local income tax whether it's a payroll tax or a tax on residents of the city or town that sentence is being removed would be removed under question six so for the first time it would make it constitutional for the legislature to pass an enabling statute and then for a city or town to pass a local option income tax either on its residence or on uh people moving like the city of boston people uh commuters who come into town and uh and work there now the opponents will say in a second that uh no that's not accurate they're reading of it is it's still unconstitutional even and we simply don't agree we think it is in fact constitute it would be constitutional if question six passed to have a local income tax but even if there is disagreement about this the important point to take away is that that disagreement will end up in the courts and that means that there will come a time where the court is going to rule whether in fact a local income tax is constitutional or not no court needs to rule today it's unconstitutional it's prohibited today question six would bring would raise that uh issue for the first time i'll uh i'll let jim respond to from the specifics of your question on your personal taxes i'm far from disingenuous the department of revenue says 92 percent of taxpayers will get a tax reduction here that's the thought the top 8 percent will pay more and that's it however this you know this issue of local income taxes is mike's domino theory like the old cold warriors which is you give up on one communist country that all the other countries are going to fall if you have a graduated income tax pretty soon the barbarians will be at the gate asking for all of your other taxes in fact there's no municipality no city or town no local government that has ever asked for a local option income tax none of them has stepped up to the plate to say so the commonwealth has had the ability the cities and towns uh ever since we have been a commonwealth to pass local option payroll taxes and they have never availed themselves of that opportunity uh this is a red herring it says red is the reddest herring that there is it's a diversion it's a scare tactic and it's a shame that you need to use these things in massachusetts to scare them with millions of dollars of spending and misrepresentation we're trying to terrify you because you're simply wrong mitchell it just shows your lack of understanding the reason the cities and towns haven't asked for a local income tax is the constitution says clearly they can't have one what's the point of asking if the answer is going to be absolutely not if question six passes the answer in my opinion in the opinion of our legal experts is absolutely yes but michael could be right it could end up in the courts at that point we don't know what the answer is let's not take a chance on it okay uh on the right the first half is if business is so big on creating jobs why have they been so many of them been so keen on laying people off on downsizing in the name of not cooperation but this thing called competitiveness why are they why the gm plant closes in massachusetts they open one in mexico the second half is why isn't if we're going to get into the economics of this 300 or 200 or 500 in my pocket that i'm going to go out and spend good or better for business than more money in mr palmer's or whoever else is in pocket i believe that's a question directed over here okay the the first part of the question uh the world economic situation today we all know is incredibly competitive and the kind of luxury that businesses in this state or any state had 20 30 years ago to employ people and not worry about costs and overhead simply don't exist anymore because we're in a very very worldwide competitive situation that's why and the one item that mitchell and i do agree on the cost of doing business that's why it's a critical issue for this state to get those costs down and that's the disadvantage that we already face and that's why we are losing jobs today to the likes of all the other states north carolina michigan illinois and texas and florida because of the disadvantages we have here today now how do we turn that around we if we were following a positive economic policy what we would do is give is have a tax structure we would deal with a cost but we also have a tax structure that helped small businesses that are some portion of which are going to be the future major employers in this state and we would have a tax system so that as they added people and got a little more working capital and wanted to invest that into their business and then expand they would actually instead of being penalized there would be some inducement to do that you have a situation on questions six and seven where as they grow it's impossible for them not to move into the higher tax brackets so you've designed an economic policy to undercut your very job creators that's the problem with question six yeah you're right as you get wealthy it's impossible to avoid payment this is working capital these are small businesses this is not well this isn't working capital this is the personal capital of sub chapter s corporations yes and that is working capital mitchell if you understand how tax systems work working capital i run a business i the tax understand works and everybody who runs a small business you're you're a uh c corporation we weren't i wasn't born right working capital working capital mitchell is the key ingredient and what happens at the end of the year what are you taxed on at the end of the year not on the salary alone you know that mitchell and i know that and i understand it very well and that's one of the reasons that i was responsible for inserting in question seven a significance tax incentive for entrepreneurs okay please mitchell i was hoping you would stop i was hoping people start businesses from massachusetts that if they do what i did and start their businesses uh do what i did by the way prospectively because unlike what your campaign is saying i get no personal tax break out of this that if they start businesses and if they are and if they are successful uh uh in their businesses as i have been and they stay with their businesses for three five or seven years they will get a 70 tax break on the capital gains associated with the ownership of their stock mitchell everybody who has looked at that from accountants to venture capitalists to everybody in this state who deals with building businesses has called it a fraud but i still haven't heard an answer to why extra spending money in the pockets of large numbers of people isn't going to be good for the economy isn't going to be good for business of course it's good for business it's good for everybody that's why we support it we would put more money into the hand to the taxpayers right now we filed the legislation to do it teams showed up at the hearing and said that it was throwing money away but you're right it would be very very good to put more money into the hands of the working people as long as you didn't take it away from the people who are creating their jobs for the working people okay on the left yes if questions six and seven do not pass and if you are so concerned with fairness have you considered giving your employees a raise or uh or a subsequent lowering of the price of your products we uh i believe that if you talk to the employees of powersoft you will find that they are among the best compensated people in the commonwealth what does it mean at every level of the organization money come out of the pockets of the people who buy your products and couldn't they better put that to you spending it somewhere else i think you're confusing tax policy with uh competitiveness here i i don't think i i i i'm using taking money out of one person's pocket and putting to someone else's pocket i think that's what the whole issue was here tonight i'll decline to pursue this question that's fine on the right uh question about uh impact on businesses as i understand it dec will not pay one dollar more from as a result of the graduated income tax than they did before the ceo of dec may pay more so the question is i can understand why rich people wouldn't want to live in massachusetts but why would rich corporations not want to be headquartered in massachusetts and as i understand it most small business owners don't make millions and millions of dollars why would they care excuse me why would they why if help me with that if you're the owner of a small business right you make you know 40 000 a year why would you want to move out of massachusetts because of the graduated income tax the issue isn't just moving in or out of massachusetts the question this gets back to what mitchell and i were disagreeing on a moment ago at the end of the year if you're a small business person the so-called sub-chapter s corporation you pay a personal income tax based on your earnings at the end of the year what classically happens is you take what's called a draw or a small part of that for a salary and you tend to live on a smaller part of that as you can in order to take what remains and invest that back in the business and that's the only way any small business can grow since small businesses create virtually all the new jobs in this state and most of the states in the nation what a positive economic policy would do would be to help those businesses instead the successful businesses the ones that are creating jobs will be pushed into these higher tax brackets and even just in year one alone a minimum of a hundred million dollars that they could reinvest in their businesses will instead go to beacon hill and tax so so everything above the bottom line will get taxed more i mean every dollar of profit will get taxed more not just what they pay and salary correct okay we have time for exactly one more question ma'am um i have a question about the income gap um in an economics textbook hello academia here by courtney and stroup the authors hypothesized that the income gap resulted not from the rich actually getting richer but that with tax cuts they actually revealed their incomes and i was wondering if you have any hard data or if you have considered how the graduated income tax would create an incentive for the rich to shelter their incomes and just playing with numbers i looked at if somebody who makes seventy thousand dollars shelters twenty away claims fifty thousand the state would actually lose a thousand in revenue i believe that's on the ladder well the uh shelter is usually meant to mean to take advantage of some legal uh tax mechanism sure you can afford it to to invest and uh as you say it's a the wealthy are more able to do that uh massachusetts actually doesn't offer a very wide variety of legal tax shelters so uh it will be very difficult for wealthy people in massachusetts to find places to hide that income they can't go to another state personal taxation pardon me they can't go to another state or another country to show well not if they earn it here uh the the issue is and by the way if they invested somewhere else they still have to pay it as income when it comes in uh so no you you uh there is no really effective way to do that now the question is will it give people a greater incentive to be dishonest uh i don't fundamentally believe that i can say one one additional thing by the way if it was easy to avoid the increase under question six and seven my assumption is the top eight percent percent wouldn't be spending three million dollars to defeat it yes the answer is of course they could leave the state but also they wouldn't have to they could hire a lobbyist to go to beacon hill and and make sure that all the top legislators had plenty of money at their political times in order to change the tax laws to benefit them something which we ordinary citizens couldn't do but that that is also uh ordinary citizens with the three million dollars to fight i'm talking about presidential limited taxation the people i represent mitchell which of course you as a millionaire couldn't begin to understand what we have to go through to pay our taxes but i want to remind everybody of the federal government which when it came up with it with its graduating tax it said the same thing they're saying it's only going to be on the rich and it was only one percent this is back in 1915 well over the years pretty soon we were all rich because i'll bet you all paid an income tax last year and the top rate went up to 91 on the rich but i think this is the point the lady was making at that time the rich were paying a very small amount of the total taxes because they found at that rate it simply wasn't worth paying if you could hire somebody to get you out of it so when the tax top rate on the on the rich for the federal government was 91 percent the rich were not paying their share of taxes when that rate dropped under reagan's tax cut then the rich started paying a larger share so the point she made was absolutely right the rich will avoid taxes the rich will avoid taxes you can check the data it's not hard to find the actually actually had the rich paying less in taxes before their tax rate was cut then they paid afterwards because there was no longer any major reason to spend a lot of time and money avoiding paying taxes of course right after 1915 bolshevik revolution look what it leads to okay well before bracket creep starts setting in it's time to move on to the final part of our program which is uh summary statements by either side and we will start with barbara anderson thank you mitchell started out with kind of a personal statement so i'm going to do the same thing i'm going to tell you what got me involved in tax policy and activism in the first place when i first moved to massachusetts 1970 when i was living with my husband at the time who was working in a boat yard hard physical work 17 hours a day six days a week and this thing called the graduated income tax was on the ballot for the third time and i asked andy what is the graduated income tax he hadn't studied economics he hadn't been to college neither had i studied economics but i figured at least he grew up in the state so i said what's a graduated income tax and he said oh that's the one where the harder you work the more they steal from you now you might find that a bit dramatic as a statement but that's why i voted against the graduated income tax he was making eighteen thousand dollars counting all his overtime at the time and they would have taxed him according to their plan at eight percent but if you want another statement how about dominic posado the president of hotel workers union local 26 who said in about today's graduated income tax proposal we can call it the bracket bracket and they'll pass it on halloween at midnight one year they'll hit my bracket the next year they'll hit your bracket pretty soon everyone has a big tax increase except the rich who hire their accountants or take their jobs elsewhere the reason we're opposing the graduated income tax is we want you to understand just why this thing is on the ballot the way it is they put the grad tax on the ballot question six basically on the ballot four times and four times the voters crushed it 73 to 27 percent the last time what would you do if you were them and you wanted to grad tax you and the political leaders on beacon hill and the welfare lobbyists and human service providers and the public employees what would you do if you know if you put it back on the ballot it was going to be crushed again you would do what they have done you look for question six on the ballot all it says is the legislature will set the number in range of brackets and then you would create question seven the bait and the trap to try to lure the taxpayers into doing what they have refused to do four times in the past which is give the legislature new powers to pick us off one bracket at a time and create local income taxes city town county water and sewer rate income taxes you would create bait for that trap by offering a solid tax cut goodie and all we have to do to get it is vote for question six and change the constitution forever and then they'll come in remove the bait and raise our taxes for the rest of our lives vote no on six and seven it's a tax trap and and for the other side jim brody you know i've debated barbara dozens of times hearing a story about andy your first husband one night i said how much did andy make she said eighteen thousand dollars he said my god all he would need to do is get eighty four thousand dollars at his second job and he'd be in the next bracket believe it or not in a perverse way i actually enjoyed tonight and i'm sure mitchell did too i want to thank everybody for in a very perverse way for sponsoring this let's look at the facts 92 percent of the people would pay less 100 of people would see their services protected if you're in their position what do you do to convince voters to vote no on such a plan you hire a pollster you hire a california pr firm and you decide where are the public scared and angry they're angry at the legislature well then it's going to give them more power whether it does or not they're worried about small businesses well then we're going to raise their tax rates for the roof even though 82 percent are going to pay less it's going to kill the economy even though 35 states are competitors 35 states please don't forget that fact have a graduated income tax all of these are red herrings because that's all they can fish up the issue is what mitchell said 90 minutes ago fairness according to that left wing think tank the federal reserve bank the wealthiest one percent of the population have as much wealth as the bottom 90 percent according to the census bureau the gap between rich and poor today is greater than it has been since they started collecting data in 1947. it is not only economically unwise it is not only socially unwise it borders on immoral the grad tax is on the ballot for one simple reason to bring long overdue tax fairness to people who have had it promised to them for decades but never had it delivered and the beauty of doing it on the ballot is this you don't have to call bill weld on the phone you don't have to call your legislator on the phone you don't have to lobby on beacon hill all you have to do is go out to fifty percent of your neighbors say ask them to join you in voting yes on six and seven and if it happens long overdue much promised never delivered tax relief finally is given to people who truly need it thank you very much everybody thank you to our debaters and panelists

Channel: Harvard Kennedy School's Institute of Politics

Views: 379

Rating: 5 out of 5

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Id: _tDkQXO_Hf0

Length: 82min 31sec (4951 seconds)

Published: Thu Apr 22 2021