ELECTION '94 Grad-tax backers attack job study

Carol Gerwin
The Patriot Ledger
605 words
13 September 1994
The Patriot Ledger Quincy, MA
All
23
English
(Copyright 1994)

QUINCY -- Proponents of a graduated income tax yesterday assailed an economic study that claims the measure would cost the state 78,000 jobs and $87 million in lost revenue in its first year.

The report, written by two economics professors at Suffolk University, warns that many people who end up in the new, higher tax brackets would react by leaving the state or turning down second jobs. More jobs would be lost in future years as workers' incomes grow, the study says.

"It's a mini-recession," said co-author David Tuerck, head of Suffolk's Beacon Hill Institute for Public Policy Research. "People discover that with every extra dollar they make . . . they have to pay more to the state, so they start rethinking their working decisions."

But the group that put the issue on the November ballot criticized the study as "absolute garbage" and said its methodology was flawed.

Jim Braude, head of the Tax Equity Alliance for Massachusetts, also called Tuerck "an idealogue" and accused him of shaping the results of the study to fit his personal opinions.

As evidence of the professor's opposition to the ballot initiative, Braude noted that Tuerck contributed $100 in January to the Citizens for Limited Taxation, one of the measure's leading opponents.

Tuerck yesterday acknowledged he contributed $100 to the anti-grad-tax group, but said that has no bearing on the validity of his report, called "An Economic Model of Massachusetts Tax Policy."

"Whatever my attitude, the study should be evaluated on its merits," Tuerck said. "Professors all the time make contributions to causes without it impugning their integrity."

The so-called grad tax, as proposed on the November ballot, would set higher rates for people with higher incomes.

Ballot Question 6 would amend the state constitution to require a graduated income tax. Question 7 would set the specific rate structure at 5.5 percent, 8.8 percent or 9.8 percent, depending on your income.

The current system imposes a flat tax rate of 5.95 percent on earned income and 12 percent on unearned income, such as dividends on investments.

According to the state Department of Revenue, 92 percent of the state's taxpayers would see their taxes drop with a grad tax.

The revenue department also found no evidence that the tax would have a negative impact on the economy.

Tuerck, who co-authored the study with a visiting assistant professor, In-Mee Baek, says their research definitively proves otherwise. They used a database of economic information going back 22 years and asked a computer to determine how changes in certain average tax rates influence employment.

But Braude says it is ridiculous to assume that 78,000 of the 199,000 people who would pay higher taxes under a grad tax would work less because of it.

"He's essentially saying it will cause doctors to quit their practices or not take night jobs flipping burgers at McDonald's," Braude said. "It is beyond preposterous."

George Plesko, an assistant professor of economics at Northeastern University, agreed the study does not prove what Tuerck claims. Among several problems, it ignores the fact that people can deduct state taxes from their federal income tax, so it assumes people would pay higher taxes than they actually would, he said.

"This study is no better than opinion," said Plesko, who serves on the Department of Revenue's independent advisory committee. "There is no convincing evidence that the state will lose one job, let alone the number of jobs he's suggesting."

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