by David Tuerck
September 3, 2000.
There is a story going around that
tax cuts put only pennies in the pockets of taxpayers
while starving critically important social programs. Thus
a November ballot question that would cut Massachusetts'
personal income tax to 5 percent would, by one account,
save middle-income families just $ 264 a year, about enough
to pay for a pizza a month, while costing the state $
1 billion annually in lost revenue.
We hear similar rhetoric at the
national level. Democratic presidential candidate Al Gore
describes Republican tax cut proposals as being worth
no more than a Diet Coke a day to the average American
Instead of funding America's appetite
for fun food, so the argument goes, isn't it more responsible
to put the money toward education or health care?
The underlying (and unspoken) assumption
here is that left to their own devices, families will
apply any windfall in disposable income to trivial needs
rather than to their children's futures. Allowed to keep
a bit more of their own money, they will choose pizza
over pedagogy every time.
Ironically, these same voters,
deemed incapable of choosing wisely in their personal
lives, are now being asked to choose wisely in public
matters by putting society's welfare ahead of their own.
This cynical view of voter intelligence
echoes a sentiment expressed 50 years ago by economist
Joseph Schumpeter, who wrote: "A typical citizen
drops down to a lower level of mental performance as soon
as he enters the political field.
Assume, however, that taxpayers
are, in fact, profoundly concerned with the future well-being
of their families. Assume that they are able to think
responsibly about how they might apply a tax saving to
their children's education.
Consider, then, the median two-earner
Massachusetts family. If, starting next year, that family
put the money it saved as a result of the tax cut into
the commonwealth's U-Fund college savings plan, it would
accumulate $ 23,930 in 18 years to apply to a child's
education. That would pay for almost four semesters at
the University of Massachusetts.
For all of Massachusetts' educational
resources, the cost of putting a child through college
in the Bay State is among the highest in the nation. In
1996-1997, Massachusetts had the fifth highest in-state
tuition rate for four-year public colleges and the fourth
highest for community colleges.
Contrast this to the calls for
increased public education spending. In 1993, the Education
Reform Act established a seven-year spending plan aimed
at improving student performance in Massachusetts' public
schools. Since that time, the commonwealth has increased
spending by 34 percent. In spite of the expenditure of
$ 5.6 billion on education, reform there has seen no measurable
improvement in school performance.
In the current jargon, cutting
the Massachusetts income tax rate to 5 percent is a "risky"
proposition. There is, however, nothing risky about affording
families the opportunity to support their children's education
or to meet some other family need that may, as it turns
out, go toward something more profound than satisfying
a craving for fun food.
What is risky is trusting government
to use tax money to advance education or other family
needs? While taxpayers don't know what they'll get if
the state keeps a billion dollars of their money, they
know what they'll get by putting their share in the U-Fund.
And it isn't just pizza.
David G. Tuerck, PhD, is chairman
and professor of Economics at Suffolk University where
he also serves as Executive Director of the Beacon Hill
Institute for Public Policy Research.
Thi s article appeared in the September
3, 2000 edition of the Boston Herald.
on 18 August, 2004