High tax, low tax not the real issue

by Thomas Keane, Jr.
Friday, August 15, 2003

Planning to move to Billerica soon?

It's doubtful. In fact, the town of 39,000 just south of Lowell is projected to lose population over the next few years.

This might seem a puzzle, since Billerica just came out tops in a survey by the Beacon Hill Institute of the most "anti-tax" communities in the state. After all, we all hate taxes, don't we? Yet the fact that people aren't moving in droves to Billerica, or to the other six towns it identified as anti-tax, suggests that something is amiss with the institute's analysis.

The institute, a think-tank at Suffolk University, looked at the voting results of seven tax-related referenda questions, ranging from 1980's Proposition 2 1/2 (which won statewide) to last year's effort to abolish the state income tax (which lost by a narrow margin). It used voting results on these to label towns as anti-tax or pro-tax.

Now, this is useful information if you happen to be running for office from, say, West Bridgewater, another anti-tax town. Campaigning there on the proposition that we double the state income tax rate probably won't get you elected.

But the institute goes further than that. It argues that people actually choose to live in towns based on their tax policies. People who hate to pay taxes "sort themselves out," in the institute's words, moving to communities with a reputation for opposing taxes. And those benighted few who actually enjoy paying taxes? Presumably, they move to Amherst, one of the institute's top seven pro-taxers.

The message of the study, according to John Barrett, the institute's director of research, is that "people can and will vote with their feet." He argues that the study is proof of a theory proposed in 1956 by the late economist Charles Tiebout. Tiebout's idea, which at the time seemed heretical, was that localities compete against each other for residents. Yet while the institute's findings are intriguing, and seemingly fit well within its own anti- tax philosophy, this is a case of ideology getting ahead of the facts.

One of the objections to Tiebout's theory has been what I call the Minnesota Conundrum: Given the weather, why would anyone ever live there? (Minnesotans have their own version of this, which they call the Massachusetts Conundrum.) The answer is that moving is difficult and there are many reasons - some rational, some irrational - that cause people to stay: friends, family or even an obsession with ice fishing for 11 months a year.

And that's the objection to the institute's analysis as well. Taxes are only one of a host of reasons why people move - and indeed, they may be such a minor reason that they end up being inconsequential.

The institute's own study doesn't make its case very effectively.

One would think, for example, that the top pro-tax and anti-tax towns would end up imposing significantly different tax burdens on themselves. Not true. I ranked all of the state's 351 cities and towns by their actual tax bills ("1" being the highest tax burden; "351" the lowest). When averaged together, the rank of the top seven pro-tax towns was 112. The anti-tax towns averaged 148. A difference, to be sure, but far less significant than one would think.

Moreover, six of the seven pro-tax towns are in the Amherst area. The institute would have you believe they are pro-tax because people who like to pay taxes chose to congregate together. On the other hand, the area is home to schools like UMass and Amherst College. Wouldn't it make more sense that people moved there not because of taxes but for their jobs (as teachers) or because they are students? And, having moved there, the towns end up being more pro-tax because students and academics tend to be more left wing. (Although, in what is an oft-observed bit of hypocrisy, left-wing voters generally still don't like to pay taxes themselves: Pro-tax Wendell, for example, ranks a low 259 on its tax burden.)

So what is really going on in these communities? The pro-tax towns spend significantly more on schools, a reflection perhaps not of tax sentiment but rather that those residents have kids. Anti- tax communities average higher levels of unemployment. Could their anti-tax votes simply be because residents don't have the resources to pay more taxes? And crime rates are significantly higher in the anti-tax towns. Could their anti-tax mood be anger that their communities are not delivering services (such as police protection) very effectively?

My suspicion is that the institute's singular focus on tax ideology is a mistake.

Pro-tax or anti-tax, most of us are pragmatists. The issue isn't taxes, but value for our dollar.

Towns that are well managed, efficient and honest will have people clamoring to move in - despite having to pay a bit more. And even the most ardent of pro-taxers will stay away from places that simply waste their money.

Talk back to Tom Keane at tomkeane@tomkeane.com.