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Taxachusetts

05/05/03 12:00AM By Timothy McQuiston
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Michael Dukakis. Say it out loud. It rolls off your tongue. Michael Dukakis. A nice name for a nice guy. Now try this one, another favorite. Taxachusetts. It's not only a wonderful mix of consonants, its a mainstay of the Republican National Party lexicon, right up there with the words Jimmy Carter and Hillary.

Taxachusetts was gleefully used by George H. Bush in his successful presidential campaign against that very same Michael Dukakis in 1988. Dukakis was first elected governor of Massachusetts in 1974. The Bay States economy was a wreck because of the cut in defense spending after the Vietnam War. The well pressed young Dukakis rode a wave of change into the Statehouse. His mandate was to get the state back on its feet, which to him included re-funding and re-energizing the states social programs.

Of course, with the national malaise plaguing the states revenues, Dukakis decided to increase taxes. So he pushed a plan through the Legislature to raise the states sales tax one penny to 6%. This is where the story starts to sound familiar. But there was a consumer backlash and the tax was rescinded. And the state of pilgrim's pride earned the nickname, Taxachusetts.

After the sales tax reduction, the property tax was asked to carry much of the load. In 1980, another tax revolt led to Proposition 2 1/2, which limited a town's property tax revenues to 2.5% of the town's total cash value. It also got rid of unfunded state mandates. It was an ugly scene as the state battled the towns. That sounds familiar, too.

The boom times of the middle 1980s saved the economy and far different moniker emerged known as the Massachusetts Miracle. It propelled the Duke to the Democratic presidential nomination. The elder Bush teased Dukakis about the so-called miracle. As you remember, the inevitable 80s recession caught up with Dukakis shortly before the election and the miracle turned into an illusion. That recession played no political favorites, however. It swallowed President Bush whole in 1992.

Vermont is on the verge of raising its sales tax one penny to 6%. A property tax revolt looms over Act 60 if the Legislature doesn't hurry up and do something. But here's the thing: Raising the statewide sales tax to 6% is a bad idea. Vermont does have a relatively under-utilized sales tax, but its also narrowly defined. Those goods that are taxed will be under more pressure to perform. The sales tax is dependent on consumer confidence, which isn't great right now. Sales tax revenues are unpredictable. Raising this particular tax offers a big target for retailers from New Hampshire and politicians from everywhere to shoot at.

I can hear a new word forming now. It sounds promising. Has a nice ring to it. A guilty pleasure, for sure. Vermontachusetts.

This is Timothy McQuiston

Timothy McQuiston is editor of Vermont Business Magazine.
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