Have Taxachusetts Voters Finally Had Enough?

High taxes have been an issue in what's today called the Commonwealth of Massachusetts for quite some time now.  One of my friends is an amateur historian who read through some New Hampshire town records which predated the founding of the United States.  When signing up a new voter, most town clerks asked the new arrivals to write down why they'd moved.  Well over half the reasons were "Taxes in the Massachusetts Bay Colony are too high!"

Under our federal system, there's absolutely nothing wrong in principle with the politicians of a given state being allowed to vote in any taxes they like, provided that people are free to leave.  In that sense, New Hampshire,which is one of the very few states with neither a sales tax nor an income tax, makes Massachusetts excesses possible - rather than agitate for change, a discontented voter could simply move over the border.  Moving conservatives off the Massachusetts voting rolls made it possible for Massachusetts to put in ever more expensive programs, which drove more conservatives to New Hampshire, and so on.

The Death of the Massachusetts Miracle

When I entered MIT in 1963, MIT graduates were starting companies all around Route 128.  By the time I fled the People's Republic of Taxachusetts for New Hampshire a decade-some-odd later, high taxes were driving the Massachusetts Miracle to California.

It's hard to believe now, but at that time, California was a low-tax state - remember, it was the era of Governor Reagan.  Now that California taxes have followed the Massachusetts route, Silicon Valley is under siege as entrepreneurs are moving to other states yet again.

Unfortunately, a side-effect of Massachusetts taxes damaged New Hampshire severely.  At first, the taxes drove out productive hard-core conservatives, which was good for New Hampshire; but then semi-conservatives started moving out, too.

With the passage of time, even moderate liberals found that taxes were higher than they were willing to pay, but when they got to New Hampshire, they wondered where the municipal tennis courts were.  They forgot why they'd left and started voting for higher taxes to pay for all the wonderful public services they'd left behind in Massachusetts.

Over time, New Hampshire turned blue.  Today, New Hampshire legislators are firmly in the "We don't have a spending problem, we have a revenue problem" camp and are trying to raise taxes on businesses.

In a perverse sort of way, New Hampshire businesses taxes have a singular virtue - they tax businesses receipts, not profit.  They don't care if a business makes a profit or not; once a business takes in $150,000, it pays .75% on every dollar that comes in regardless of profitability.  That's certainly simpler to administer than a tax based on profits, but if a business gets in trouble, the tax helps put the final nail in its coffin.

Over the years, public spending in New Hampshire, as in most states, went up far faster than the economy grew.  Even without a recession, this couldn't have gone on forever; bills eventually come due.  The recession just made state budgets collapse a bit sooner.

Where It All Began

There's been a great deal of talk about Sen. Brown taking "Ted Kennedy's Senate Seat."  People forget that his older brother John F Kennedy, who got us involved in two wars, held that seat before Teddy; that seat has been Democratic since 1953.

In 1962, two years after he was elected President in an election tainted by massive vote fraud in Chicago, JFK signed Executive Order 10988 which allowed federal employees to join unions.

Unionization of public sector workers had been an issue for some time.  Boston police officers went on strike in 1919 after the police commissioner refused to let them form a union.  Calvin Coolidge, governor of Massachusetts at the time, declared that police had no right to strike.  He fired more than 1,000 strikers and hired replacements from unemployed WW I veterans to quell the riots that ensued when there were no police to stop criminals.

Members of the United Garment Workers Union refused to make uniforms so the new officers had to report for work in civilian clothing.  Coolidge didn't let that stop him and simply issued stamped-metal badges.  Successfully breaking the strike gave Coolidge national recognition - he was nominated as the Democratic candidate for Vice President in 1920.

By the 60s, times had changed.  Instead of declaring that federal employees had no right to strike, the young Democratic president encouraged them to join unions.  Given that they already had civil service protection, federal employees are among the workers who need unionization least.  The point wasn't to benefit the workers; the goal was to give the union bosses who'd supported JFK another group of people from whom they could forcibly extract dues.

And extract they did!  Today, the public sector unions are the only viable unions left because unions have bankrupted most of the private sector businesses in which they're involved.  Detroit, which prospered mightily with the automobile industry, is now a ghost town being kept alive by state and federal subsidies, to name but one example.

It's generally agreed that the cost of public employees is a major contributor to the economic difficulties being felt in states like California, New York, and New Jersey.  Even the New York Times, which reflexively supports unions except when its own economic survival is threatened, has started listing public sector unions among the special interest groups which control the Albany legislature and keep New York state spending high even though the state is running a huge deficit.

The result of pushing up the cost of government employees is that government can't afford to fix our roads and bridges, and government can't fix the schools because the unions won't let incompetent teachers be fired.

This simple fact sometimes comes out in ludicrous public statements.  New Hampshire gets a great deal of attention from Presidential candidates, so every four years, the normally placid byways of that state are littered with ads of the form, "Running for President?  Then what about xx" as a special interest group tries to influence a candidate's thinking.  When Mr. Obama and Hillary were contending in New Hampshire, the Service Employees International Union (SEIU) sponsored an ad with a disgruntled-looking health care worker asking the candidate why the children of state employees couldn't afford houses in New Hampshire.

I didn't know whether to laugh or cry.  The state employee's children couldn't afford houses in New Hampshire for the same reason my sons couldn't afford houses in New Hampshire and had to move elsewhere.  The unions had run costs, and thus taxes, up so high that it was essentially impossible for a young couple to put together a decent down payment.

The fact that environmental laws and zoning regulations, which unionized state employees get to write and enforce, kept reducing the supply of buildable house lots didn't help either.  The SEIU didn't need to spend thousands on a billboard to find an answer; all they really needed was a $10 mirror, but that was an answer they wouldn't like.

Simple Solutions

Massachusetts voters saw the same solution to their problems that the voters in New Jersey and Virginia saw - turn out the party that's pals with the state employee unions.  Alas, that's just a start to a long and painful process of ripping out the embedded brambles of public-sector unionization.

It's going to be difficult to chop back on unionized workers.  Once JFK signed his fatal executive order, the unions used their financial windfall to lobby to enshrine their "rights" not only in law but also in the constitutions of various states.

Most state constitutions now have amendments requiring that public-sector pensions, once promised, cannot ever be cut no matter what.  In theory, even if a state had to lay off every single existing worker, all the retirees would still be paid in full.

Although Mr. Obama perverted GM's and Chrysler's bankruptcy process to save the UAW, a state ought to be able to go through bankruptcy rapidly and shed its union contracts and union pensions just as other private-sector companies have done.  That might get costs down to size, but it would be messy, and definitely impossible under the current administration.

We see the fruits of JFK's Faustian bargain with the unions who spent vast sums to elect Mr. Obama.  Instead of forcing cutbacks, the Obama administration directed 2009's $700 billion "porkulus" mostly towards saving public sector jobs which consume taxes rather than towards private sector jobs which generate taxes.  He's run up such huge deficits paying off his union supporters that there isn't enough money left to do anything beneficial for the country as a whole.

The cost of government employees is simply not sustainable.  If it turns out that there's no way short of societal collapse to get rid of the unions, then societal collapse it shall be.

That's the choice the Massachusetts voters saw, we hope; the Economist interprets Mr. Brown's victory as a growl of hostility to an overbearing, and overly-expensive, government.  If so, if Massachusetts liberals could join New Jersey and Virginia and "throw the rascals out," then there's hope that we can change our policies for paying government employees before it's too late.