Soloway Favors Revision Of Mass. Fiscal Policies

A Harvard assistant professor of Economics has called for a comprehensive revision of Massachusett's tax and fiscal policies to meet the state's pressing financial crises.

Arnold M. Soloway in a report made public today, says that a proper use of the current income tax would satisfy the immediate financial needs, but that a progressive income tax is essential for any long-run solution.

In a 36-page report to the State Board of the Massachusetts Chapter of Americans for Democratic Action, titled A Balanced Fiscal Program for Massachsetts, and released today, he sharply criticizes the present handing of the Commonwealth's fiscal affairs, and offers several specific recommendations for its improvement.

He cites the "abject failure of the state government" to assume its proper "financial and functional responsibilities" as the factor which forces cities and towns "to an excessive use of the property tax in order to meet their mounting obligations."

To alleviate this problem, Soloway recommends that the State increase aid to cities and towns, especially for education, and that it accept full responsibility for all welfare programs, such as General Relief and Veterans' Assistance, now handled by the municipalities.

Soloway opposes a sales tax, even as a stop-gap, fund-raising measure. He attacks it for the increased costs of administrating a new tax as well as unfairness to taxpayers and denies that any sales tax is necessary, since a "properly revised income tax can produce as much tax revenue as we need."

Specific recommendations for such a revised income tax are:

1) Eliminate deductions for state income tax purposes on federal individual income tax payments.

2) Tax net rental income at the same rate as other forms of business income.

3) Tax the dividends of business trusts having transferable shares distributed among individual shareholders in the same way as all other dividend income.

4) Introduce a constitutional amendment enabling the Commonwealth to tax personal income from whatever source derived under a progressive rate schedule.

5) When the constitutional amendment has been approved, enact an appropriately revised personal income tax.

Since the adoption of a constitutional amendment takes four years, increased money would be needed in the interim, Soloway says. In addition to some of the above proposals, Soloway urges lowering of personal exemptions, perhaps to the Federal level, as a means of obtaining the extra revenue. This move alone would bring in $60 million in increased annual receipts, he estimates.

He refutes the contention that his proposed changes would result in a "soak-the-rich" scheme. The burden of taxes would be spread throughout, since a lowering of personal exemptions would mean that lower income groups would share the costs.

He emphasizes that taxpayers can deduct payments to the State from income on their federal tax returns.

If the bulk of these recommendations is followed, particularly state aid to cities, Soloway maintains, the high property taxes, which now prevent new construction, could be substantially reduced