Just returned from a legislative hearing on income
tax issues, where I was reminded of a favorite cartoon.
"Porterfield" is being lobbied by someone arguing that a particular
proposal is "morally correct and ethically sound."
Porterfield replies: "Are you trying to make me say, 'So what?'"
That's how I always feel when saying to legislative committees that
something is "the right thing to do," as several citizens did today in
reference to the retroactive capital gains tax. Were they trying to make
legislators say, "So what?"
In May of 2002, the Legislature froze the income tax rollback that the
voters passed in November 2000. In the same bill, it hiked the capital
gains tax for all future transactions. The later action was clearly
unconstitutional, since a tax rate must be the same for all taxpayers
throughout any given tax year.
So taxpayers went to court and won. Now the state had to return the
taxes paid by those who had capital gains from May to December, or send
a bill for more taxes to those who had capital gains from January to
April. They chose the latter.
A couple from Revere testified that in early 2002 they sold some
housing, paid all the taxes required at the time, and put the rest into
college funds for their two children. His mother is using her share to
pay for her nursing home.
If they have to pay the retroactive tax, they will have to pay penalties
(and the capital gains tax again!) on the money they must withdraw early
in order to pay the state. There will no money left for remaining
college costs, and Mom will become a Medicaid patient instead of a
They also noted an uncle who has since died, and his gains distributed
throughout his estate. How does the state collect that? What about
people who have moved?
A woman put her gains from the sale of a veterinary business into a
college fund for her four children. Another woman had been chosen to
represent 321 people in her district who would be required to come up
with $691,000 in just a month to pay the retroactive tax.
A man testified that he had "once-in-a-lifetime" capital gain with which
he'd bought a house, donated to charities, and set aside money for
college for his three children. He said the retroactive tax bill would
be more than his annual salary.
Another man said that he and his family, lifelong taxpayers in
Massachusetts, sold a property that they had owned for over 25 years. He
paid the taxes on his share and invested the rest. Now he is told he
must come up with an additional $8,000 within 30 days and he asks, "Do I
sell the new investment? Take out a loan? Get another job?"
And noting Massachusetts' population loss, he predicts that "sooner or
later, this state will wake up and wonder what happened" to its
productive taxpayers, as they escape to places where they can keep more
of their money.
A retired teacher invested in a rental property in the city and after he
sold it, paid medical costs and invested the rest of his gains.
The Massachusetts Teachers Association, by the way, testified in favor
of the retroactive taxes. Well, he's not paying dues anymore, so who
cares about him?
An attorney told the Committee on Revenue that the court action on this
issue is not over, and in the end, when the courts rule against
retroactive taxation, the commonwealth will have to repay not only the
May-to-December taxpayers, but the January-to-April taxpayers too — this
after forcing the latter to sell investments and pay penalties for
cashing in CDs and IRAs.
To their credit, the few committee members who were present listened
attentively. The chairwoman, Sen, Cynthia Creem, D-Newton, suggested to
the Revere couple that they contact their own state senator, who happens
to be Senate President Robert Travaglini. This was the first time I'd
ever heard a committee chairperson recommend that someone testifying
before his/her committee go over his/her head to the boss. It does
indicate who will be making the decision on the retroactive capital
gains tax — the governor, the Senate president, and House Speaker Sal
We know where Gov. Romney stands, since he filed the bill to move the
effective date of the 2002 capital gains tax hike to Jan. 1, 2003.
DiMasi's House has rejected attempts by Republican legislators to move
the date forward, but 13 Democrats voted with them last week, so slow
progress is being made. And Senate President Travaglini must respond,
one way or another, to the Revere couple who said, in a letter to
legislators, "How you sleep at night is beyond me, but I can't be
worrying about your sleep when I'm getting very little of my own,"
worrying about things like how to pay for repairs to her 8-year-old
Honda and some required treatment for her dog.
Many ordinary people are being assaulted by the Legislature and forced
to make up for its 2002 mistake. We might say this is morally wrong and
ethically unsound, not to mention economically foolish, but that would
apparently make most legislators say, "So what?"
Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem
News, Newburyport Times, Gloucester Times, (Lawrence) Eagle-Tribune, and Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the Providence
Journal and other newspapers.