CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

 

CLT UPDATE
Thursday, February 13, 2003

Making progress exposing MTF


But the difference between filing this year and last year is that taxpayers will have the opportunity to choose to give the state more money, through a voluntary tax check-off.

The voluntary tax check-off is the brainchild of the Citizens for Limited Taxation [CLT]. The taxpayer watchdog organization is the same group that has passed many initiative petitions such as Proposition 2 legislation, and worked hard to fight waste, fraud, and abuse in government....

The logic and beauty of the check-off is simple: If you want to pay more for state services, feel free.... The option allows advocates who support increased state spending to put their money where their mouths are, in an effort to avert the "budget crisis."

Not surprisingly, few taxpayers have voluntarily given more money to the state.

A Winchester Star editorial
Feb. 12, 2003
Voluntary tax check-off


Speaking in deeply personal terms, and stressing his working-class roots, Senate President Robert E. Travaglini yesterday expressed skepticism about major aspects of Governor Mitt Romney's restructuring proposals, especially plans to eliminate the Massachusetts Turnpike Authority and the Metropolitian District Commission....

While Romney criticizes waste and patronage and stresses the efficiencies to be gained by consolidating government functions, Travaglini is emerging as a defender of state programs, stressing the need for compassion even as Massachusetts struggles with paralyzing budget deficits. An unabashed provider of government jobs to his neighborhood, Travaglini is the only major state leader to say publicly that he may support another tax increase to save programs.

The Boston Globe
Feb. 13, 2003
Travaglini cites doubts on streamlining


The state Senate has a lot of little messes to clean up as it considers a fiscal 2003 budget balancing plan. Some of the messes were created by the governor, others by the House of Representatives, still others by the Senate Ways and Means Committee. But senators face a simple choice today: they can make the fiscal crisis better, or make it worse....

We'd like to pat the Senate on the back for going above and beyond the call of duty but these extra dollars come from additional fees and trust fund grabs, not spending cuts, and therefore fail to address the underlying budget issue - overspending.

A Boston Herald editorial
Feb. 13, 2003
Fix budget mess, don't make it worse


The Massachusetts Board of Education said yesterday it will not consider new requests from communities seeking state money to help build new schools.

The decision means cities and towns not already on the waiting list will for now have no help from the state aid program that pays for up to 90 percent of school building projects.

The Boston Herald
Feb. 12, 2003
State halts funding for new schools construction


"The notion of changing the statute after the fact to go back four years changes the rules in midstream and sends a very negative message to businesses we might attract and which might expand here," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, an advocacy group.

The Boston Globe
Feb. 13, 2003
State, banks wrangle on bid to recoup taxes


Chip Ford's CLT Commentary

Yesterday's Winchester Star editorial highlighted our voluntary tax check-off and put out the word to those who insisted they "didn't need or want" a tax cut. Now those who lost the Question 4 battle can also be winners -- by paying 5.85 percent -- along with those of us who'll pay 5.3 percent!

The Gimme Lobby ought to be out there publicizing this opportunity for "the most vulnerable among us" - investing as much money and energy into promoting the check-off as they mustered against our tax rollback question on the 2000 ballot. There are still over a million who voted no on Question 4 who haven't elected to keep paying the higher rate. Surely they can't all be hypocrites ... can they be, really?

Senate President Travaglini, it turns out, has been feeding at the trough since he was a little kid. He doesn't want to restructure the MDC because ... well, he has fond childhood memories of how sweet it was, how it took care of him and his family. "Cradle to grave" government. Can there ever be any reform in The Peoples' Republic of Taxachusetts with this sort of lifelong, inbred dependency?

The School Building Construction program has been blown up. The state will no longer provide matching funds of up to 90 percent for local school construction, though there are still proposals -- and even override plans -- out there. Beware: If your city or town is not already pledged funds, it will not be getting any for the foreseeable future. Buy into a school construction override, and prepare to eat 100 percent of the cost through ever-increasing property taxes.

And finally, how delicious. Michael "Mickey W." Widmer, president of the so-called Mass. Taxpayers Foundation, is beside himself. The state, in its never-ending troll for more revenue, has targeted his high-rolling Fat Cat MTF members!

Historically, CLT has always opposed increased taxes on businesses. We didn't initiate this class-warfare, but since Mickey W. has targeted average taxpayers with endless tax increases, this time we're going to sit it out, remain silent, provide the "business community" with the same level of support it provides us.

Until our state income tax rate is rolled back to 5 percent - with or without Widmer's support -- who cares, tax the hell out of his members. Mickey W. and his MTF launched this divisive offensive and it has never relented.

We are making progress in our truth offensive though. If you notice in today's Boston Globe report, MTF is not identified as "highly-respected" or even "nonpartisan" this time; but instead as "an advocacy group." Finally, an accurate depiction, especially in this current tax blowup.

Listed as executive members of the so-called Mass. Taxpayers Foundation -- affected by just this tax loophole (only members who represent big banking) -- are:

MTF EXECUTIVE COMMITTEE

James E. Mahoney, Senior VP
FleetBoston Financial

David A. Spina, Vice Chairman, CEO
State Street Corporation

MTF BOARD OF TRUSTEES

Donald J. Barry, Jr., Senior VP & Counsel
Citizens Bank of Massachusetts

Christopher W. Bramley, President
Banknorth Massachusetts

Arthur R. Connelly, President & CEO
South Shore Savings Bank

William S. Hogan, Jr., President & CEO
Easthampton Savings Bank

Karen Kruck, Senior VP
State Street Corporation

James E. Mahoney, Senior VP
FleetBoston Financial

Robert Rose, Senior VP / Chief Credit Officer
Sovereign Bank

David A. Spina, Chairman and CEO
State Street Corporation

MTF PROGRAM COMMITTEE

Michael H. Koonce, Senior VP & General Counsel
Evergreen Investment Services
First Union Corporation

Oh yeah, Mickey W. is scurrying around today, trying to devise some scam to shift the burden over to average taxpayers and earn his salary.

Yeah, "an advocacy group" sounds about right. At last.

It's just too bad that it's taken the media this long to recognize it, allowing MTF to get away with as much subterfuge as apparently Bechtel/Parson Brinckerhoff did with its Big Dig shenanigans, and with just as much financial damage to average taxpayers.

Chip Ford


The Winchester Star
Wednesday, February 12, 2003

Editorial
Voluntary tax check-off

During the next few weeks, the subject of filing taxes will be on the mind of just about everyone. By law, employers have already sent residents their W-2 and 1099 earnings forms.

Until April 15, many of us will be tinkering with our calculators - or spending money on accountants - in attempt to figure out the best way to get most of our money back.

But the difference between filing this year and last year is that taxpayers will have the opportunity to choose to give the state more money, through a voluntary tax check-off.

The voluntary tax check-off is the brainchild of the Citizens for Limited Taxation [CLT]. The taxpayer watchdog organization is the same group that has passed many initiative petitions such as Proposition 2 legislation, and worked hard to fight waste, fraud, and abuse in government.

In 1998, while promoting the Income Tax Rollback to 5 percent, CLT also put forth a clever solution for those people who did not support cutting taxes - a voluntary tax check-off.

The logic and beauty of the check-off is simple: If you want to pay more for state services, feel free. Check it off and part of your refund will divert back to the state. It is the same for those people who want to make a donation to the Clean Elections Fund or other programs offered on the state income tax forms. The option allows advocates who support increased state spending to put their money where their mouths are, in an effort to avert the "budget crisis."

Not surprisingly, few taxpayers have voluntarily given more money to the state.

According to published reports only 20 out of the 234,000 tax filers have taken advantage of the check-off. This number is shockingly low when you consider that millions of people voted against the income tax rollback as well as the 2000 initiative petition to eliminate the income tax altogether.

But it also shows the hypocrisy of most taxpayers who would gladly take your money to pay for their pet projects and programs, but refuse to open their own checkbooks.

In the end, the choice is yours: If you want the state to have more money to spend, use the voluntary tax check-off. If you don't, back efforts to find accountability on Beacon Hill with the $21 billion they already take from us.

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The Boston Globe
Thursday, February 13, 2003

Travaglini cites doubts on streamlining
By Rick Klein, Globe Staff

Speaking in deeply personal terms, and stressing his working-class roots, Senate President Robert E. Travaglini yesterday expressed skepticism about major aspects of Governor Mitt Romney's restructuring proposals, especially plans to eliminate the Massachusetts Turnpike Authority and the Metropolitian District Commission.

In his first appearance before the Greater Boston Chamber of Commerce, Travaglini, an East Boston native raised by a single mother, described the MDC's significance to his boyhood. Saying he and his neighbors depended on the agency, he told more than 400 business leaders of his summer work as a lifeguard at Constitution Beach and as a supervisor at the Porrazzo Skating Rink.

"The MDC is special to me," Travaglini said. "I'm fully aware of the fact that presently, the MDC is the only entity that offers recreation at a cost that is affordable to much of the population, with its skating rinks, with its swimming pools, with its recreation areas and walking trails."

The remarks underscored a dynamic that is taking shape on Beacon Hill. While Romney criticizes waste and patronage and stresses the efficiencies to be gained by consolidating government functions, Travaglini is emerging as a defender of state programs, stressing the need for compassion even as Massachusetts struggles with paralyzing budget deficits. An unabashed provider of government jobs to his neighborhood, Travaglini is the only major state leader to say publicly that he may support another tax increase to save programs.

"I was raised in East Boston, one of five sons in a family where hard work and sacrifice were values we lived every day," Travaglini said in his speech. "I believe in and respect public service, and I believe strongly that government has an essential role to play in our lives."

Travaglini said he had no interest in governmental changes that are designed primarily to "gain popularity in the media" or "target and punish unpopular constituencies." The Senate president also said that Romney's proposal to merge the Turnpike Authority with the Highway Department raises a host of legal concerns that he's not sure can be addressed without sacrificing federal reimbursements and the state's standing with bondholders.

"I'm just not comfortable with that one at all," Travaglini said. "There are so many legalities and problems."

Asked about Travaglini's comments, Romney refrained from criticizing the Senate president directly, but sought to portray their differences as a battle over big bureaucracy. The budget proposal he is due to file Feb. 26 will seek to eliminate duplicative state functions, reducing administrators while maintaining a similar number of front-line workers.

"I say let's have one highway department, with just as many people actually plowing the streets and managing our roads, and not as many bureaucrats in the Commonwealth," Romney said. "We only need to have one person responsible for all the parks, urban and non-urban, in the Commonwealth."

Travaglini's comments on the MDC facilities echoed those of House Speaker Thomas M. Finneran earlier this week. Both suggested that wealthier people don't understand the importance of the MDC, which for more than a century has maintained the Boston-area park system.

"It's really the only recreational outlet for lots of people, probably over a million people, and they don't have the Cape," the speaker said.

Still, sharp differences exist between the priorities of House and Senate leaders, and those were underscored yesterday. Travaglini said the Senate would seek to preserve K-12 education funding, even as House leaders and the Romney administration warn of deep cuts to local aid in the fiscal year that begins July 1.

At the same time, the Senate president said he is exploring the possibility of limiting Lottery prize payouts - a move that many city and town officials fiercely oppose because they fear it will drive players away, and result in a decline in Lottery revenues, on which they depend. Finneran has previously opposed efforts to tinker with the Lottery.

Travaglini said he would be willing to discuss Romney's proposal to eliminate the MDC and hand its functions to other agencies only if the governor could offer a guarantee that hours at MDC facilities wouldn't be scaled back. When he announced a round of budget cuts two weeks ago, Romney warned that hours would have to be limited at some state facilities through June 30, but a spokeswoman for the governor said he hopes his restructuring will allow hours to be expanded again in the new fiscal year beginning July 1.

"Our thought is it will be less bureaucrats, but the same amount of service," said Nicole St. Peter, a Romney spokeswoman. "We will maintain the same level of service at our rinks and parks."

Romney said that while a merger of the Highway Department and the Turnpike Authority would be complicated, he is confident it can be accomplished. People seeking to streamline government have long urged the consolidation. The Turnpike Authority was established to oversee the construction and operation of the Massachusetts Turnpike as part of the road expansions that followed World War II. It now oversees the harbor tunnels and construction of the Big Dig in addition to the turnpike. The state Highway Department predates the authority's existence.

Romney said the savings to the state would easily exceed the $50 million he estimated would come from the move as a candidate last fall.

At least one of Romney's restructuring proposals is meeting with Travaglini's approval. The Senate president said he is willing to pursue the governor's suggestion that higher-income Medicaid recipients be required to contribute more to their own health care, through a sliding scale of copayments.

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The Boston Herald
Thursday, February 13, 2003

A Boston Herald editorial
Fix budget mess, don't make it worse

The state Senate has a lot of little messes to clean up as it considers a fiscal 2003 budget balancing plan. Some of the messes were created by the governor, others by the House of Representatives, still others by the Senate Ways and Means Committee. But senators face a simple choice today: they can make the fiscal crisis better, or make it worse.

The first, and most odious, mess is a range of fee hikes on homeowners, including an average $150 fee, up from $36, for recording a mortgage at the Registry of Deeds. This bad idea started in the corner office, but offering fee increases to the Legislature is like lighting up in front of a die-hard smoker who is trying to quit - they're simply irresistible. According to the governor's office, with the exception of a $5 technology fee, the additional revenue will go into the general fund, instead of being retained by the registry to support service levels. These fee hikes, then, are nothing more than a revenue grab out of homeowners' pockets and should be rejected.

Second, the Senate, like the House, taps a capital projects sluice fund for almost $40 million. But $26 million from the fund was already spent by acting Gov. Jane Swift. As much as they'd like to, the legislators can't spend the same money twice, creating an additional $26 million budget hole.

Third, the Senate bill goes along with the House and governor in closing some tax loopholes, including one involving transactions of banks and real estate investment trusts. But by imposing the change retroactively to 1999, they are not only imposing an onerous burden on smaller banks but also harkening back to Massachusetts' well-earned anti-business image by changing the rules in midstream. The banks should pay the tax prospectively, but they shouldn't be penalized because the law until now was unclear.

Finally, the Senate, like the House, relies too much on one-time fixes that exacerbate the budget problem in fiscal 2004 and avoid addressing necessary changes in Medicaid and state employee health care costs.

The Senate bill is valued at $254 million, about $110 million more than the governor asked for. We'd like to pat the Senate on the back for going above and beyond the call of duty but these extra dollars come from additional fees and trust fund grabs, not spending cuts, and therefore fail to address the underlying budget issue - overspending.

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The Boston Herald
Wednesday, February 12, 2003

State halts funding for new schools construction
by Kevin Rothstein

The Massachusetts Board of Education said yesterday it will not consider new requests from communities seeking state money to help build new schools.

The decision means cities and towns not already on the waiting list will for now have no help from the state aid program that pays for up to 90 percent of school building projects.

"We're not going to look at any new applications," said Heidi Perlman, spokeswoman for the state Department of Education. "It's just irresponsible to incur any new costs to the state when the state's economy is in such crisis."

Current construction projects as well as those approved for funding will not be affected by the decision. But to the 62 communities who have told the state of their intentions to seek help, the move means they will be on their own.

"Those districts will be told we're freezing the program indefinitely," Perlman said.

The decision threatens to wreak havoc in communities that have sometimes spent considerable resources preparing renovation plans. In some cases, local voters were to decide Proposition 2 overrides based on assumptions about state aid.

"What happens to those projects?" said Mike Gilbert, field director for the Mass. Association of School Committees. "There are probably a number of projects that have been submitted to the department where communities are going out on overrides this spring."

In a memo to local officials, state Education Commissioner David Driscoll said yesterday the moratorium would last at least until the end of the fiscal year that ends June 30.

Through its School Building Assistance Program, the state has already promised more than $5 billion in long-term assistance. Another 350 projects have been approved for funding.

The state generally pays for 60 to 70 percent of school building costs. In communities with school desegregation plans in place, state aid can reach 90 percent.

Without the state assistance, local communities would either have to cancel their projects or see their costs skyrocket, said Chris Martes, executive director of the Mass. Association of School Superintendents.

"No one wants to be on the hook for the whole amount," he said.

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The Boston Globe
Thursday, February 13, 2003

State, banks wrangle on bid to recoup taxes
Business leaders see plan as unfair retroactive levy
created to help budget ills
By Jeffrey Krasner, Globe Staff

The looming budget gap on Beacon Hill has pushed a simmering dispute between the state's banks and the Department of Revenue into the spotlight, with tax collectors seeking to grab $140 million and business leaders claiming the state is trying to tax them retroactively.

The Senate budget proposal set to be debated today includes about $140 million the state says it will reclaim from banks which set up tax shelters as far back as 1999.

Critics of the Romney administration's proposal charge that making the change retroactively will alienate companies that might locate and expand in the state, and revive its dubious distinction as "Taxachusetts."

"The notion of changing the statute after the fact to go back four years changes the rules in midstream and sends a very negative message to businesses we might attract and which might expand here," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, an advocacy group. "This goes well beyond the question of banks all the way to the setting of tax policy in the state."

In response to a 1995 change in state tax law, banks sought to set up tax shelters using real estate investment trusts, or REITs. Banks established REITs as subsidiaries, and used them to hold mortgages and other real estate assets. When the REITs paid income in the form of dividends to the parent bank, they were able to take advantage of a deduction that lowered the amount of tax the banks owed to the states.

The Department of Revenue discovered the tax shelters last year and audited dozens of banks. It ultimately ordered about 60 banks to pay additional assessments. The banks are fighting those new assessments. But now, the Romney administration is counting on banks paying the disputed taxes to help balance the state budget.

A bank trade group said it's fine if the state wants to change the law going forward, but it should let the wrangling over the disputed years continue in the courts.

"If they make a determination this is no longer permissible, that's one thing," said Kevin F. Kiley, executive vice president and chief operating officer of the Massachusetts Bankers Association. "With respect to '99 through '02, that's part and parcel of the potential litigation brought by the Department of Revenue. Let it play out."

Steve Remsberg, associate general counsel for the DOR, said the state's argument hinges on two points. The loophole should be disallowed, he said, because REITs are governed by federal tax code, and therefore shouldn't be able to take advantage of a provision in the state code. Moreover, he said, the change should go back to 1999 because the Legislature didn't intend the 1995 law to create a way to move income between the REITs and the banks without paying taxes.

That kind of thinking has riled some legislators who will try to change the provision in today's debate.

"Just by this maneuver, the Department of Revenue is saying these things are legal," said Bill Rivers, legislative director for state Senator Robert L. Hedlund, Republican of Weymouth. "The banks are winning in court. DOR wasn't going to get the money from the courts, so now they're looking for the Legislature to make something that was legal at the time illegal. The senator opposes this change to the tax law being retroactive."

Romney and the Legislature are desperately trying to fill a shortfall to the current state budget estimated at $500 million and potentially reaching $650 million. Since taking office in January, the governor has instituted $343 million in immediate budget cuts. He is seeking additional spending cuts, and is looking at new fees and changes like the one affecting banks to make up the remaining shortfall. The House already approved a budget proposal similar to the one pending in the Senate.

Still, critics contend that even if the Senate approves changes closing the banking loophole, it will have no impact on the budget gap. "There's not going to be any immediate revenue collected because if the law is changed, the banks are going to challenge the changes," said Kiley.

Said Rivers, "We're mandated to balance the budget by the end of the fiscal year, but we'll have to find another way, because this won't generate the money they're expecting."

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