CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

 

CLT UPDATE
Wednesday, October 29, 2003

MTF forced to out itself in desperation


Property taxes in cities and towns surged by 13 percent from 2001 to 2003, hitting residents of poorer cities and towns the hardest, according to an analysis released Tuesday by the Massachusetts Taxpayers Foundation.

Foundation officials attribute the bulk of the local tax increases to efforts to preserve local services in the face of steep cuts in state aid....

Meanwhile, Citizens for Limited Taxation, the advocacy group that fought for the passage of Proposition 2, was back on Beacon Hill Tuesday pushing its agenda. CLT urged lawmakers to honor the will of the voters in 2000 when they adopted a ballot law to roll the income tax rate back to 5 percent. The rate is presently at 5.3 percent. CLT said it hopes Romney's budget in January will roll the rate back for 2004.

State House News Service
Tuesday, October 28, 2003
Local tax hikes increase in lockstep with local aid cuts,
report finds


Massachusetts residents experienced the largest two-year increase in property taxes in a dozen years as cities and towns struggled to make up for a slowdown in state aid between 2001 and 2003, according to a study released yesterday by the Massachusetts Taxpayers Foundation....

"Clearly the cuts from the fiscal crisis have had a direct impact in producing higher property taxes," said Michael J. Widmer, president of the taxpayers foundation....

"We think it's alarmist, and we hope it's not intended to stampede the Legislature into adopting the tax increase the Massachusetts Taxpayers Foundation has been calling for," said Eric Fehrnstrom, the governor's communications director. "The impression has been created that cities and towns are starved for local revenues, but this report paints quite a different story: Local revenue growth has been fairly robust." ...

The property tax trend is likely to accelerate, the business-backed research group says, because Romney and the Legislature declined to raise income taxes ...

Barbara Anderson of Citizens for Limited Taxation described the property tax as "a mean little tax" because it places a heavier burden on people who are on fixed incomes or are unemployed. But she blamed profligate government spending during the boom of the 1990s for the fiscal problems now facing cities and towns, and said it's time for them to tighten their belts. "There's only one chance for reform, ever, in government, and that's when times are tight," Anderson said.

The Boston Globe
Wednesday, October 29, 2003
Property taxes leap as state aid falls


Lawmakers, former state officials, and senior citizens locked horns with members of the business community Tuesday in a fiery debate over a tax policy change advocates say could raise roughly $140 million in new annual state revenues. 

More than 55 lawmakers are pushing a bill to require multi-state businesses to report total earnings as a lump sum, under a system called "combined reporting." By applying a new tax formula, businesses would pay taxes to each state proportionate to what was earned there. 

Supporters of the bill say businesses in Massachusetts have benefited from more than 40 tax cuts in the last decade. Rep. Paul Demakis (D-Boston), lead sponsor of the bill, said the state lost nearly $300 million this year in revenue due to those tax cuts....

[Rep. Paul Demakis (D-Boston), lead sponsor of the bill] demonstrated that by using figures from 2000. He said 15 of the state's 50 largest companies paid an average of $456 in corporate income taxes that year, the lowest amount possible under state law. The average family, he said, paid $2,795 in taxes. 

Similarly, since 1968, businesses' contributions to the overall state tax base have declined from 16 percent to 4 percent, he said. "When businesses aren't paying what they should be paying, someone else is picking up the tab," Demakis said....

"Businesses pay close to half the total tax load in Massachusetts," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "This is just one more piece that makes us uncompetitive." ...

The Associated Industries of Massachusetts (AIM), the state's largest business representative, agreed with Widmer....

"By the way, we're in a recession," Widmer said. "This couldn't be a worse time."

State House News Service
Tuesday, October 28, 2003
Business tax burden debated as Democrats,
Liberals push policy change


Liberal activists who claim to want "public accountability" wiped a legislative scorecard off their Web site after Democratic senators threw a fit because their scores were worse than several Republicans.

Endorsed by more than 1,000 delegates to the Democratic Party's issues convention this spring, the scorecard aims to measure lawmakers' adherence to the letter of the party platform.

But senators were stunned when an early scorecard draft appeared online and then made the rounds on the Senate floor - trumpeting a 75 percent score for GOP Sen. Richard R. Tisei of Wakefield, which trumped Democrat Senate President Robert E. Travaglini's 67 percent.

The Boston Herald
Wednesday, October 29, 2003
Dem senators protest online scorecard


Chip Ford's CLT Commentary

Yesterday the so-called Massachusetts Taxpayers Foundation hung it all out there for the world to see, unavoidably demonstrating what we've been saying for years, that it's simply a shill for Fat-Cat Big Business. It had no choice: Fat-Cat Big Business was under assault and MTF earned its hazardous-duty pay racing to the fat-cats' rescue. Yesterday, MTF charged into its own "Perfect Storm" and MTF has "unleashed" it upon itself.

While MTF again set the stage for higher taxes on average taxpayers, it called for preferential treatment, lower taxes, for its membership ... reminding the Legislature and anyone else foolish enough to be taken in by this fat-cat special interest that, "By the way, we're in a recession. This couldn't be a worse time" for a tax hike. And the state's " largest business representative," Associated Industries of Massachusetts, frantically bobbed its head yelping "me too!"

In its anticipated report, "Cuts in State Aid Lead to Higher Property Tax Burdens," MTF bemoaned: "Total state assistance to cities and towns was cut in both 2003 and 2004 after growing strongly for almost a decade, and a third year of reductions is virtually inevitable." MTF president Michael Widmer noted, "The state's fiscal crisis is clearly placing a heavier burden on property taxpayers including those in poorer communities, as well as forcing reductions in local programs and services."

Concern for property taxpayers is heartwarming coming from MTF, which opposed Proposition 2 in 1980 and has shown little support for local aid over the decades.

Eric Fehrnstrom, the governor's communications director, clearly saw through Widmer and accurately nailed MTF' right between the eyes. "We think it's alarmist, and we hope it's not intended to stampede the Legislature into adopting the tax increase the Massachusetts Taxpayers Foundation has been calling for. "

Gee whiz, what a surprise this must be for the MTF's self-promotion as  "among the largest and most effective organizations of its kind in the country."

MTF must have somehow missed the news reports that warned of this inevitability, like:

  • Towns rolling in cash, by the Eagle-Tribune - Feb. 16, 1999: "These days, the state is pouring money into local coffers at unprecedented rates, while local business growth and housing construction -- not to mention tax increases approved by voters -- pump in even more.

    "But it has raised a conundrum for some town officials: What do you do with an embarrassment of riches?"

As such an allegedly "highly-respected" and "nonpartisan" organization, how can the so-called Massachusetts Taxpayers Foundation have missed such blatant facts? You couldn't help from tripping over them only a few years ago. In its news release footnotes it always touts that it "has won eight prestigious national awards in as many years for its work on business costs, capital spending, state finances, MBTA restructuring, state government reform, and health care." I wonder who's awarding MTF this distinction? I'll bet it's not average taxpayers!

Chip Ford


State House News Service
Tuesday, October 28, 2003

Local tax hikes increase in lockstep with local aid cuts,
report finds


Property taxes in cities and towns surged by 13 percent from 2001 to 2003, hitting residents of poorer cities and towns the hardest, according to an analysis released Tuesday by the Massachusetts Taxpayers Foundation.

Foundation officials attribute the bulk of the local tax increases to efforts to preserve local services in the face of steep cuts in state aid. The foundation reported that more than 80 percent of cities and towns have absorbed cuts in state aid since the state's fiscal crisis began. The overall cut to date is $422 million.

The new numbers do not reflect local aid cuts included in this year's state budget and foundation officials predict further local aid cuts in fiscal 2005 are "virtually inevitable." Even with the big local tax hikes, total local revenues grew by only 2.3 percent in 2003, the lowest rate of growth in a decade. 

The picture is different at the state level. After a $1.2 billion increase in state taxes in 2002, the Legislature has since taken new or higher taxes off the table, in part because Republican Gov. Mitt Romney has vowed to reject tax hikes, which he says will be a drag on the economic recovery.

The authors of the report say the local tax burdens are increasing by more than the 2.5 percent a year allowed under a 1980 ballot law because more municipalities are approving Proposition 2 overrides and more communities are opting to raise taxes closer to the allowable thresholds under the law.

In 2003, communities added $48 million to local tax bills through overrides, the most in more than a decade. In 200 communities surveyed, local excess capacity levels - the amount communities tax themselves below the 2 percent limit - fell by $65 million, or more than 50 percent, the report found.

Meanwhile, Citizens for Limited Taxation, the advocacy group that fought for the passage of Proposition 2, was back on Beacon Hill Tuesday pushing its agenda. CLT urged lawmakers to honor the will of the voters in 2000 when they adopted a ballot law to roll the income tax rate back to 5 percent. The rate is presently at 5.3 percent. CLT said it hopes Romney's budget in January will roll the rate back for 2004.

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The Boston Globe
Wednesday, October 29, 2003

Property taxes leap as state aid falls
By Scott S. Greenberger, Globe Staff

Massachusetts residents experienced the largest two-year increase in property taxes in a dozen years as cities and towns struggled to make up for a slowdown in state aid between 2001 and 2003, according to a study released yesterday by the Massachusetts Taxpayers Foundation.

Per-capita property taxes climbed an average of 3 percent a year in fiscal 2002 and 2003, which translates into an increase of $73 for every man, woman, and child in the Commonwealth.

In another sign of the financial stress on cities and towns, voters are increasingly deciding to override the state's limit on property taxes under Proposition 2. The report says residents in 39 communities voted to override the annual property tax limit in 2003, approving a total of $48 million in new revenue. That amount is twice as much as what was adopted in 2002 and more than six times the average between 1994 and 2000.

"Clearly the cuts from the fiscal crisis have had a direct impact in producing higher property taxes," said Michael J. Widmer, president of the taxpayers foundation.

But officials in Governor Mitt Romney's administration disputed the numbers in the report, arguing that once new construction and annual increases in property values are factored in, property tax increases have been minimal. Romney took office in January, the middle of the fiscal 2003 budget year.

"We think it's alarmist, and we hope it's not intended to stampede the Legislature into adopting the tax increase the Massachusetts Taxpayers Foundation has been calling for," said Eric Fehrnstrom, the governor's communications director. "The impression has been created that cities and towns are starved for local revenues, but this report paints quite a different story: Local revenue growth has been fairly robust."

State aid to cities and towns actually increased slightly between fiscal years 2001 and 2002, but it wasn't enough for many cities and towns to cover cost increases in areas such as health care. In fiscal year 2003, aid decreased by about 3 percent, the first decline in more than a decade.

The property tax trend is likely to accelerate, the business-backed research group says, because Romney and the Legislature declined to raise income taxes and made even deeper cuts in state aid in the current fiscal year, 2004, which isn't covered in the report. Romney said yesterday he probably won't propose further cuts in aid to cities and towns in fiscal year 2005, but he has vowed to veto any income tax hike.

"My hope is that we will be able to preserve the same level of funding from '04 to '05," Romney said in an interview.

Many local officials say Beacon Hill's approach is particularly painful for poorer communities reliant on state help. Compared with income taxes, property taxes place a disproportionate burden on lower-income residents, retirees on fixed incomes, and the unemployed. "There's no question that what is happening at the state level is a shifting of the burden onto the backs of people who are less able to afford to pay for services," said Fall River Mayor Ed Lambert, whose city's property taxes went up 11 percent between 2002 and 2003, according to the study. "For the governor to raise his hands and say he doesn't support increasing taxes on the backs of working people totally ignores what has to happen at the city level and the town level."

Despite the property tax hikes, total local revenues in 2003 went up just 2.3 percent, the smallest increase in a decade and less than half of the 6 percent increases that were typical during the 1990s, according to the study. Because health care and other fixed costs are growing much more rapidly, cities and towns have had to cut programs, eliminate services, and lay off workers.

Even with Fall River's property tax increases, Lambert said, he had to trim his roughly 1,000-person nonschool work force by 160, laying off 61 police officers and firefighters.

"All of this is happening in the context of thousands of people being laid off, larger class sizes, fewer police officers and firefighters, and the stopping of routine maintenance on buildings," said Geoff Beckwith of the Massachusetts Municipal Association, which lobbies for cities and towns on Beacon Hill. " So we have both an increase in the local property tax burden and a reduction overall in the full range of local services that are provided."

But Fehrnstrom rejected the idea that property tax increases are less desirable than income tax hikes -- especially in the case of Proposition 2 overrides when local residents vote to tax themselves. "We think residents of a city or town are the best judges of whether or not their community is being well-run," Fehrnstrom said.

Barbara Anderson of Citizens for Limited Taxation described the property tax as "a mean little tax" because it places a heavier burden on people who are on fixed incomes or are unemployed. But she blamed profligate government spending during the boom of the 1990s for the fiscal problems now facing cities and towns, and said it's time for them to tighten their belts. "There's only one chance for reform, ever, in government, and that's when times are tight," Anderson said.

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State House News Service
Tuesday, October 28, 2003

Business tax burden debated as Democrats,
Liberals push policy change
By Amy Lambiaso


Lawmakers, former state officials, and senior citizens locked horns with members of the business community Tuesday in a fiery debate over a tax policy change advocates say could raise roughly $140 million in new annual state revenues. 

More than 55 lawmakers are pushing a bill to require multi-state businesses to report total earnings as a lump sum, under a system called "combined reporting." By applying a new tax formula, businesses would pay taxes to each state proportionate to what was earned there. 

Supporters of the bill say businesses in Massachusetts have benefited from more than 40 tax cuts in the last decade. Rep. Paul Demakis (D-Boston), lead sponsor of the bill, said the state lost nearly $300 million this year in revenue due to those tax cuts. 

"That underscores a disturbing trend," Demakis told the Taxation Committee Tuesday. 

Senior citizens and human services advocates joined Demakis at the hearing, pleading with the committee to make more business income taxable and help the state state raise revenue to restore funds to health care, human services and education programs cut during this budget cycle. 

But the business community, tax analysts and the committee's chairman said adopting combined reporting could hurt the already struggling economy. 

Rep. Paul Casey (D-Winchester), referring to comments made earlier this year by state Commissioner of Revenue Alan LeBovidge, said the state would lose money in the short run by adopting the tax policy. 

The businesses that would benefit from combined reporting would comply, Casey said, while the larger businesses would challenge the change. 

"I repeat, in the short run, we would lose money," Casey, the committee chairman, told the packed hearing room. "We hear so often that the panacea to all corporate tax woes is combined reporting." 

Joseph Donovan, associate general counsel for the Department of Revenue, reiterated the possibility that a revenue drop could result from companies that would pay the most fighting the method. By law, the state cannot collect taxes until the dispute is settled, Donovan said. 

But Rep. James Marzilli (D-Arlington) said the policy change would prevent "creative accounting" methods that multi-state businesses use to shift tax burdens to states with lower tax rates. Combined reporting, a method used by 16 other states, is the "one true and fair way" to ensure corporations are paying their fair share.

Demakis demonstrated that by using figures from 2000. He said 15 of the state's 50 largest companies paid an average of $456 in corporate income taxes that year, the lowest amount possible under state law. The average family, he said, paid $2,795 in taxes. 

Similarly, since 1968, businesses' contributions to the overall state tax base have declined from 16 percent to 4 percent, he said. "When businesses aren't paying what they should be paying, someone else is picking up the tab," Demakis said. 

Peter Enrich, general counsel for the Executive Office of Administration and Finance under Democratic Gov. Michael Dukakis, also testified in favor of the proposal, saying it was "long overdue." 

"Combined reporting is a vastly preferable form of configuring tax contribution," said Enrich, now a Northeastern University law professor.

The Massachusetts Budget and Policy Center supported the plan in a March report and came out again Tuesday to call it the "most effective" way to curb corporate tax avoidance. Using figures from other states that have adopted combined reporting, Jeff McLynch, a policy analyst with the center, predicted the change could generate $140 million per year. 

After the hearing, tax analysts and businesses decried the claims about corporate tax contributions.

"Businesses pay close to half the total tax load in Massachusetts," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "This is just one more piece that makes us uncompetitive."

Widmer said the 4 percent figure used by the bill's supporters ignores the many other taxes businesses are required to pay outside the corporate income tax. Unemployment insurance, sales taxes and property taxes should be equated into the businesses share as well, he said. 

Claiming that requiring businesses to report and pay taxes on out-of-state earnings would be "inequitable," Widmer said the bill had a "perverse incentive of penalizing in-state companies." 

The Associated Industries of Massachusetts (AIM), the state's largest business representative, agreed with Widmer. Eileen McAnneny, vice president for legislative services at AIM, said it was a "faulty premise" to believe the policy change would result in a revenue boost for the Commonwealth. 

This bill "is the latest attempt of a growing and very troubling trend to dub all tax incentives as 'corporate loopholes' that must be closed and all businesses as villains that evade taxes whenever and however possible," McAnneny said in her written testimony. 

McAnneny further concluded that creating "one more hurdle" for businesses to jump over could be a deterrent for them to locate or expand in the Bay State. 

"By the way, we're in a recession," Widmer said. "This couldn't be a worse time."

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The Boston Herald
Wednesday, October 29, 2003

Dem senators protest online scorecard
by Elisabeth J. Beardsley


Liberal activists who claim to want "public accountability" wiped a legislative scorecard off their Web site after Democratic senators threw a fit because their scores were worse than several Republicans.

Endorsed by more than 1,000 delegates to the Democratic Party's issues convention this spring, the scorecard aims to measure lawmakers' adherence to the letter of the party platform.

But senators were stunned when an early scorecard draft appeared online and then made the rounds on the Senate floor - trumpeting a 75 percent score for GOP Sen. Richard R. Tisei of Wakefield, which trumped Democrat Senate President Robert E. Travaglini's 67 percent.

Sen. Jarrett Barrios, whose district includes the Progressive Democrats of Somerville, admitted he was dispatched to read activists the riot act - prompting organizers to quickly yank the Web site, saying they jumped the gun by posting a "pilot" scorecard.

"The Senate does have a point that it makes them look bad inappropriately," said organizer Jesse Gordon.

Democratic Party officials, who opposed the scorecard idea, said they sent a threatening letter to the Somerville group - ordering them to stop using the party moniker.

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