and the
Citizens Economic Research Foundation

The following memo was both e-mailed and hand-delivered to all legislators.
It was also sent to the media statewide.

Tuesday, May 18, 2004

State budget and the Income Tax Rollback, Amendment #777

To:   Members of the Massachusetts Senate
Cc:    Members of the Massachusetts House
          May 18, 2004

The FY’04 budget has a surplus. Why shouldn’t the income tax rollback – that was frozen by the Legislature at 5.3 percent – be thawing now?

When opponents argue that the rate should return to its previous 5.95 percent, one could get the impression that this is some kind of traditional level of taxation. In fact, the income tax rate was 5 percent until 1989, when it was raised "temporarily" to deal with a state fiscal crisis.

After a decade of asking the Legislature to keep its promise that the rate hike would be "temporary" – a decade during which surpluses were squandered and state spending almost doubled -- we placed a "Keep the Promise" initiative petition on the 2000 ballot and 59 percent of the voters mandated a responsible phased-in three-year rollback.

Tax collections for this year are half a billion above projections. The rollback is estimated at $225 million for the budget you are about to debate, which proposes a billion dollar spending increase over the present budget. Opponents want to keep all the "extraordinary growth in revenues" to restore or create new programs, institute a constitutional rainy day fund – whatever works for their own political goals: exactly what created the last fiscal crisis. Yet they accuse the governor of political opportunism in advocating a tax cut.

First and foremost, this is not a tax "cut" – for we were assured in 2002 that the "freeze" was not a tax hike. Second, the governor is merely asserting the will of a solid majority of Massachusetts voters, who wanted to make state government, for once in its life, keep a promise that a tax increase would be "temporary." The rate should be rolled back immediately, but we are asking only that it return to 5 percent by 2005. We hope that you will vote for amendment #777 so that your FY’05 budget will reflect "a promise finally kept."

Speaking of promises: on the anniversary of the Brown ruling, shouldn’t the Legislature be supporting the charter schools that have been giving many children their only chance at a decent education? Shame on the House for letting intimidation by the teachers union override its concern for the children. And what is this tax on health insurers, which will of course be passed on to consumers? Is this how the Senate supports the need for affordable health insurance? 

We congratulate the Senate W&M Committee on its proposed transportation mergers and pension reform.

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