CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

CLT UPDATE
Saturday, November 19, 2005

Joined by CLT members, Gov calls for fairness
on retroactive cap gains tax


Gov. Mitt Romney on Friday sent a controversy over retroactive taxation back to the Legislature, rejecting a proposal that failed to prevent 40,000 taxpayers from being suddenly taxed on investment income earned nearly three years ago.

Flanked by roughly a dozen taxpayers affected by the high court ruling that prompted the legislative action, the governor held a press conference here to detail his proposed amendment to a bill lawmakers sent him last week....

Romney's amendment, which aides described as a "compromise," would advance the tax rate change to Jan. 1, 2003, making up to 157,000 taxpayers eligible for a refund from the state. Under the amendment, the state would pay the $225 million to $275 million in refunds over a three-year period.

Taxpayers eligible would receive one-third of the refund owed each year for three years, under the governor's proposed amendment. It would cost the state between $75 and $80 million a year. Romney says state government has surplus revenues available to pay the refunds.

"The state made a mistake," Romney said, noting that a tax cut for capital gains is not a high priority of his. "And when the state makes a mistake, the citizens shouldn't have to pay for it." ...

Revere resident Loretta LaCentra, who would owe nearly $100,000 in back taxes under the current law, appealed to "Scrooge [House Speaker Salvatore] DiMasi and Ebenezer [Senate President Robert] Travaglini" to "get a reality check" and acknowledge the "bogus" legislation they helped pass.

"I am an average, hardworking taxpayer who will be severely affected by this insanity," LaCentra said, noting that the amount she owes is equal to four years of college tuition for one of her two children.

State House News Service
Friday, November 19, 2005
Romney proposes capital gains tax refund
to correct state's "mistake"


"Fairness trumps everything else," Romney said at a press conference yesterday to outline his tax plan. "The state made a mistake, and in all fairness, we have to make sure that people are not taxed retroactively."

The Boston Globe
Saturday, November 19, 2005
Romney poses yearly rebates on capital gains tax
Says state must repay residents for its mistake


Romney said taxpayers should not have to pay the retroactive tax at all, and that the lawmakers made a mistake they should now correct. He said it was not a partisan issue, giving credit for the idea to a Democratic state Sen. Cynthia Stone Creem of Newton....

Creem said that she does stand by the idea, but is uncomfortable with the governor naming her as an ally on the issue.

"I appreciate the governor being magnanimous, but I think that at this point the governor is looking for a way to lay it on someone else -- me. I feel strongly that the governor make a recommendation that he believes in," she said.

Associated Press
Friday, November 18, 2005
Romney proposes gradual tax rebate on retroactive taxes


The Massachusetts Legislature is attempting an unprecedented and unfair money grab from taxpayers. Gov. Mitt Romney and some legislators are trying to stop it. But they only have a chance to do so if taxpayers scream with outrage.

Imagine this scenario: You work and pay your state income taxes on time, having the appropriate amount withdrawn each week from your paycheck. Then the Legislature decides it wants to raise the tax rate. But legislators refuse to wait until the beginning of next year to raise the rate. They raise it retroactively back to the beginning of the year. You think you've paid your taxes correctly but you're wrong. You now owe the state a big check for back taxes....

Raising taxes retroactively is wrong. It's bad for the economy to send investors such a message of uncertainty.

If the Legislature gets away with this, there's no telling what it will try next.

An Eagle-Tribune editorial
Sunday, November 13, 2005
It's not fair to raise taxes retroactively


[House Speaker Salvatore] DiMasi has also been willing to permit debate on many topics . . . although supporters of slot machines and an income tax cut could make a strong case that DiMasi has thwarted debate on those subjects....

There's very little talk anymore of reforming and restructuring government, which dominated conversation on the Hill during Romney's first two years in office. Budget surpluses are forming, thanks to a surge in tax revenues and conservative tax revenue collection projections. The state's rainy day fund has a $1.7 billion balance and it is growing. Lawmakers are intensely focused on increasing budget accounts.

In fact, the Legislature is in the midst of a mini-spending frenzy.

State House News Service
Friday, November 19, 2005
Weekly Roundup -- Week of November 14, 2005


Legislative sessions may be scaled back during the next seven weeks but there'll be little discernible difference in life on Beacon Hill. Last Wednesday's "deadline" for concluding this year's work on major legislation came and went with little concern about its threat to the fate of any major or routine bills. Lawmakers did acknowledge the existence of the rule requiring them to suspend formal business on that day, mainly by suspending it to give them the option of returning before Jan. 4 if given a reason to act on any of the four major bills now in dispute and subject to negotiation....

For the most part, the next seven weeks will be business as usual.

State House News Service
Friday, November 19, 2005
Advances -- Week of November 21, 2005


Legislative leaders are talking about convening a special session to deal with healthcare next month. They need to resist the temptation to put other bills on the agenda and rush them all through in a manner reminiscent of the "feeding frenzies" that once regularly tarnished the institution....

The supplemental budget and the economic stimulus bills are just the kind of grab-bag, easy-to-exploit packages that should not be considered in a rush...

January is the quietest month of the legislative year, an ideal time to take up those bills without the risks of year-end sloppiness. The voters will be better served if the Legislature avoids putting unpleasant surprises under the holiday tree.

A Boston Globe editorial
Saturday, November 19, 2005
Legislative leftovers


Chip Ford's CLT Commentary

In Room 157 at the State House yesterday afternoon, Governor Romney held a well-attended news conference to announce that he was sending back to the Legislature its retroactive capital gains tax bill with his amendment to it.  Onstage with him, along with Barbara and others, were CLT members Irwin Jungreis, John Sullivan, and Loretta & Rick LaCentra -- all devastated by the Legislature's either stupidity or treachery.  Loretta LaCentra of Revere gave an impassioned presentation from the podium of how her family will be affected.

The bill the governor sent back was passed by the Legislature last week.  What "The Best Legislature Money Can Buy" considered "fairness," along with exempting 'payment owed' of $100 or less, was to forgive any 'interest owed' on 'late payments' of a 2002 tax that didn't exist.  Affected taxpayers didn't even know they 'owed' the tax until just last week when the Department of Revenue began sending out the retroactive bills!

The greedy Legislature's Democrat majority considered it fair enough just to waive three year's of accrued interest on top of a tax that didn't even exist at the time.

The Boston Globe reported that doing the just and honorable thing, repealing the retroactivity, concerns "Democratic legislative leaders that a one-time outlay of $275 million would severely crimp the state's budget."

That greedy legislative leaders and a majority of Democrats can even think of carrying through on their "mistake" -- this morally repulsive scam -- because it might "crimp" their feeding frenzy confirms our worst, most "cynical" opinion of them.

"Budget surpluses are forming, thanks to a surge in tax revenues and conservative tax revenue collection projections. The state's rainy day fund has a $1.7 billion balance and it is growing," the State House News Service reported yesterday -- but still that's not enough!

Again they demonstrate that "More Is Never Enough (MINE) -- and never will be." They've extracted it by hook or by crook and by god, "It's MINE now and we're not giving it back!"

Chip Ford


State House News Service
Friday, November 19, 2005

Romney proposes capital gains tax refund
to correct state's "mistake"
By Amy Lambiaso


Gov. Mitt Romney on Friday sent a controversy over retroactive taxation back to the Legislature, rejecting a proposal that failed to prevent 40,000 taxpayers from being suddenly taxed on investment income earned nearly three years ago.

Flanked by roughly a dozen taxpayers affected by the high court ruling that prompted the legislative action, the governor held a press conference here to detail his proposed amendment to a bill lawmakers sent him last week. The bill kept in place the Jan. 1, 2002 effective date of a capital gains tax rate change, while waiving interest, penalties and taxes owed that total less than $100. The court had initially ruled that a May 1, 2002 tax increase was not permissible because it taxed people differently in the same year.

Romney's amendment, which aides described as a "compromise," would advance the tax rate change to Jan. 1, 2003, making up to 157,000 taxpayers eligible for a refund from the state. Under the amendment, the state would pay the $225 million to $275 million in refunds over a three-year period.

Taxpayers eligible would receive one-third of the refund owed each year for three years, under the governor's proposed amendment. It would cost the state between $75 and $80 million a year. Romney says state government has surplus revenues available to pay the refunds.

"The state made a mistake," Romney said, noting that a tax cut for capital gains is not a high priority of his. "And when the state makes a mistake, the citizens shouldn't have to pay for it."

The governor's proposal is contained within a $115 million legislative package that closes roughly $85 million in corporate tax loopholes and dips into the state's rainy day fund to balance this year's budget.

With formal sessions for this year ending last Wednesday, lawmakers must either wait until January to consider the amendment or take it up during informal sessions, when the objection of one lawmaker can halt legislative action.

House Minority Leader Bradley Jones said he will object to the amendment being rejected during an informal session. House Democrats on Nov. 10 rejected a Republican motion to suspend rules to offer an amendment similar to the one Romney proposed today.

"There is no way I am going to allow this, unless they want to accept it, to go through in an informal session," Jones said after today's press conference announcing the amendment. "Unequivocally, no way."

During today's press event, Romney, Jones, and taxpayers affected by the issue sought to appeal to lawmakers by noting the approaching holiday season.

"If we don't accept this amendment, there is only one message my colleagues can convey to the thousands of people subject to their retroactive tax - happy holidays from the State House," Jones said.

Revere resident Loretta LaCentra, who would owe nearly $100,000 in back taxes under the current law, appealed to "Scrooge [House Speaker Salvatore] DiMasi and Ebenezer [Senate President Robert] Travaglini" to "get a reality check" and acknowledge the "bogus" legislation they helped pass.

"I am an average, hardworking taxpayer who will be severely affected by this insanity," LaCentra said, noting that the amount she owes is equal to four years of college tuition for one of her two children.

The state Department of Revenue (DOR) last week began mailing out notices to taxpayers owing back payments as a result of a Supreme Judicial Court ruling that a mid-year 2002 capital gains tax increase was unconstitutional.

The state made the tax rate change effective Jan. 1, 2002 in the fiscal 2005 budget, while providing an amnesty for taxpayers who would be required to pay additional taxes as a result of that change. The SJC again ruled that action unconstitutional, prompting this most recent action.

Democratic lawmakers opted to leave 2002 effective date in place, which would bring in $175 million in new tax revenue.

Romney said the DOR is required to follow the law, and has "no choice" but to issue bills to roughly 40,000 taxpayers. Unless, he said, the Legislature agrees to his proposed amendment.

The governor said Sen. Cynthia Creem (D-Newton), co-chairwoman of the Revenue Committee, recently floated the idea of making the date change and refunding taxpayers over several years to spread out the burden on the state budget. An aide to Sen. Creem said she thinks it's a "reasonable idea."

A leading tax policy observer agrees that Romney's proposal "makes sense."

"Clearly, this makes the best of a difficult situation," said Michael Widmer, president of the Massachusetts Taxpayers Foundation. "We aren't as flush as some of the headlines suggest, but we certainly have the money."

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The Boston Globe
Saturday, November 19, 2005

Romney poses yearly rebates on capital gains tax
Says state must repay residents for its mistake
By Raphael Lewis, Globe Staff


Governor Mitt Romney yesterday proposed that Massachusetts residents forced to pay retroactive capital gains taxes from 2002 get the money back in rebates over three years.

The Romney measure, first floated by a group of citizens who have repeatedly sued to kill the tax increase, would spread the refunds over three years to allay concerns by Democratic legislative leaders that a one-time outlay of $275 million would severely crimp the state's budget.

"Fairness trumps everything else," Romney said at a press conference yesterday to outline his tax plan. "The state made a mistake, and in all fairness, we have to make sure that people are not taxed retroactively."

The situation stems from the Legislature's unusual decision to raise the capital gains tax rate midway through 2002. Last year, the Supreme Judicial Court ruled that midyear tax rate changes were unconstitutional, leaving the Legislature with a choice: Move the effective date of the increase from May 1, 2002, to Jan. 1, 2002, or shift the date forward to Jan. 1, 2003. The first option would mean reaping more than $150 million in retroactive taxes. The other would mean refunding up to $275 million, which equals roughly 1.5 percent of annual state spending.

Lawmakers chose the Jan. 1, 2002, date over the objections of Romney and irate taxpayers. Earlier this month the Department of Revenue began sending out bills to 48,000 taxpayers. The average among the 48,000 taxpayers is about $4,200. But about $78 million is owed by just 278 wealthy people, who would pay an average of $281,000 each.

Last week, the Legislature passed a bill to forgive interest on the payments, as well as any payments owed by those whose bill would total $100 or less.

Romney amended the Legislature's bill yesterday to push the date forward to Jan. 1, 2003, but to pay the money out over a three-year period. Doing so would cost the state approximately $90 million a year, instead of $275 million all at once. Taxpayers would have to apply for the refunds by June 30, 2006, Romney said, and would not be eligible to collect interest.

The governor, whose wealth has been estimated at half a billion dollars, said he might be one of the beneficiaries of his proposal. He said he would give the proceeds to charity.

"This is not something I plan on getting enriched by, " he told reporters. "But this is not a personal matter. This is instead a matter of doing what's right to do when the state makes a mistake."

Portraying his plan as bipartisan, Romney said Cynthia S. Creem, a Newton Democrat who chairs the Senate's Committee on Revenue, proposed a multiyear, phased-in tax rebate plan at a hearing earlier this week.

Creem, one of 12 lawmakers who opposed the tax increase in the 40-member Senate, said in a telephone interview yesterday that she had no idea whether the proposal would change enough minds. "This was certainly one idea amongst a whole bunch of ideas, and I don't know if it's one that everyone is going to embrace," she said.

House Republican Leader Bradley H. Jones Jr. said many lawmakers will change their minds once some of the 48,000 people receiving tax bills begin to complain.

"The idea of spreading out the rebates over three years is all well and good, but I think what will win [lawmakers] over is that you have real people and real stories," Jones said.

Material from the Associated Press was used in this report.

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Associated Press
Friday, November 18, 2005

Romney proposes gradual tax rebate on retroactive taxes
By Theo Emery


"Fairness demands it," Romney said at a press conference, ringed by people who say that they'll get socked with huge tax bills.

The proposal addresses a change in state tax law implemented by the Legislature in response to a Supreme Judicial Court ruling earlier this year....

The court ordered the Legislature to fix the problem. Republicans lobbied for the tax to go into effect on Jan. 1, 2003, which would have given rebates to taxpayers who paid the tax on financial transactions, such as sales of stocks or real estate, in the previous eight months.

Instead, the Democrat-dominated Legislature made the tax go into effect on Jan. 1, 2002. Some 48,000 taxpayers would have to retroactively pay those taxes on transactions made during those four months, totaling some $200 million....

The Legislature has tried to soften the blow of the retroactive tax. An $85 million tax loophole bill sent to Romney this week includes a provision that would waive capital gains tax bills for less than $100, as well as penalties and interest. Romney amended the legislation with his proposal, and returned it to the Legislature.

Romney said taxpayers should not have to pay the retroactive tax at all, and that the lawmakers made a mistake they should now correct. He said it was not a partisan issue, giving credit for the idea to a Democratic state Sen. Cynthia Stone Creem of Newton....

Creem said that she does stand by the idea, but is uncomfortable with the governor naming her as an ally on the issue.

"I appreciate the governor being magnanimous, but I think that at this point the governor is looking for a way to lay it on someone else -- me. I feel strongly that the governor make a recommendation that he believes in," she said.

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The Eagle-Tribune
Sunday, November 13, 2005

An Eagle-Tribune editorial
It's not fair to raise taxes retroactively


The Massachusetts Legislature is attempting an unprecedented and unfair money grab from taxpayers. Gov. Mitt Romney and some legislators are trying to stop it. But they only have a chance to do so if taxpayers scream with outrage.

Imagine this scenario: You work and pay your state income taxes on time, having the appropriate amount withdrawn each week from your paycheck. Then the Legislature decides it wants to raise the tax rate. But legislators refuse to wait until the beginning of next year to raise the rate. They raise it retroactively back to the beginning of the year. You think you've paid your taxes correctly but you're wrong. You now owe the state a big check for back taxes.

That's the essence of what the Legislature did only not with income taxes but with capital gains taxes. Capital gains taxes are paid on the profits made from the sale of assets such as real estate or stocks.

The heavily Democratic Legislature voted Wednesday to set the capital gains tax rate for all of 2002 at 5.3 percent. That means 33,500 Bay State residents now owe $150 million more in taxes for 2002 even though they've already paid every penny of tax they owed under the law that existed at that time.

It's outrageous and completely unfair. But the Legislature is playing the old class warfare game. Most capital gains taxes are paid by wealthy people. Supporters are banking that the average resident doesn't care if rich people have to pay an extra $150 million.

We should care. There's an important principle involved here: Equal justice under the law. It doesn't matter if an unjust law only affects people we don't like. What's fair for the rich is fair for the poor alike.

Nor is it true that only rich people pay capital gains taxes. House Minority Leader Brad Jones, R-North Reading, opposed the retroactive tax. His office told reporter Edward Mason that statewide, 354 people with incomes of $5,000 or less will owe an average of $2,250.

This retroactive tax hits residents of communities across the Merrimack Valley, rich and poor alike. Mason found that, according to the Department of Revenue, taxpayers living in Andover owe $1.5 million. Those living in North Andover owe $828,000; Haverhill, $327,000; Methuen, $240,000; and Lawrence, $146,000.

Remember, these are not tax cheats. These people all paid the full amount of taxes owed on their transactions at the time they were made. Now, three years later, the Legislature wants more.

The Legislature bungled its way into this mess. It first raised the capital gains tax to 5.3 percent on May 1, 2002. Prior to that date, capital gains were taxed on a sliding scale. There was no tax on assets held for six years or more and a 12 percent rate on those held less than a year.

In 2002, those who had gains prior to May 1 paid on the old sliding scale. These are the taxpayers who owe money now. Those who had gains after May 1 paid the 5.3 percent rate.

But in 2004, the Supreme Judicial Court ruled the whole plan was unconstitutional. The court ruled the Legislature could not change tax rates in the middle of the year. The court ordered the Legislature to pick either Jan. 1, 2002 or Jan. 1, 2003 as the date the change took effect.

Had the Legislature opted for 2003, the state would owe taxpayers a refund of $275 million.

Romney is expected to send the bill back to the Legislature with an amendment setting the tax-increase date at Jan. 1, 2003. But unless legislators hear outrage from their constituents over this money grab, they'll likely leave the bill unchanged.

Raising taxes retroactively is wrong. It's bad for the economy to send investors such a message of uncertainty.

If the Legislature gets away with this, there's no telling what it will try next.

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State House News Service
Friday, November 19, 2005

Weekly Roundup -- Week of November 14, 2005
[Excerpts]


[House Speaker Salvatore] DiMasi has also been willing to permit debate on many topics that had been off limits under Finneran, although supporters of slot machines and an income tax cut could make a strong case that DiMasi has thwarted debate on those subjects. A last reason is one of atmospherics - the once total obsession with spending levels has passed and the Legislature has been able to more carefully consider matters other than "budget crisis reaction."

There's very little talk anymore of reforming and restructuring government, which dominated conversation on the Hill during Romney's first two years in office. Budget surpluses are forming, thanks to a surge in tax revenues and conservative tax revenue collection projections. The state's rainy day fund has a $1.7 billion balance and it is growing. Lawmakers are intensely focused on increasing budget accounts.

In fact, the Legislature is in the midst of a mini-spending frenzy. The major bills moving at the fall break would pour tens of millions of dollars into efforts to create jobs, appropriate surplus fiscal 2005 revenues and help the needy pay their heating bills this winter. Concerns about overspending are not often heard these days.

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State House News Service
Friday, November 19, 2005

Advances -- Week of November 21, 2005
[Excerpts]


Legislative sessions may be scaled back during the next seven weeks but there'll be little discernible difference in life on Beacon Hill. Last Wednesday's "deadline" for concluding this year's work on major legislation came and went with little concern about its threat to the fate of any major or routine bills. Lawmakers did acknowledge the existence of the rule requiring them to suspend formal business on that day, mainly by suspending it to give them the option of returning before Jan. 4 if given a reason to act on any of the four major bills now in dispute and subject to negotiation.

In the meantime, they'll spend the next seven weeks meeting in informal sessions, continuing to process routine bills and more significant ones as they did last Thursday when they sent Gov. Mitt Romney a handful of important bills he's now reviewing.

During similar sessions from now until the first Wednesday in January, when formal sessions may resume, local bills and those with wide-ranging effects will continue to move between the branches and onto Romney's desk as long as no one member objects to their progress. If there is an objection voiced, further action will simply be postponed until the new year....

For the most part, the next seven weeks will be business as usual. Legislative committees will continue to meet sporadically to hear recently submitted bills along with others that were filed months ago but never heard. Negotiations over four high priority bills that had been targeted for passage before year's end will go on behind closed doors. Legislative leaders say members of four conference committees will struggle during the coming holidays to resolve differences between the branches on health care, welfare, and job creation initiatives and on a supplemental budget....

Under legislative rules, conference committee meetings are open unless committee members vote to close the meetings. But over the years, committee members and staff have rarely even responded to requests for information about the time, date and locations of such meetings. Legislative clerks also don't draft reports called for under legislative rules listing the differences between bills in conference committee. Conference committee members often cite the confidentiality of negotiations in declining to discuss differences between the bills. Conference committee reports, once struck, are subject to up-or-down votes.

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The Boston Globe
Saturday, November 19, 2005

A Boston Globe editorial
Legislative leftovers


Despite a A session lasting more than 10 months, the Massachusetts Legislature left too much of the people's business unfinished when it concluded its formal meetings Wednesday. Legislative leaders are talking about convening a special session to deal with healthcare next month. They need to resist the temptation to put other bills on the agenda and rush them all through in a manner reminiscent of the "feeding frenzies" that once regularly tarnished the institution.

These holiday-season sessions were supposed to have ended in 1995. The Legislature changed its rules to end work on the third Wednesday of November in years without a state election, and at the end of July in election years. The legislators could still meet in informal session after that, but a single member's objection could prevent a bill from getting through, in order to limit the year-end marathons.

This schedule has worked well for a decade. This year, however, the Legislature devoted the early months to reorganizing its committee structure and took a vacation after the budget was passed in July, leaving a rush of work for the late fall.

The Legislature did approve a sensible budget, toughened drunk driving laws, legalized embryonic stem cell research, improved the Smart Growth housing program, approved a $200 million housing bond plan, improved access to emergency contraception, and increased aid to veterans. But it failed to agree on a supplemental budget ($241 million to $317 million), an economic stimulus package ($350 million to $473 million), and bills to reorganize the welfare system, offer in-state tuition to immigrant students, and force churches to open their financial records.

Speaker Salvatore DiMasi said the House would take up the church-records bill in January, but the other three bills will be considered in the special session, assuming that DiMasi and Senate President Robert Travaglini reach agreement on healthcare.

The supplemental budget and the economic stimulus bills are just the kind of grab-bag, easy-to-exploit packages that should not be considered in a rush, especially when the complex healthcare package will demand the full attention of the leadership. In a preview of possible mischief to come this week, the Senate quietly included a $9,000 pay raise for court clerks and $36,000 raises for the sheriffs of Nantucket, Dukes, and Franklin counties in the supplemental budget it passed this week.

January is the quietest month of the legislative year, an ideal time to take up those bills without the risks of year-end sloppiness. The voters will be better served if the Legislature avoids putting unpleasant surprises under the holiday tree.

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