and the
Citizens Economic Research Foundation

Wednesday, February 13, 2008

The DiMasi budget plan

CLT likes the freeze in the unemployment insurance rates, though we would prefer that it be a permanent reduction, with U.I. reforms attached.  Still, a good thing for the economy.

We support the phase-down of the corporate income tax rate, but we have seen this sort of thing before:  when the Legislature phased-out the capital gains tax in return for business support for a legislative pay raise, then increased the tax again later.  Not to mention the "temporary" freeze on the voters’ income tax rate, six years old and counting.  So we would warn the business community not to compute the rate freeze into its five year plans.  The loopholes will, however, be closed forever, which is as OK with CLT as the attack on our rollback has been OK with Big Business.

We oppose the cigarette tax increase.  We would also warn that the increase in the cigarette tax will not fund the new health insurance law for long.  If smokers use such a large hike as incentive to quit, return to shopping out-of-state, and/or die, the revenues will decrease and cigarette taxers will be looking to the income tax for revenue replacement.  (Proponents say that increased taxes don’t discourage smoking; if this is true, increase them $100 a pack and fund lots of things!)  Before any more taxes are raised for the health insurance law, we should see the cost reductions we’ve been promised.

BTW, did everyone note the new study from the Netherlands, showing that smokers are less of a drain than non-smokers on the health care system because they die sooner?  So if we are going to place an unfair tax burden on these unfortunate addicts, we should at least stop saying that we do it because of their "cost to society."  The state should also stop pretending it hopes that the higher taxes will encourage smokers to quit.  If all Massachusetts smokers were to quit overnight, the state would lose over $400 million dollars.  Why not be honest and use some of the new revenue for ads encouraging young people to start smoking for the good of state services?

We do look forward to more detail on the House Leadership’s proposed reforms.

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