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CLT UPDATE
Friday. December 18, 2015
The New Year starts with a tax
cut
|
The Massachusetts state income tax rate will fall
slightly in January, the third-to-last step in the tax rate's
odyssey from 5.95 percent in 1999 to its potential nadir two years
from now at the voter-approved level of 5 percent.
Gov. Charlie Baker's budget office confirmed
Tuesday that the last of the economic benchmarks needed to trigger
the reduction had been met resulting in the automatic lowering of
the tax rate on income to 5.1 percent, from 5.15 percent....
Voters in 2000 passed a ballot law directing the
state to lower the income tax rate to 5 percent over three years,
but in 2002 the Legislature stepped in to block the final decrease
as it dealt with falling revenues and an economic downturn that was
putting a strain on state budgets and services.
In its place, the House and Senate agreed on a
long-term plan to slowly ratchet the income tax rate down to 5
percent by half of a percentage point a year, provided that certain
economic triggers were hit....
While Republicans and Citizens for Limited
Taxation have used the 15-year saga of trying to achieve a 5
percent income tax rate as campaign fodder for many cycles, the goal
could be achieved within Baker's first term if economic growth
continues to drive reductions in 2017 and 2018 when Baker will be
presumably be seeking re-election.
That could also be the year voters decide on
another major tax policy.
Raise Up Massachusetts, the coalition behind last
year's mandatory sick leave law, has proposed a change to the state
constitution that would tax earnings above $1 million at a rate 4
percentage points higher than the state income tax.
State House News Service
Tuesday, December 15, 2015
Mass. workers will receive Jan. 1 income tax cut
The state income tax rate will drop next year for
all Massachusetts residents.
As of Jan. 1, 2016, the income tax rate will be
5.10 percent, a drop from the current 5.15 percent.
"Meeting the requirements needed to reduce the
income tax rate is a sign that the Massachusetts economy remains
strong," Gov. Charlie Baker said in a statement. "Allowing citizens
across the Commonwealth to keep more money in their pockets will
allow the state's economy to continue growing in 2016."
Under the new tax rate, someone paying state
income taxes on $66,000 would pay around $33 less.
A ballot initiative passed by voters in 2000
required the state to reduce the income tax rate to 5 percent, from
what was then 5.85 percent. Lawmakers passed a bill in 2002 setting
the reduction at 0.05 percent a year in each year that certain
economic triggers are met.
The Springfield Republican
Wednesday, December 16, 2015
Massachusetts income tax rate to drop to 5.10 percent in 2016
Driven by a growing economy, Massachusetts tax
revenues are expected to grow by between 3.8 percent and 4.2 percent
in the next fiscal year, according to the state's top revenue
official.
"We're seeing pretty good growth in both jobs and
the beginning of some increasing wages in Massachusetts," said
Massachusetts Revenue Commissioner Mark Nunnelly.
But there are potential dangers. The retiring of
baby boomers is expected to shrink Massachusetts' work force in the
coming years, and there remains uncertainty in the global economy,
in Europe, China and the Middle East.
The state is also expected to lose money due to a
cut in income tax rates – which is part of the reason expected
growth is below the 4.6 percent average of the last five years.
Nunnelly, Treasurer Deborah Goldberg, and several
Massachusetts economists delivered their predictions for state
revenues at a hearing of the Legislature's Joint Committee on Ways
and Means on Wednesday....
House Ways and Means Committee Chairman Brian
Dempsey, D-Haverhill, said lawmakers need to continue adding money
to the state's rainy day fund and paying off pension obligations in
order to satisfy bond rating agencies.
Secretary of Administration and Finance Kristen
Lepore warned of another "difficult budget year," pointing to a
"significant structural gap." Policymakers used one-time money to
balance the current fiscal year's budget, so they will have to find
new sources of funding next year....
Nunnelly said in the last year and a half, the
state's economy has continued to grow, with increased investments,
improvements in the labor market, and increases in consumer
confidence. The Department of Revenue predicts that current fiscal
year revenues will come in $69 million to $231 million above what
was projected when the budget was passed, at between $25.68 billion
and $25.84 billion.
But the state may still have to trim its budget
mid-year, if spending is also higher than anticipated....
Looking toward fiscal year 2017, Nunnelly
predicted that the state will collect between $26.65 billion and
$26.89 billion, which represents growth of 3.8 percent to 4.2
percent over the current year.
The estimate anticipates cuts in the income tax
rate over the next two years. Due to a ballot initiative passed in
2000, the income tax rate is scheduled to drop from 5.15 percent
this year to 5.1 percent in 2016 and, potentially, to 5.05 percent
in 2017.
The biggest chunk of the state's tax revenue is
the income tax, followed by sales and corporate taxes. According to
Nunnelly's estimates, a strong labor market is expected to
contribute to increases in all of those revenues.
The Springfield Republican
Thursday, December 17, 2015
Massachusetts tax revenues expected to grow by around 4 percent in
2017, economists say
House Ways and Means Chairman Brian Dempsey
on Wednesday said he plans to build a state budget for fiscal
2017 using growth in existing state revenues and downplayed
consideration of new or higher taxes next year.
Speaking after a hearing where experts
testified about their expectations for growth of current tax
revenues, the Haverhill Democrat said taxes are "not on the
table at all" for the debate over spending priorities in 2016, a
year when lawmakers will be up for re-election in November.
"We anticipate building a budget based on the
revenue growth projections, and we will determine what that
number is over the course of the next few days or weeks,"
Dempsey told reporters. Asked for what went into his thinking on
the matter, Dempsey noted increases to gas and sales taxes over
recent years....
Spilka noted the income tax will "probably"
make another statutorily mandated drop next year to 5.1 percent
- administration officials on Tuesday confirmed the rate drop
will occur - saving the average taxpayer $30 and continuing a
15-year trend where she said the state has experienced a nearly
$2 billion annual drop in revenue as the tax rate ratcheted down
from 5.95 percent.
"It's easy to see how we must prepare for an
ever-shrinking pot of funds," the Ashland Democrat said.
Standard and Poor's, a bond and credit rating
agency, downgraded the state's credit outlook from stable to
negative last month, while the state maintained its bond rating
at AA+, following several years of spending money from the rainy
day fund.
The state's stabilization fund has a balance
of $1.2 billion, which Dempsey said is about half as large as it
should be. Lawmakers have faced criticism of late from drawing
too heavily from the fund during recent years marked by economic
growth and rising tax collections.
State House News Service
Wednesday, December 16, 2015
Dempsey: New taxes "not on the table" for next year's budget
The revenue prognosticators announced their
forecasts yesterday, an exercise that comes across as wonkfest
but has real-world implications. Beacon Hill leaders will have
to arrive at a consensus forecast early next year in building
the 2017 budget, and a conservative revenue estimate will only
intensify an ongoing budget squeeze.
The problem is this: Having roughly $1
billion in new tax revenue come in, about 4 percent growth,
likely won't be enough to cover spending needs. Revenue growth
over the past five years has averaged 4.6 percent, but there is
never quite enough money coming in.
MASSterList
Thursday, December 17, 2015
[Excerpt]
A little budgetary caution sets in
— and why cuts (likely) are
coming
By George Donnelly and Sara Brown
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Chip Ford's CLT
Commentary
In 2002 — over a
dozen years ago — the Legislature
unilaterally "froze" the voters' mandate that it be rolled back to 5
percent, giving taxpayers another Beacon Hill middle-finger salute.
Instead of returning the income tax rate to its historic 5 percent
in 2003, as 60% of the voters had ordered on the 2000 ballot,
starting on January 1 their "freeze" will thaw another degree or two
— precisely five one-hundredths of one percent.
CLT has fought for that rollback for decades since, collected the
signatures and put it on that 2000 ballot where the voters
resoundingly demanded it be rolled back to 5 percent.
Five one-hundredths of one percent. That equates to 5/100ths of a
penny on every dollar we pay in state income tax. Pardon me for not
popping the champagne cork yet, but it's a better direction than the
alternative. This amounts to a savings of about $33 for
someone paying taxes on an income of $66,000. But again, any
savings is better than more confiscation.
Remember, when the income tax was hiked in 1989
by Gov. Michael Dukakis and the Democrat majority in the Legislature
they promised it would be only "temporary" —
in fact, they promised it would be for "only 18 months." [See
The Promise here, from our 2000 ballot campaign]
Still, almost three decades of the broken
promises and arrogance later, so used to having those extra billions
of ill-gotten gains, some Democrats in the Legislature still have a
sense of entitlement to our money. Senate Ways and Means Chairwoman
Karen Spilka (D-Ashland) griped that the state has experienced a
nearly $2 billion annual drop in revenue as the tax rate ratcheted
down from 5.95 percent. "It's easy to see how we must prepare
for an ever-shrinking pot of funds," she said.
Madame Chairwoman, that "temporary" tax hike
never should have existed for you and your cohorts to spend for the
past twenty-five years. That "nearly $2 billion annual drop in
revenue" cumulatively amounts to many, many more billions
that came out of our and your constituents' pockets since the
"temporary" promise made by the Legislature was broken.
Regardless, and despite the miniscule income tax
reduction, according to Department of Revenue Commissioner Mark
Nunnelly, "Massachusetts tax revenues are expected to grow by
between 3.8 percent and 4.2 percent in the next fiscal year over the
current year . . . the state will collect between $26.65 billion and
$26.89 billion." Further, the DOR "predicts that current
fiscal year revenues will come in $69 million to $231 million above
what was projected when the budget was passed, at between $25.68
billion and $25.84 billion."
George Donnelly and Sara Brown observed:
"The problem is this: Having roughly $1 billion in new tax revenue
come in, about 4 percent growth, likely won't be enough to cover
spending needs. Revenue growth over the past five years has averaged
4.6 percent, but there is never quite enough money coming in."
As we've so often asserted, More Is Never Enough
(MINE). The state does not have a revenue problem
— it has a spending problem.
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Chip Ford |
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State House News Service
Tuesday, December 15, 2015
Mass. workers will receive Jan. 1 income tax cut
By Matt Murphy
The Massachusetts state income tax rate will fall slightly in
January, the third-to-last step in the tax rate's odyssey from 5.95
percent in 1999 to its potential nadir two years from now at the
voter-approved level of 5 percent.
Gov. Charlie Baker's budget office confirmed Tuesday that the last
of the economic benchmarks needed to trigger the reduction had been
met resulting in the automatic lowering of the tax rate on income to
5.1 percent, from 5.15 percent.
While Baker and the Legislature budgeted for the expected lowering
of the income rate in January by removing $74 million in projected
revenues from its tax forecast for the fiscal 2016 budget, the
income tax decrease is expected to result in $152 million less in
tax collections in fiscal 2017, which starts next July.
Under a separate law, the Massachusetts minimum wage rate will rise
to $10 an hour on Jan. 1, and the Bay State will be tied with
California for the nation's highest minimum wage, according to the
group Business for a Fair Minimum Wage.
The administration and lawmakers could also choose to budget for
another income tax decrease in January 2017, which would lower
available revenues for budgeting next year even further.
Voters in 2000 passed a ballot law directing the state to lower the
income tax rate to 5 percent over three years, but in 2002 the
Legislature stepped in to block the final decrease as it dealt with
falling revenues and an economic downturn that was putting a strain
on state budgets and services.
In its place, the House and Senate agreed on a long-term plan to
slowly ratchet the income tax rate down to 5 percent by half of a
percentage point a year, provided that certain economic triggers
were hit.
The first of five triggers was met in September when Department of
Revenue Commissioner Mark Nunnelly reported that fiscal 2015
inflation-adjusted baseline tax revenues grew 5.37 percent over
fiscal 2014, higher than the 2.5 percent growth rate required under
the tax cut trigger law.
Earlier this year, Senate leaders passed a proposal over objections
from Republicans and some Democrats to pay for an expansion of the
earned income tax credit for low-income families by freezing the
income tax rate at 5.15 percent.
The House rejected that proposal, and eventually legislative leaders
and Gov. Baker reached a deal to pay for the EITC expansion without
touching the income tax cut trigger law, allowing this latest
decrease to occur.
Both Baker and Senate President Stanley Rosenberg are interested in
further expanding the earned income tax credit, potentially in 2016.
While Republicans and Citizens for Limited Taxation have used
the 15-year saga of trying to achieve a 5 percent income tax rate as
campaign fodder for many cycles, the goal could be achieved within
Baker's first term if economic growth continues to drive reductions
in 2017 and 2018 when Baker will be presumably be seeking
re-election.
That could also be the year voters decide on another major tax
policy.
Raise Up Massachusetts, the coalition behind last year's mandatory
sick leave law, has proposed a change to the state constitution that
would tax earnings above $1 million at a rate 4 percentage points
higher than the state income tax.
The change is being pitched as a way to address income inequality
and generate new revenues for education and transportation
infrastructure. The Department of Revenue estimates that the
millionaires tax would generate roughly $1.9 billion in new income
tax revenues to the state.
The Springfield Republican
Wednesday, December 16, 2015
Massachusetts income tax rate to drop to 5.10 percent in 2016
By Shira Schoenberg
The state income tax rate will drop next year for all Massachusetts
residents.
As of Jan. 1, 2016, the income tax rate will be 5.10 percent, a drop
from the current 5.15 percent.
"Meeting the requirements needed to reduce the income tax rate is a
sign that the Massachusetts economy remains strong," Gov. Charlie
Baker said in a statement. "Allowing citizens across the
Commonwealth to keep more money in their pockets will allow the
state's economy to continue growing in 2016."
Under the new tax rate, someone paying state income taxes on $66,000
would pay around $33 less.
A ballot initiative passed by voters in 2000 required the state to
reduce the income tax rate to 5 percent, from what was then 5.85
percent. Lawmakers passed a bill in 2002 setting the reduction at
0.05 percent a year in each year that certain economic triggers are
met.
The triggers ensure that the state's economy is strong enough to
withstand the loss of tax revenue. The Department of Revenue
certified on Tuesday that the state had met the final economic
trigger this year.
In crafting the state budget for the current fiscal year, lawmakers
had assumed that the tax rate would decrease, so the budget takes
the lower rate into account. The cut will result in the state taking
in $74 million less in income taxes in the second half of fiscal
year 2016, which ends June 30.
"This is good news for the taxpayers with no new impact on the
state's fiscal outlook," said Secretary of Administration and
Finance Kristen Lepore.
The Springfield Republican
Thursday, December 17, 2015
Massachusetts tax revenues expected to grow by around 4 percent in
2017, economists say
By Shira Schoenberg
Driven by a growing economy, Massachusetts tax revenues are expected
to grow by between 3.8 percent and 4.2 percent in the next fiscal
year, according to the state's top revenue official.
"We're seeing pretty good growth in both jobs and the beginning of
some increasing wages in Massachusetts," said Massachusetts Revenue
Commissioner Mark Nunnelly.
But there are potential dangers. The retiring of baby boomers is
expected to shrink Massachusetts' work force in the coming years,
and there remains uncertainty in the global economy, in Europe,
China and the Middle East.
The state is also expected to lose money due to a cut in income tax
rates – which is part of the reason expected growth is below the 4.6
percent average of the last five years.
Nunnelly, Treasurer Deborah Goldberg, and several Massachusetts
economists delivered their predictions for state revenues at a
hearing of the Legislature's Joint Committee on Ways and Means on
Wednesday.
The hearing is the first step in developing a state budget for
fiscal year 2017, which begins July 1, 2016. The Ways and Means
Committee will now develop its own estimate of how much money the
state will raise from taxes and will base state spending on that
figure.
State budget writers say they will be looking to balance the need to
provide state services with fiscal responsibility.
"We've seen a steady economic recovery reflected in the revenue
trends for fiscal year '16, but we must also be prepared for the
next fiscal shock," said Senate Ways and Means Committee Chairman
Karen Spilka, D-Ashland. "It's not a matter of if this will happen
but when."
House Ways and Means Committee Chairman Brian Dempsey, D-Haverhill,
said lawmakers need to continue adding money to the state's rainy
day fund and paying off pension obligations in order to satisfy bond
rating agencies.
Secretary of Administration and Finance Kristen Lepore warned of
another "difficult budget year," pointing to a "significant
structural gap." Policymakers used one-time money to balance the
current fiscal year's budget, so they will have to find new sources
of funding next year.
The hearing is also an opportunity for the committee to receive an
update on how the state is doing in the current fiscal year. Despite
growing revenues, Gov. Charlie Baker is still considering mid-year
budget cuts.
Nunnelly said in the last year and a half, the state's economy has
continued to grow, with increased investments, improvements in the
labor market, and increases in consumer confidence. The Department
of Revenue predicts that current fiscal year revenues will come in
$69 million to $231 million above what was projected when the budget
was passed, at between $25.68 billion and $25.84 billion.
But the state may still have to trim its budget mid-year, if
spending is also higher than anticipated.
Gov. Charlie Baker told The Republican/MassLive.com that he is still
working through the question of whether to institute mid-year
executive branch budget cuts, and he anticipates deciding in
January.
"We view this as not a first resort but a last resort," Baker said
of potential cuts, which are referred to as 9C cuts.
"We're continuing to work our way through fiscal '16 spending plans
that people have submitted and are processing that against the
revenue piece," Baker said. "As we've said before, there's a delta
there, it's a negative delta, and the real question is can we come
up with other ways to solve for the delta without having to go to
9Cs."
Looking toward fiscal year 2017, Nunnelly predicted that the state
will collect between $26.65 billion and $26.89 billion, which
represents growth of 3.8 percent to 4.2 percent over the current
year.
The estimate anticipates cuts in the income tax rate over the next
two years. Due to a ballot initiative passed in 2000, the income tax
rate is scheduled to drop from 5.15 percent this year to 5.1 percent
in 2016 and, potentially, to 5.05 percent in 2017.
The biggest chunk of the state's tax revenue is the income tax,
followed by sales and corporate taxes. According to Nunnelly's
estimates, a strong labor market is expected to contribute to
increases in all of those revenues.
"The Massachusetts economy is doing pretty well," Nunnelly said.
Estimates by other economists varied, but also generally reflected
moderate growth.
The Massachusetts Tax Foundation estimates 3.8 percent revenue
growth in fiscal year 2017. It attributes the slower than average
growth to tax cuts - the income tax cut and an expansion of the
earned income tax credit – and to a projected drop in capital gains
tax revenue.
The Tax Foundation noted that baby boomer retirements in
Massachusetts are expected to result in a decline in job growth in
coming years. Deflation in Europe, debt in China, falling oil prices
and continued turmoil in Russia and the Middle East all threaten
economic growth.
Eileen McAnneny, president of the Massachusetts Taxpayers
Foundation, urged lawmakers to balance the budget without using
one-time revenues and to put more money into the state's rainy day
fund, a reserve available in case of fiscal crisis. "These actions
are vital to prepare us for the heightened challenges to economic
growth that we face due to demographic shifts in Massachusetts and
the numerous economic and geopolitical global risks that escalate
each day," McAnneny said.
Michael Goodman, executive director of the Public Policy Center at
UMass Dartmouth, said while he is "optimistic" about the state and
country's economic prospects, there are risks. In the short term, he
noted a weak global economy. In the long-term, he said
Massachusetts' economic growth is being put at risk by high
electricity rates, poor educational performance by students in urban
schools, a lack of housing, inadequate transportation infrastructure
and climate change.
Economists at the Beacon Hill Institute at Suffolk University
estimated 5.6 percent growth in fiscal year 2017, largely driven by
growth in personal income tax payments.
State House News Service
Wednesday, December 16, 2015
Dempsey: New taxes "not on the table" for next year's budget
By Andy Metzger
House Ways and Means Chairman Brian Dempsey on Wednesday said he
plans to build a state budget for fiscal 2017 using growth in
existing state revenues and downplayed consideration of new or
higher taxes next year.
Speaking after a hearing where experts testified about their
expectations for growth of current tax revenues, the Haverhill
Democrat said taxes are "not on the table at all" for the debate
over spending priorities in 2016, a year when lawmakers will be up
for re-election in November.
"We anticipate building a budget based on the revenue growth
projections, and we will determine what that number is over the
course of the next few days or weeks," Dempsey told reporters. Asked
for what went into his thinking on the matter, Dempsey noted
increases to gas and sales taxes over recent years.
Changes in tax law have to originate in the House. The more liberal
of the two legislative branches, the Senate was stymied last year in
attempts to increase taxes on certain tobacco products and re-work
state income taxes.
"Right now there has been no discussion about taxes other than the
ballot initiative," Senate Ways and Means Chairwoman Karen Spilka
told reporters after the hearing. Petitioners have proposed a
constitutional amendment that would establish a surtax on incomes
over $1 million. That amendment, if it reaches the ballot, would not
go before voters until at least 2018.
Kicking off development of next year's budget, the state's two
legislative budget-writers on Wednesday anticipated lean times and
praised efforts to put the state on more stable financial footing.
Spilka noted the income tax will "probably" make another statutorily
mandated drop next year to 5.1 percent - administration officials on
Tuesday confirmed the rate drop will occur - saving the average
taxpayer $30 and continuing a 15-year trend where she said the state
has experienced a nearly $2 billion annual drop in revenue as the
tax rate ratcheted down from 5.95 percent.
"It's easy to see how we must prepare for an ever-shrinking pot of
funds," the Ashland Democrat said.
Standard and Poor's, a bond and credit rating agency, downgraded the
state's credit outlook from stable to negative last month, while the
state maintained its bond rating at AA+, following several years of
spending money from the rainy day fund.
The state's stabilization fund has a balance of $1.2 billion, which
Dempsey said is about half as large as it should be. Lawmakers have
faced criticism of late from drawing too heavily from the fund
during recent years marked by economic growth and rising tax
collections.
"We will continue to prioritize stabilization. We will continue to
prioritize pension funding," Dempsey said. "At the same time we'll
continue to make sure that we're providing adequate resources to
those critical services that are so important to the citizens of the
Commonwealth."
Dempsey noted Massachusetts still outpaces the majority of the other
states in the size of its reserve fund and said that the state
should get credit for recently taking four years off its pension
funding schedule "at a cost" of about $340 million over the last two
fiscal years. He said, "Perhaps we could have directed that money
toward the rainy day fund."
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NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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