Thursday, July 25, 2002
Study: Personal income taxes in state budget
highest in the nation
By Steve Leblanc
BOSTON - Massachusetts is becoming Taxachusetts again. The
package of personal income taxes approved by state lawmakers last week is the highest in the country this year,
according to a new study.
The $1.1 billion package, which was vetoed by Republican
acting Gov. Jane Swift, included about $755 million in higher personal income taxes, according to the National Conference of
That's well ahead of the other nine states which opted to
increase personal taxes to help close budget deficits this year.
Oregon and Oklahoma were next, with net increases of about
$108 million and $101 million respectively, according to the report. Eleven states cut personal income taxes.
Opponents of the tax package said the study reinforces the
image that after a decade of cutting taxes, Massachusetts is returning to its "tax and spend" roots.
"We're not just getting back to the term
Taxachusetts, we're there," said Sen. Brian Lees, R-East Longmeadow. "It got
ridiculous what the Democratic leaders were doing."
Supporters of the tax package said the choice was between
higher taxes, draconian cuts to state services, or risky alternative revenue sources, including reducing state Lottery
prizes or selling future tobacco settlement revenues on the bond market.
Raising taxes was the best alternative, said state Rep.
James Marzilli, D-Arlington.
"We made a choice that satisfies very few people, but the
alternative was to slash even further away at services," Marzilli said. "We took the middle ground."
Massachusetts' taxes are about in the middle of the pack
nationwide when measuring the total state and local tax burden as a percent of personal income, he said.
Overall the report found states have used two-thirds of
reserve cash trying to cope with budget crises.
The $1.1 billion tax package would freeze the state income
tax at 5.3 percent, reduce the personal exemption; postpone deductions for charitable donations; raise cigarettes taxes and
tax capital gains income at 12 percent for the first year and 5.3 percent after that.
Moments after the House voted to override Swift's veto on
Tuesday, House budget chief John Rogers, D-Norwood, suggested that more tax hikes might be needed to balance next
Swift quickly criticized lawmakers for not exploring other
"I'm a little bit worried that on the very day that they
override the biggest tax increase in the history of the commonwealth they put on the table additional tax increases,"
The Senate is also expected to override Swift's veto,
perhaps as early as today.
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The Boston Globe
Thursday, July 25, 2002
Study ranks state third in tax hikes
Revenues expected to rise 5.6 percent
By Rick Klein
Massachusetts taxpayers are being hit with the third-largest
tax increase in the nation this year, according to the first comprehensive nationwide study of states' responses to slumping
Although states across the country are coping with a
sputtering economy, just 16 have moved to raise taxes by 1 percent or more of annual tax collections, according to the
report by the National Conference of State Legislatures. And only five states - including
Massachusetts - are increasing the tax base by more than 5 percent.
"Really, most states have been taking a wait-and-see
approach, to see if additional taxes are necessary or not," said Corina Eckl, fiscal programs director for the group. "But
these handful of states, Massachusetts included, decided that the magnitude was such that they
needed to turn to taxes this year."
The $1.14 billion tax package, scheduled for final approval
by the Legislature today, will bring a 5.6 percent jump in tax revenues this year over last, according to the study.
Only Tennessee and Indiana, where sales tax increases will
help boost the tax base by 9.7 percent and 9.1 percent, respectively, are raising tax collections by a larger
percentage than Massachusetts.
What's more, the Bay State's new tax package targets the
income tax like no other state in the nation. Between a freeze of the voter-approved income tax, the elimination of deductions
for charitable contributions, and a reduction in the amount of income that isn't subject to
taxation, Massachusetts collections from the income tax will rise $755 million this
year. In actual dollars, the national study found that to be seven times more than the income tax
increase imposed by any other state.
"We're going to be quicker back to 'Taxachusetts' than
anyone thought we could be," said Senate Republican leader Brian P. Lees of East Longmeadow. "This has been an amazing
run for the Democratic leaders, that no member of their own party has stood up and said it's
too much. Their mantra is taxes, and no to anything else. This has gotten out of hand."
The study includes tax information from 47 states, with
California, North Carolina, and Wisconsin excluded because insufficient data were available. Researchers relied on
information provided by officials in each of the states.
The Massachusetts Legislature's tax package, which also
includes increased taxes on cigarettes and long-term capital gains, is expected to cost the average nonsmoker resident
$317 next year, according to the state Department of Revenue; smokers will pay about $600
The tax package was vetoed by Acting Governor Jane Swift on
Monday, but the House easily overrode her 24 hours later. The state Senate, which has twice shown veto-proof
support for the tax package in recent months, is scheduled to take up the
matter this afternoon. Veto overrides require two-thirds votes in the House and the Senate.
House Taxation Committee chairman Paul C. Casey said
Massachusetts has taken a responsible path in confronting the fiscal crisis. Cuts have been made, reserves funds are
being tapped, and taxes are being used as a solution that will help the state through several
years of tight budgets, he said.
"If you look across the broad spectrum of what Massachusetts has looked into, we're
covering all the bases," said Casey, a Winchester Democrat. "Going too far [on taxes]
means you hurt one particular group more than others. I don't think anybody's accused us of that."
According to Senate Ways and Means chairman Mark C.
Montigny, Massachusetts was affected by the current slowdown more than many other states because of its reliance on
capital gains and corporate taxes from high-tech companies, which have
faltered over the past year. He added that this year's tax increase should be seen in perspective; over the past
decade, the state reduced taxes by about $3.6 billion.
"If a comparison were done on how aggressively taxes were
cut in the past 10 years, Massachusetts would be at the top of the list," said Montigny, a New Bedford Democrat.
"What we did mainly in this tax package is slowing down a tax cut, and some
who have postponed this reality in an election year are going to face an even worse bite next year."
Montigny said that the Legislature has avoided "desperate"
measures that can have long-term consequences, such as spending years' worth of tobacco settlement money up front or
borrowing money to pay for government operations. Both approaches are being espoused
by a small handful of states, according to the national group.
Besides taxes, 26 states enacted budget cuts, 23 states used
reserves, and 10 raised fees, the study found. Massachusetts is relying on a combination of those measures; it is raising
fees by $100 million on top of the $1.14 billion in taxes, and is using $900 million in reserves
while trimming hundreds of millions of dollars in spending.
Sarah Magazine, a Swift spokeswoman, said the report
illustrates a point that the acting governor has been making for months: The state has other options than turning to
broad-based tax increases. She called on lawmakers to adopt Swift's proposal to limit state
lottery payouts, which could free up hundreds of millions of dollars but which is opposed by
legislators who fear it will drive away players.
"The governor has been out there from the beginning saying
that going into the pockets of the taxpayers is not the place we should be looking when we need additional revenues," she
Under the Legislature's budget, overall state spending is
expected to rise $600 million in fiscal 2003, which began July 1, to $23.4 billion. Most of the new dollars are slated to go
toward the state's Medicaid program and to K-12 education, which were the two biggest
areas of new spending nationwide, the report found.
House Republican leader Francis L. Marini of Hanson said
that Democrats in the Legislature have lost perspective in their rush to raise taxes. "These tax increases are going to
affect real live human beings, trying to live their lives and support their families," Marini said. "That's the
part that they don't really see."
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The Boston Herald
Thursday, July 25, 2002
Bay State deficit nation's fifth worst
by Elisabeth J. Beardsley
Senators are expected to overwhelmingly reinstate a $1.14
billion tax hike today, as a new report pegs the Bay State's $2.5 billion deficit as the fifth worst in the nation.
The nationwide survey by the National Conference of State
Legislatures found that Massachusetts is hardly alone in its fiscal woes - 43 other states faced budget gaps in the
year just ended.
"State fiscal problems in fiscal year 2002 were widespread
and often severe," NCSL said.
But the Bay State's crisis - a hole representing 15 percent
of the overall budget - is only surpassed by California, Alaska, Kentucky and New Jersey, the report said.
Only 16 states resorted to tax hikes, and of those, only
five - including Massachusetts - jacked up their levies by more than 5 percent, NCSL found.
Acting Gov. Jane M. Swift vetoed the five-tax package of
hikes on Monday, but Democratic lawmakers rushed to put it back on the books.
Swift, meanwhile, is poring through the budget with a poised
veto pen, looking to slash $400 million from programs. Yesterday, the acting governor said things are pretty grim.
"I'm dying for good news," she said.
Lawmakers are expected to override some of Swift's budget
vetoes when they're released next week.
But legislative leaders are urging "restraint," after they
sent Swift a budget that overspends by $300 million, asking her to clean up the mess.
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The Patriot Ledger
Wednesday, July 24, 2002
State budget turmoil
The Legislature has humiliated itself even more than usual
in the $22.9 billion state budget it sent to acting Gov. Jane Swift.
Legislative leaders know the budget is out of whack but have
asked Swift to make the hard decisions they would not. House Speaker Thomas Finneran then had the gall to signal that
one revenue source Swift favors - reducing Lottery payouts - would not be acceptable.
Finneran spokesman Charles Rasmussen argued that Lottery
earnings are "the lifeblood of cities and towns. That's too important to be experimenting with it."
Finneran and Co. did almost no experimenting with this
budget, despite stark numbers that point to a continuing downward spiral in revenue collections - with no end in sight.
The drop in capital gains taxes has been a major contributor to the state's negative cash flow; the Dow
has lost 22.5 percent of its value in nine weeks, and continues down. Only a giddy
optimist thinks the market will turn around soon. Sellers are not reaping gains; they're suffering
personal losses, which become tax losses.
It is typical of the autocratic Finneran to dictate what is
acceptable from the acting governor, after putting her in an untenable position.
The budget debate demanded a return of the Finneran whom
local leaders saw in the early months of this year. The speaker and members of his leadership team traveled around the
state to issue warnings that local aid and state aid to education likely
would be cut, possibly as much as 10 percent. Cities and towns took that message seriously, and began to plan
accordingly. Then spring fever struck the House leader. We'll raise taxes
and level fund the big accounts and pretend we have a budget in balance, was the new line.
The jig was up a long time ago, but Finneran and his Senate
counterpart, Tom Birmingham, refused to own up to it. They still dish out the double talk, even after the Massachusetts
Taxpayers Foundation has uncovered maneuvers which moved nearly $400 million off the
budget, further obfuscating the true numbers.
As expected, Swift has vetoed the tax increases, but that
veto will be overriden easily. Still, another $300 million must be cut. And that's a bare minimum.
The only honest and fair way to attempt to balance this
budget is to cut aid to education. It's a bitter pill for localities to swallow but there no other option can net the
savings needed. The schools benefited more than any other public account in the good times. And the good times
are now a memory.
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