STATE HOUSE, BOSTON, OCT. 10, 2000 ... State tax collections have been so strong
over the last three months that Gov. Paul Cellucci is already predicting a $1 billion state surplus
and using the claim to justify the $1.2 billion income tax cut that voters statewide will
consider in less than a month.
"We're well on our way to another billion-dollar surplus," Cellucci told reporters on the
wind-whipped steps of the State House today. "Why not keep the promise? Why not
strengthen the economy?"
Tax collections in September were up 14 percent from last September. And for the first
quarter of the fiscal year, receipts are up 12.4 percent, according to the state Department
of Revenue. Income tax receipts were up 25 percent for the month, with sales and use tax
collections up 11 percent. Cellucci says the "booming" economy generated $360 million in
surplus revenues in July, August and September.
The governor's top priority officially secured the expected support today of the state's
10,000-member small business association. Sidney Small of Newton, who serves on the
national board of the National Federation of Independent
Businesses, said there's one big difference between a similar tax cut proposed in 1990 and the one on the ballot now. "Things
are better today," Small said.
Opponents of the tax cut, including leading Democrats, municipal officials and labor unions,
say the good economic times present the best opportunity to improve education, tackle
problems in health care, and pay for the $14 billion Big Dig. Treasurer Shannon O'Brien
(D-Easthampton) will debate Cellucci on the tax cut later this week. On Friday, in a letter
to the governor, O'Brien said she too expects a "substantial" surplus and suggested that
half of the surplus should be devoted to paying down state debt.
With $12.4 billion in issued debt, the state has nearly doubled its debt load in 10 years
and has another $3 billion in public works-related borrowing planned for this year. O'Brien
says recent state surpluses have saved taxpayers millions in debt-related interest costs,
but maintains the core debt just keeps growing.
Asked about O'Brien's claims, Cellucci referenced efforts to refinance debt and suggested
that "some" of the expected surplus should be used to reduce state debt. But Cellucci said
the capital spending all stems from the state's neglect of its infrastructure in the 1970s
and 80s. "We have to do this for the future of our economy," Cellucci said. "We are managing
the capital spending of this state very well." Cellucci urged taxpayers not to "fall for the
line" that the income tax can't be cut because of concerns about debt.
O'Brien says the state should focus the materializing surplus on "things that will pay
dividends in the future," such as local water and sewer projects, affordable housing or
social services. While criticizing the governor for backing a tax cut that will
"disproportionately help the wealthiest people," O'Brien said she supports "smaller tax
relief, fairer tax relief."
"I've been stating very clearly that we have a once-in-a-lifetime opportunity to prepare
ourselves for the ultimate downturn in the economy," O'Brien said. "It's sort of like a
three-legged stool - it's tax relief, it's debt reduction, and it's investing in either
capital infrastructure or education or health care."
But Cellucci says the state has $4 billion in reserves, including about $2 billion set aside
for jobless benefits. The governor also said he expects a UMass poll results soon on the
income tax question. The ballot question would reduce the 5.85 percent income tax rate to 5
percent over three years, taking $1.2 billion away from state government, which has a $21.4
billion budget, and sending it back to workers.
Opponents of the ballot question argued that the state has granted 41 tax breaks over the
last decade, many of them targeted toward business. Campaign for Massachusetts' Future
spokesman Jack McCarthy said Federal Reserve Chairman Alan Greenspan told the national
governors' association in July that the most critical component of preserving the economy is
a sound education for the future workforce.
"That's Greenspan, never confused as a liberal, telling the governors that the best thing
they can do for the economy is educate children who can turn into productive workers for
this global economy," McCarthy said. The opposition campaign has painted the debate as a
stark choice between funding an income tax cut and funding an array of government services,
including education and health care.
Regarding the burgeoning surplus, McCarthy praised Treasurer O'Brien's proposal to pay
down the state's debt. "We think you can actually do some targeted tax cuts targeted toward
the middle-income working class families, and then have money to invest in education, invest in
health care and pay down the debt," he said.
O'Brien and Cellucci will debate the income tax cut on Thursday morning as part of "News
Conference" with John Henning. The debate will air on Channel 4 at 11 am Sunday.