and the
Citizens Economic Research Foundation

Barbara's Column
September #3

Beware new taxes disguised as government 'reform'
by Barbara Anderson

The Salem News
Friday, September 16, 2005

The fall political season began here with the release of the Hamill Commission task force report on municipal finance all 96 pages of it.

As expected, and undeterred by gas prices exceeding $3 a gallon, the report recommends an increase in the annual auto excise tax. However, instead of a rate increase, it states that "a more realistic depreciation schedule would require only a slight modification to current law while generating significant new revenues for municipalities" and argues for an increase in assessed vehicle values.

Yes, drivers, a "slight" tax hike equals "significant" new revenues, just as they all do, all the way to the fourth highest per-capita tax burden in the nation.

The report also argues that "special excise taxes, such as local option meals taxes, parking excise taxes or rental car surcharges, would give municipalities help with their financial bottom lines and diversify municipal revenue streams."

As for the taxpayers' bottom lines? Never mind, let's celebrate diversity.

"Local option" sounds so innocuous, doesn't it? Only those communities that want an additional meals tax will choose it. But wait! That was the argument on smoking bans until consumers took their business to a neighboring community. Then "fairness" demanded that the ban be instituted statewide.

Prediction: The same thing would happen with "local option" taxes. Eventually, no matter where we eat, we'll pay a local meals tax on top of the already existing state meals tax.

The report doesn't come right out and demand higher taxes of other kinds. Instead, it just mentions in passing that continuing the voter-mandated income tax rate rollback would "diminish annual state revenues by approximately $500 million," while "increases in the state's two broad-based taxes the income and sales taxes are appealing because of their potential for generating significant additional revenues that could help ease the pressure on municipal finances. For example, a one-half-percent increase to the income tax rate would bring in approximately $950 million and a one-cent increase in the sales tax rate would raise about $800 million in revenue".

Lest some taxpayers not find this "appealing" at all, the report gives the impression that these suggestions are due to concern about property taxes, which are 9.1 percent above the national average. Interesting, coming from a task force, some of whose members have long been enemies of Proposition 2, which at least got our property tax burden down from third highest in the country to its present rank of 17th.

Yes, the Hamill Commission task force that is so concerned about high property taxes includes representatives of the Massachusetts Mayors Association, and the so-called Massachusetts Taxpayers Foundation, the Massachusetts Federation of Teachers, along with the former head of the Massachusetts Municipal Association, whom I debated during the 1980 Prop 2 ballot campaign. Further, the task force does not recommend actually lowering property taxes in return for all these "appealing" new revenues.

It does, eventually, address the spending side of municipal budgets. Try to follow this sentence: "Although some observers occasionally suggest that some municipal employment contracts have been overly generous in recent years, it seems that most have been conservative enough to produce annual average growth per employee of only 0.7 percent, in inflation-adjusted terms between 1994 and 2003, compared to 1.8 percent for private sector and 1.0 percent for state employees over the same period."

What the heck does that tell us? Add health care and pension benefits. Then ask the private unions and us nonunion average taxpayers if we are doing so much better than local teachers. Also, In 96 pages, shouldn't the task force have found a place to compare municipal pay with teachers' pay, which other recent reports place above the national average?

There's a good section called "Giving Municipalities the Tools to Control Costs," with tentative recommendations for additional flexibility in collective bargaining, health care, regionalization, joint purchasing, and other reforms that have been talked about for years. They don't get done because members of the task force support tax hikes; and once they have new revenues, the Legislature and municipalities don't ever get around to the "tools" part.

Bottom line: The Municipal Task Force report is the usual Boston business community and mayor's association statement against the income-tax rollback, a stealth attack on Massachusetts drivers, and the first step in mandatory local taxes.

While it seems obvious why mayors might take these positions, I'm often asked why many Boston business leaders want higher taxes. One answer is that they fear that if individual taxes are cut, business taxes will rise to fill the gap. Another answer is that business leaders get support for their own legislation by kissing up to politicians who enjoy spending our money. But it is also important to note that some Boston banks finance the municipal and state bonding that high taxes support.

One member of the task force, Michael Widmer of the taxpayers foundation, took this municipal finance show on the road to the North Shore Chamber of Commerce (where I no longer get invited to speak) recently. Hey guys, did he tell you about the tax-hike part of their plans?

Barbara Anderson is executive director of Citizens for Limited Taxation. Her syndicated columns appear weekly in the Salem News, Newburyport Times, Gloucester Times, (Lawrence) Eagle-Tribune, and Lowell Sun; bi-weekly in the Tinytown Gazette; and occasionally in the Providence Journal and other newspapers.