There is something
wrong with our commonwealth. But there's nothing wrong with our
commonwealth that higher taxes will fix.
It's not just that
per-capita Massachusetts state and local taxes are fifth highest in
the nation; or that certain higher taxes can negatively impact our
economic recovery; or that taxpayers can't afford higher taxes in
the midst of a recession. The real problem with tax increases is
that they are a substitute for solving problems, for real reform,
for facing fiscal realities.
Our commonwealth is
having itself another budget crisis: Revenues down because of the
recession, costs increasing. Some of these are referred to as "fixed
costs," which often means that a contract is involved.
The problem begins when
revenues are up — because of either a strong economy, or tax
increases that were passed during a fiscal crisis, usually
"temporarily." These "temporary" taxes continue to bring in
extraordinary revenues when the crisis is over.
I've liked the idea of
sharing state revenues with the cities and towns in the form of
local aid. But those shared "temporary" state taxes have often been
handed right over to the public employee unions by local officials
who are no match for the professional union negotiators. Raises are
given even in a recession. Health care and pension benefits are
increased to levels the taxpayers who fund them will never see. Some
retiring employees get huge "unused sick day" bonuses.
This excessive spending
in good times virtually guarantees another budget crisis during the
next economic downturn. But far worse, it creates unmanageable
unfunded pension and health insurance liabilities at both the state
and local levels.
Some local budget
problems are caused by state mandates and micro-managing, about
which local officials have been complaining for years. Last week
their "Municipal Relief" bill was ready for Statehouse debate. Then
the Massachusetts Municipal Association apparently convinced the
House Ways & Means Committee to quietly add language that would
allow increases in property taxes by the amount in local overlay
(tax abatement) accounts.
This new language
violated Proposition 2½, the local levy limit created by voters in
1980. If it passed as part of the "relief" bill, property taxes
would have been allowed to increase by more than what Prop. 2½
presently allows without first requiring an override by local
voters.
Naturally, Prop. 2½
supporters sounded the alarm. On Monday, as the House took up the
bill, I shared a news conference at the Statehouse with state Sens.
Richard Tisei, R-Wakefield, and Bruce Tarr, R-Gloucester, who would
be leading the fight in the Senate if the provision got that far.
Charlie Baker said he
would veto the property tax hike if he were governor. So did Tim
Cahill. So did the actual governor, Deval Patrick, who ran in 2006
on a pledge of property tax relief.
The House removed the
tax-hike language from the bill, so Prop. 2½ was saved. But the
point I'm making here is that a beginner reform bill that the
Massachusetts Municipal Association has wanted for years, could have
been vetoed just because they added an unpopular tax increase to it!
It's like the
Massachusetts Taxpayers Foundation, which does excellent budget
analysis with many recommendations for reforms. During past fiscal
crises, those recommendations could have been followed. But
unaccountably, MTF supported major tax hikes that took the place of
the reforms. So the commonwealth kept spending, and the next fiscal
crisis slouched toward Beacon Hill to be born.
During one such crisis,
then Gov. Bill Weld's "no new taxes" pledge prevented the easy
"raise taxes" way out; the result was long-needed state welfare
reform. This is the reason for the pledge: Not to position a
candidate, but to send a message to the Legislature that the
overspend-then-tax game is over. Once they get that message, they
are open to suggestions for change.
At the beginning of its
current budget shortfall, Massachusetts had an opportunity to begin
fixing what is wrong with it. Instead, it muddled through with an
increase in the sales tax and a new tax on alcoholic beverages.
Local officials, instead of the reforms they wanted, were given
increases in the meal and hotel/motel taxes. Local taxpayers were
told that these new taxes were Gov. Patrick's "property tax relief."
In fact, local
officials were urged to increase the meals tax another .75% to
provide even more property tax relief! Property owners later see the
tax on their fish dinner, hamburger lunch, and breakfast omelet
subtracted from their local property tax bill.
Just kidding. They
actually never see that money again. There is no property tax
relief. And worst of all, there has been no reform, no better
government, no salvation. The commonwealth and its communities are
in trouble, and they aren’t going to tax themselves out of it
forever.
Following the "Save
Prop. 2½" news conference, liberals held one to support new taxes on
candy, soda and investment income.
Firefighters unions
rallied to protest the proposal in the "Municipal Relief" bill that
would allow municipalities to design health insurance plans with
less union input.
Even though there is
nothing wrong with the commonwealth that higher taxes will fix,
advocates for those taxes and opponents of reform can easily make
things a whole lot worse.