Real reform won't come until higher taxes are off the table
© by Barbara Anderson

The Salem News
Saturday, May 1, 2010

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.

The comments made and opinions expressed in her columns are those of Barbara Anderson
and do not necessarily reflect those of Citizens for Limited Taxation.

Barbara Anderson is executive director of Citizens for Limited Taxation. Her column appears weekly in the Salem News and other Eagle Tribune newspapers; bi-weekly in the Tinytown Gazette; and occasionally in the Lowell Sun, Providence (RI) Journal and other newspapers.

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