The Boston Herald
Sunday, February 16, 2003
Let's watch liberals gag on poison-pill higher tax check-off
by Howie Carr
Have you noticed the new check-off line on the Massachusetts
state income-tax form? It allows all good-hearted liberals, if they so desire, to reject
the current 5.3 percent rate, and instead pay at the old 5.85 percent rate.
So if you earned $50,000 in taxable income in 2002 and owe
the commonwealth $2,650, you can now opt to pay an extra $275.
You can do it ... for the children. For the most vulnerable
members of society. For those who fell through the safety net, who are victims of the Reagan-Bush
recession blah-blah-blah....
Now the liberals can put their money where their big fat
mouths are. If they really support higher taxes, then here's an opportunity for them to pay their
"fair share."
This appears to be the perfect solution to the state budget
"crisis." Let those who demand higher taxes pay them, and the rest of us mean-spirited types
who work two or three jobs to make ends meet can keep a few more bucks in
our own pockets.
God knows there are enough liberals around here who want
higher taxes - for somebody else, anyway. In 2000, when a referendum on cutting the state
income tax was on the ballot, 41 percent of the Massachusetts electorate said
no, don't reduce the income tax.
In all, 1,055,161 citizens said they preferred high taxes.
So if these million-plus kind-hearted individuals pay at the higher rate, we should be awash in cash,
right?
Er, wrong. You see, it's apparently one thing to demand
higher taxes on somebody else. It's another thing altogether when a liberal is asked to pay with
his own cash.
According to the Department of Revenue, as of last Monday,
404,000 people had filed their 2002 state income tax forms.
Of those first 404,000 filers, exactly 140 had opted to pay
at the higher rate - one-thirtieth of 1 percent. Those 140 filers' extra payments have thus far
amounted to exactly $12,146. According to my figures, that means that those
opting to pay more have an average annual income of less than $20,000.
"It seems likely," said a DOR spokesman, "that a lot of
those who checked the box aren't paying any taxes anyway."
Funny how that works, isn't it? Did you ever notice how most
of the reps, both locally and nationally, who are always clamoring for higher taxes represent
districts teeming with the shiftless, the promiscuous, the drug-dependent and
the undocumented. That is to say, non-taxpayers.
Two of the biggest proponents of ever-higher taxes are the
leaders of the Legislature - House Speaker Tommy "Taxes" Finneran and Senate President
Bobby "Trav" Travaglini.
As career solons from the City of Boston, they must be
honorable men, so I wanted to ask them if they'll be paying their income taxes at the optional
higher tax rate.
Remember, it's for the children.
First I called Tommy Taxes' flack to confirm that Mister
Speaker would be paying the higher taxes he so desperately wishes to impose on the rest of us.
My call was not returned.
Then I phoned Trav's new flack with the same question. Will
Trav be paying his "fair share" of 5.85 percent?
That call was not returned either.
So this voluntary tax-increase check-off is a wonderful
innovation. It's easy to talk the talk, but now we'll see how many will walk the walk - very, very few
would be my guess. Thank you Citizens for Limited Taxation for inserting this
little poison-pill reform into the tax code.
Meanwhile, the state's budget "crisis" deepens. Consider
Franny Joyce, the one-time tin-whistle player in Billy Bulger's band. After a lifetime at the trough,
Franny is being kicked down the stairs at the Mass. Convention Center Authority with a
mere $500,000 kiss, and his final bonus is only $80,000.
I would love to hear from any legislators or mayors who have
decided to pay more taxes than they're required to. Before I write you up, though, I'll need
some proof that you're actually paying your "fair share." It's not that I don't
trust you but ...
Please, all you tax-fattened hyenas, feel free to call and
tell me of the sacrifices you're making for the children. When the phone don't ring, I'll know it's you.
Howie Carr's radio show can be heard every weekday afternoon on WRKO AM 680, WHYN AM 560, WGAN AM 560, WEIM AM 1280, WXTK 95.1 FM or online at howiecarr.org.
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The Boston Herald
Sunday, February 16, 2003
A Boston Herald editorial
Taxachusetts gone but not forgotten
It is easy to forget, in these difficult economic times, how
far we've come in improving the business climate in Massachusetts. During the previous
economic downturn, state job losses were magnified in part because of economic and tax
policy that put employers here at a competitive disadvantage.
Tremendous strides were made in the 1990s by the state's
governors and Legislature. They treated business as partners in the effort to revive the state's
economy and make a serious dent in lowering the cost of doing business.
Workers' compensation, unemployment insurance, energy costs
and the corporate tax burden were all tackled with some success. But there is still much
progress to be made on all of these, and on the rising cost of health care.
Business leaders released a report last week to point this
out and to warn state lawmakers not to turn back the clock on efforts to bury our reputation as a
high-cost state.
Specifically, the business leaders pointed out that the
corporate income tax was still the sixth-highest in the nation and commercial electric rates 25 percent
above the national average. Health-care premiums for families were third-highest
among 40 states and, despite reforms, unemployment insurance costs were among the highest in the nation.
In the upcoming budget debate, human services advocates will
make the mistake of comparing the revenue lost to business tax breaks with budget cuts
to state services. The comparison that must be made is Massachusetts'
business costs with those of our competitor states.
By that measure, while we've come a long way it's clear we
must not only preserve the progress we've made, but we must do more.
As Massachusetts Taxpayers Foundation President Michael
Widmer noted, "It would be folly for the commonwealth to attempt to solve its short-term fiscal
problems at the expense of long-term economic competitiveness."
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Associated Press
Sunday, February 16, 2003
Tax exemptions cost state billions in lost revenue
By Steve Leblanc
If you're in the market for a cement mixer, Massachusetts is
the place to go shopping.
The state's tax code not only spares truck-mounted cement
mixers from the state's 5 percent sales tax, it also exempts the spare parts needed to fix them.
Also exempt from the sales tax: airplanes, funeral items,
the American flag, commuter boats, some precious metals and the equipment used for radio and
television broadcasting and newspaper printing.
That's just the tip of the iceberg.
Massachusetts, with an annual budget of about $23 billion
and facing a projected budget gap of about $3 billion has added scores of exemptions,
deductions, credits and deferrals to its tax code over the years, including a
number of corporate breaks during the 1990s.
"Pretty much everyone came up here with their hat in their
hands and said 'You have to cut our taxes,"' said state Rep. James
Marzilli, D-Arlington.
Tax exemptions come with a hefty price, estimated at about
$14.1 billion in potential revenue in the current fiscal year, according to the Department of
Revenue, which is quick to portray the exemptions as taxpayer savings rather
than forfeited taxes.
They're on the books at a time when the money flowing into
state coffers has slowed and Massachusetts struggles with what leaders have described as the
worst fiscal crisis since the Great Depression. Gov. Mitt Romney says the state
must close a $650 million deficit for the current fiscal year and is facing
up to a $3.2 billion deficit for the new fiscal year.
The real cost of exemptions may actually be higher. Of the
167 exemptions outlined in an annual report by the state Department of Revenue, officials could
not put a price on nearly a third.
Critics say many of the tax exemptions adopted over the
years, particularly those enacted during the 1990s, were little more than giveaways to special
interests or politically connected industries.
"There were a lot of tax cuts for a lot of industries that
we hoped would grow in the state but didn't and now we are paying the price for all the lost revenue,"
said Noah Berger, executive director of the Massachusetts Budget and Policy
Center, a liberal think-tank. "We do have to look at restoring some of the tax
revenues."
He pointed to breaks approved in 1996 and 1997 that
specifically benefited defense contractors and mutual-fund companies like Raytheon and Fidelity
Investments. Those same exemptions were later phased-in to benefit other
manufacturers.
Supporters of the defense, mutual-fund and manufacturing
exemptions, which will cost the state an estimated $233 million in lost tax dollars this year, said
the breaks were needed to encourage the companies to stay in Massachusetts
and to create more jobs. Critics said many of those new jobs never materialized.
Some tax exemptions are driven by social concerns, such as
the sales tax break for meals prepared for organizations serving the elderly. Others don't seem to
have any obvious humanitarian benefit.
There are the sales tax exemptions on Internet services
($22.4 million), on aircraft and aircraft parts ($7.6 million), and on meals served at summer camps
($700,000). Materials and machinery used in newspaper printing and radio
and television broadcasting ($24.1 million) also get to take a pass.
The largest single tax exemption is on a range of services
for businesses and individuals from medical treatment and legal advice to haircuts, car repairs and
accounting services. The exemption on services costs an estimated $4.5 billion
a year.
Other top exemptions from the sales tax include real estate
transactions ($1.9 billion), and rents on commercial and residential properties ($834 million). The
state has also exempted employer contributions to pension plans from the
income tax ($536 million).
Even the state concedes that the patchwork nature of many of
the exemptions can lead to quirks and contradictions in the tax code.
"The Massachusetts sales tax statute is filled with
exemptions that do not follow a discernible pattern," the Revenue Department's annual report said.
"For example, manufacturers are exempt from sales tax on machinery but not
on motor vehicles, and construction firms are not fully exempt from sales tax
on their equipment purchases."
Some of the forfeited revenue is more than made up by
secondary taxes.
Motor fuels, including gasoline, are exempted from the sales
tax, but are subject to an excise tax. The excise tax is 21 cents per gallon, and brought in
$660 million in the 2001 fiscal year, while applying the sales tax would bring in
about a third of that, or about $245 million.
The notion that every exemption to the tax code is bad
public policy is off-base, according to Barbara Anderson, of the group
Citizens for Limited Taxation.
"Just because they don't tax part of the cost of your
clothing doesn't mean you're getting away with something," said Anderson, referring to the
exemption on clothing and shoes up to $175 per item. "That's $14 billion
they're not stealing from the taxpayers."
Revenue officials cautioned against assuming that simply
removing an exemption from the tax code will boost the state's coffers by the estimated cost
in lost revenue.
"Most revenue loss estimates have been made without taking
into account how repeal of a provision might change taxpayer behavior," the report said. "If the
sales tax exemption for a particular item were repealed, the item would
become more expensive to consumers, so one would expect sales of that item
to decline."
State leaders have already targeted some exemptions in an
effort to boost revenue during the ongoing fiscal crisis.
A $1 billion package of tax hikes approved last year reduced
the personal exemption and postponed deductions for charitable donations. Romney has also
proposed legislation to close some corporate "tax loopholes." Lawmakers have
approved the package, which Romney said could bring in an extra $150 million
a year.
Romney said Friday he is on "constant and vigilant alert"
for other loopholes, but said he wasn't looking to hurt companies that are taking advantage of
legitimate exemptions.
"We're not looking to remove or change tax law in a way to
penalize a sector of our economy. ... The employers that are here, we want to keep them," he said.
"But if people have been taking advantage of tax loopholes that were unintended ... then
we'll close that loophole."
Some exemptions could prove tempting to lawmakers as Beacon
Hill wrangles with its budget crunch.
"In the good old days of the 1990s, we basically took about
$4 billion out of the tax base, including some specialty tax breaks," said Stephen Collins, executive
director of the Massachusetts Human Services Coalition. "We would certainly
want to look at some of those."
Any rollback of exemptions should be done carefully,
according to Michael Widmer of the Massachusetts Taxpayers Foundation.
"It certainly makes sense to look at the full array of tax
exemptions and tax policy to see if they are still serving the purpose they're intended for," he said.
"But just because they are an exemption doesn't mean they don't serve a
purpose."
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The New Bedford Standard-Times
Sunday, February 16, 2003
Fiscal veteran says budget cuts won't be enough
By Sarah Martinuea, Staff writer
It will take a patchwork of broad-based solutions for the
state to get out of its budget crunch next year, said Michael Widmer of the Massachusetts
Taxpayers Foundation.
Cutting programs, raising taxes, borrowing short-term and
tapping reserve funds are the ways the state could raise the estimated $3 billion it will need for
fiscal year 2004, he said during a recent meeting with The Standard-Times
editorial board.
"There will have to be significant cuts in spending," he
said. "There's no way around that. But is it reasonable to think, in the present political position of no
additional revenues and no borrowing, that we can cut 2 to 3 billion out
of the fiscal budget?"
Gov. Mitt Romney's plan reflects a different philosophy,
however.
Gov. Romney contends that restructuring state government and
cutting program spending will cover the anticipated shortfall.
It won't, Mr. Widmer said.
The governor will release his budget for fiscal 2004, which
starts July 1, on Feb. 26 and has remained silent on specific money-saving tactics.
A spokeswoman from his office declined comment on most of
Mr. Widmer's suggestions but re-iterated Gov. Romney's mantra about no new taxes and
government restructuring.
"Our fiscal '04 is being developed and we have not released
many details about it," Nicole St. Peter said. "Already, the legal services restructuring will save
between 15 and 30 million dollars."
Mr. Widmer, however, has some ideas: Cash in a portion of
the state's 30-year, $300 million per-year tobacco settlement, raise the sales tax, borrow money
and re-pay it over a five-year period, and tap what little is left of the reserve
funds.
His ideas, save for a tax hike, would bring in little
revenue, he said, and he held up the issue of casino gambling as an example.
Casino gambling in Massachusetts would only bring in $500
million a year in revenue at the most, Mr. Widmer said.
"It's a drop in the bucket and that revenue would not help
for fiscal year '04," he said.
As for reserve funds, Mr. Widmer said that there is little
remaining.
That leaves a tax hike.
"My conjecture is that in the end, its either spending cuts
or (raising) taxes," he said. "You either get more money in or spend less."
Because personal income taxes in Massachusetts are relatively high, a logical
place to get revenues would be to raise the sales tax, he said.
The last time the state raised the sales tax was in the
1970s, and a one-cent hike on the sales tax -- from $.05 to $.06 -- would raise $700 million, he said.
But people hate both taxes and those who suggest raising
them, he said.
"People are upset about taxes when they are upset about
everything else," he said. "They are a symbol of uneasiness and anger."
Barbara Anderson of the Citizens for Limited Taxation group,
doesn't agree with Mr. Widmer's approach.
"For an organization that calls itself the Massachusetts
Taxpayers Foundation, they are awfully busy trying to raise taxes," she said of Mr. Widmer's sales tax
hike idea.
Like Gov. Romney, she believes there are other options, like
rooting out government waste and corruption.
"The problem is, the legislature will look at (Mr. Widmer's
suggestions) and one approach will jump out at them," she said. "That one approach will be to raise
taxes. Any chance the Legislature has of raising taxes, it's going to take."
Mr. Widmer calls wishful thinking Ms. Anderson's idea that
there is $2 billion to $3 billion worth of inefficiency.
"We support restructuring but there will be very limited
savings," he said. "We've already cut ($2 billion) out of state spending."
On Feb. 26, Gov. Romney will submit his budget and the
Legislature will see how deep the cuts will go.
Mr. Widmer thinks it will be "ugly."
"I don't know what's going to happen," he said. "I don't
think politicians and the public can begin to understand the impact of reduced programs."
State Sen. Mark C.W. Montigny, D-New Bedford, agreed.
"There is no easy solution or set of solutions," he said.
"There will be significant restructuring of government, significant reductions of services, and lots of pain
for those who rely on the services being cut."
