CLT
UPDATE
Wednesday, April 7, 2004
We're Number 4!
Mass. 4th last to hit national Tax Freedom Day
According to Tax Foundation calculations using the latest government data on income and taxes, Tax Freedom Day® in 2004 will be celebrated on April 11th, the earliest Tax Freedom Day for 37 years.
April 11th is three days earlier than 2003’s Tax Freedom Day of April 14 and an amazing 21 days earlier than in 2000, when the boom and bubble pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 2... "Federal tax cuts have made the average American tax burden lighter in 2004," said Tax Foundation President Scott Hodge....
Tax burdens vary considerably from state to state, not only because of different state and local taxes, but because of divergent federal tax payments. Therefore, the report includes a separate calculation of Tax Freedom Day for each state.
The five states with the heaviest tax burdens and who therefore wait the longest for Tax Freedom Day are all in the northeast: Connecticut (April 28), New York (April 27), New Jersey (April 19),
Massachusetts (April 18) and Rhode Island (April 16).
The Tax Foundation
News Release
Wednesday, April 7, 2004
Tax Freedom Day Arrives April 11th in 2004, Earliest Since 1967
The Romney administration - long sworn against tax hikes - indicated yesterday it will push for a $200 million retroactive tax increase as a result of an unfavorable Supreme Judicial Court ruling.
The SJC ruled that lawmakers acted unconstitutionally when they raised the capital gains rate in May 2002 instead of at the start of a calendar year....
Said tax watchdog Barbara Anderson: "I don't think a tax increase should ever apply to a time when the taxpayer was earning the money and didn't know what the rate was going to be." ...
The lead plaintiff in the case was E. Joel Peterson, 63, a Cape Cod man who closed on the sale of his family's hotel on May 16, 2002. When the Legislature retroactively increased the capital gains rate, he said, it cost him several thousand dollars. "The answer was, `Well, we need to balance the budget.' And I said, 'I need to balance mine, too,' " he said last night.
The Boston Herald
Wednesday, April 7, 2004
Court ruling may spark retroactive tax hike
The Supreme Judicial Court ruled yesterday that the Legislature had unconstitutionally changed the capital gains tax rate in 2002, raising the prospect that the state will either have to return some $250 million to taxpayers or force them to pay even more....
"The same judiciary that expects full funding from the Legislature, despite the horrendous fiscal conditions we face, is the very same state agency that is taking fiscal solutions off the table," said Representative John H. Rogers, a Norwood Democrat who is Ways and Means Committee chairman. He also pointed to a Suffolk Superior Court decision last year that killed a $72 million revenue stream from pharmacy prescription drug assessments. "That amount [$250 million] is what it takes to fund half the judicial branch of government, just to put it into perspective," he said.
The Boston Globe
Wednesday, April 7, 2004
SJC rules capital gains rate change was faulty
Chip Ford's CLT
Commentary
Well, at least we moved up from second-from-last,
where we were last year on Tax Freedom Day, to fourth-from-last. But the
Tax Foundation doesn't factor in our state's half-billion dollars in
additional revenue from "fee" increases: "Every dollar that’s officially called income by the government is counted, and every payment to the government
that is officially considered a tax is counted."
We're all ahead of where we were last year, when the
national Tax Freedom Day was celebrated on April 19 (and our Tax Freedom
Day then was May 2). For this we can thank the "Bush tax cuts"
that have been so derided.
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Recall back to 1994, when the Legislature cut a dirty
deal with then-Gov. Weld, clearly a quid pro quo.
The governor got his capital gains tax cut.
(See "Capital gains double-cross,"
by Boston Globe columnist Jeff Jacoby.)
The Legislature got its 55 percent pay raise, which
it soon leveraged into "for life" automatic pay raises.
Net result? Legislators have their 55 percent pay
raise with its additional constitutional provision that boosts it
forever, doubled their "per diem" and "office
expenses." Taxpayers are again given the former senate president's "middle-finger
salute."
"The Best Legislature Money Can Buy."
Now that they've got theirs, burn the deal.
"Temporary"? "Promise"? They
don't even care if we care any more.
John Rogers, a state rep from Norwood who's the head
of the House Ways and Means Committee, expresses astonishment that the
state Supreme Judicial Court tossed out his baby. He's equally appalled
that the courts tossed out the prescription drug "fee."
Wake up Mr. Chairman. The court is telling you to do
tax increases legally. Retroactive taxes, and taxes disguised as
fees, are simply just not constitutional, much as you'd like to make
believe. If you're going to do tax increases, can we at least stop
playing semantics?
Is that to much to ask from "The Best
Legislature Money Can Buy"?
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Chip
Ford |
The Tax Foundation
http://www.taxfoundation.org/
Wednesday, April 7, 2004
News Release
Tax Freedom Day Arrives April 11th in 2004, Earliest Since 1967
http://www.taxfoundation.org/taxfreedomday.html
Washington, D.C., April 7, 2004 — According to Tax Foundation calculations using the latest government data on income and taxes, Tax Freedom Day® in 2004 will be celebrated on April 11th, the earliest Tax Freedom Day for 37 years.
April 11th is three days earlier than 2003’s Tax Freedom Day of April 14 and an amazing 21 days earlier than in 2000, when the boom and bubble pushed tax burdens to a record high, and Tax Freedom Day was postponed until May 2 (see Figure 1).
"Federal tax cuts have made the average American tax burden lighter in 2004," said Tax Foundation President Scott Hodge. "Because the bubble in 1999 and 2000 boosted tax collections to artificially high levels, the drop since then is all the more dramatic. In fact, it is the biggest drop in America's tax burden for at least a century."
The report is Tax Foundation Special Report No. 129, "America Celebrates Tax Freedom Day®," by Hodge and Foundation Senior Economist Scott Moody. The report traces the course of America’s tax burden since 1900, examines the composition of today’s tax burden by type of tax, projects the future course of Tax Freedom Day and compares tax payments to other typical consumer expenditures.
What is Tax Freedom Day?
Tax Freedom Day is the day when Americans will finally have earned enough money to pay off their total tax bill for the year. Every dollar that’s officially called income by the government is counted, and every payment to the government that is officially considered a tax is counted. Taxes at all levels of government are included, whether levied by Uncle Sam or state and local governments.
Tax Freedom Day gives Americans an easy way to gauge the overall tax take, a task that can be quite daunting due to the multiplicity of taxes at each level of government, especially the "hidden" taxes and fees that are often buried in the cost of living. In effect, Tax Freedom Day provides taxpayers with a tax barometer that measures the total tax burden over time and by state.
Tax Freedom Day by State
Tax burdens vary considerably from state to state, not only because of different state and local taxes, but because of divergent federal tax payments. Therefore, the report includes a separate calculation of Tax Freedom Day for each state.
The five states with the heaviest tax burdens and who therefore wait the longest for Tax Freedom Day are all in the northeast: Connecticut (April 28), New York (April 27), New Jersey (April 19),
Massachusetts (April 18) and Rhode Island (April 16). Because the cost of living and salaries are higher in these states, taxpayers must work longer to pay their disproportionate share of progressive federal income taxes. The next five most-taxed states in 2004 are Maine (April 15), Washington (April 15), Wyoming (April 14), Nevada (April 13) and California (April 13).
The five states with the lightest total tax burdens celebrate Tax Freedom Day the earliest. March 26 is the earliest of all. That’s when Alaskans will celebrate. Alabama, Tennessee and South Carolina have the second, third and fourth lightest total tax burdens, and they were all done working for government on April 1. Oklahoma, Mississippi, Louisiana, and South Dakota all celebrated Tax Freedom day on April 2 while North Dakota and Iowa celebrated April 3. See Table 1, columns 4 and 5 for this year's data.
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The Boston Herald
Wednesday, April 7, 2004
Court ruling may spark retroactive tax hike
By Steve Marantz
The Romney administration - long sworn against tax hikes - indicated yesterday it will push for a $200 million retroactive tax increase as a result of an unfavorable Supreme Judicial Court ruling.
The SJC ruled that lawmakers acted unconstitutionally when they raised the capital gains rate in May 2002 instead of at the start of a calendar year.
The high court will now have the final say in whether to push the date back - which would raise millions in additional taxes for the first four months of 2002 - or roll it forward, which would require the state to refund some $200 million in revenues already collected.
Plaintiffs are arguing to push the hike back to January 2003, but state Department of Revenue officials indicated yesterday they will urge the date be set at January 2002.
"I would think January 2002 would be the right answer," said Alan
LeBovidge, DOR commissioner. "I believe that's what the Legislature was looking for at the time, and the later date was a result of a compromise."
Plaintiff attorney Stephen Politi said he believes the court should assess the lower tax rate for all of 2002.
DOR's position, Politi said, "is inconsistent with all I've heard Gov. Romney say about how he does not favor taxes on capital gains."
Said tax watchdog Barbara Anderson: "I don't think a tax increase should ever apply to a time when the taxpayer was earning the money and didn't know what the rate was going to be."
In a 4-3 decision, the SJC struck down the effective date of the mid-2002 tax law change after hearing arguments that applying different tax rates during the same calendar year was a violation of the state constitution.
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The Boston Globe
Wednesday, April 7, 2004
SJC rules capital gains rate change was faulty
By Frank Phillips and Yvonne Abraham
The Supreme Judicial Court ruled yesterday that the Legislature had unconstitutionally changed the capital gains tax rate in 2002, raising the prospect that the state will either have to return some $250 million to taxpayers or force them to pay even more.
The SJC said the new tax rate on capital gains that took effect May 1, 2002, violated the state's constitution because only a single tax rate can be applied to assets in one calendar year. The high court ordered one of its justices to determine whether the state should make the new rate effective January 2002, which would mean some investors would pay a higher rate for the full 12 months, or January 2003 -- which would mean a refund.
"Either way, it's going to mean a lot of work for the Department of Revenue," said Alan
LeBovidge, commissioner of revenue. "If the date is moved to Jan. 1, 2003, that will have to be a significant amount of money the state has to return to taxpayers, and somebody has to come up with the money. If it is moved to [Jan. 1] 2002, we will have to assess people. We're going to be sending out a lot of bills to people who didn't think they owed some tax."
LeBovidge said the department's computer systems will make the process relatively simple, either way. "People probably won't be happy, but we'll make it easy for them," he said.
The 4-3 ruling was issued as Beacon Hill budget leaders have been struggling to close a $1 billion budget deficit for fiscal 2005. The ruling aggravated some of the raw feelings that have developed in recent months between the Legislature and the court, which ruled late last year to legalize gay marriage.
"The same judiciary that expects full funding from the Legislature, despite the horrendous fiscal conditions we face, is the very same state agency that is taking fiscal solutions off the table," said Representative John H. Rogers, a Norwood Democrat who is Ways and Means Committee chairman. He also pointed to a Suffolk Superior Court decision last year that killed a $72 million revenue stream from pharmacy prescription drug assessments. "That amount [$250 million] is what it takes to fund half the judicial branch of government, just to put it into perspective," he said.
Rogers and other fiscal specialists predicted serious fincancial consequences if the justice rules that the Commonwealth must repay taxes it collected as a result of the 2002 change. It was unclear whether the court would settle the question before the new fiscal year starts in July.
"This is a decision with the potential for significant fiscal impact on the Commonwealth, which [is] already facing some major challenges in achieving a balanced budget in the coming year," said E. Cameron Huff, senior research associate at the Massachusetts Taxpayers Foundation.
The decision has sent state tax officials scrambling to figure out how to handle what will be a huge operational headache for the Revenue Department.
The deficit projection for fiscal 2005, which begins July 1, is about $1 billion. Higher tax revenues since last summer, first from business profits and more recently from income and sales taxes, has helped lower initial projections that pegged the deficit at $1.5 billion.
A $200 million to $300 million cost to the budget would create a host of new problems for Legislative budget leaders. The House is expected to release its version of the fiscal 2005 budget on April 14.
Huff said another $250 million or so in the budget deficit would force the lawmakers to consider program cuts for next year or tax hikes. He said the lawmakers could also look into the state's reserves, which are about $700 million to $800 million.
The 2002 capital gains tax rate increase was included in a $1.2 billion tax package that lawmakers passed in July 2002. The Legislature threw out the system of taxing capital gains on a sliding scale that depended on how long an asset was held and replaced it with a flat 5.3 percent tax on assets held for more than a year. The change was made retroactive to May of that year.
At the time, the capital gains tax change was projected to raise $100 million to $200 million, but Huff said the Massachusetts Taxpayers Foundation estimates it could be as much as $300 million.
Acting Governor Jane Swift vetoed the $1.2 billion tax package, but the Democrat-dominated Legislature handily overrode her objections.
The lead plaintiff in the case was E. Joel Peterson, 63, a Cape Cod man who closed on the sale of his family's hotel on May 16, 2002. When the Legislature retroactively increased the capital gains rate, he said, it cost him several thousand dollars. "The answer was, `Well, we need to balance the budget.' And I said, 'I need to balance mine, too,' " he said last night.
In its opinion, the court cited previous cases and Article 44 of the state constitution, ruling that "a single tax rate must be applied to income from the same class of property received during the period specified by the Legislature for measuring income."
Signing the majority opinion were Justices John Greaney, Roderick Ireland, Francis
Spina, and Martha Sosman. Chief Justice Margaret Marshall and Justices Robert Cordy and Judith Cowin dissented.
The retroactive tax increase "might well have caused inconvenience, surprise, and expense to those who devised their tax strategies in reliance on the superseded tax scheme," Marshall wrote in her opinion. "But the plaintiffs have no constitutional entitlement under Article 44 to any particular income tax rate or taxable event."
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