and the
Citizens Economic Research Foundation

Monday, April 26, 2004

FY 2005 budget

To:  Members of the Massachusetts House
cc:   Massachusetts Senate
         April 26, 2004
Re:  FY 2005 budget

We don’t really think that you would pass the Spellane amendment to increase the income tax rate to 5.95 percent; but since Rep. Spellane is giving us this opening, we would remind everyone that 59% of the voters mandated that the rate be cut to 5.0% by 2003. The Legislature has not respected the voters’ mandate; here it is, 2004, and the rate is still 5.3 percent.

One intent of our income tax rollback was to inspire reform. Apparently, since there is little reform in the House budget, that project would be further along if the Legislature had a few hundred million dollars less to spend. The sooner reforms are accomplished, the easier it will be to deal with an ongoing structural deficit. It is time to consider the many good ideas put forth by Governor Romney, the Pioneer Institute, the Beacon Hill Institute, Mass. Taxpayers Foundation, as well as suggestions by some legislators.

Earmarking 20% of the sales tax for school building assistance isn’t reform: we know that the next step will be to propose raising the income tax rate to make up for that earmarked sales tax revenue. As part of SBA reform, the state needs to create a few prototype designs of simple, functional school buildings for communities to use, demand regular maintenance, encourage repairs in the New England tradition of preservation. We do support changes in construction rules.

Legislators who want to hike the income tax are probably just trying to appease their municipal leaders, who would rather you take a tough vote so they won’t have to ask for overrides. You can remind them that voters had a chance to pay a higher state income tax rate with the CLT/Legislative voluntary tax, but only 624 taxpayers, as of April 15th, took advantage of this opportunity. Why not ask tax hike advocates if they paid the 5.85% rate?

As the Governor said recently, better municipal management is a better idea; and we agree. Communities should budget for various services within a range of reasonable costs. However, we look forward this week to a roll call vote on Rep. Spellane’s amendment.

Speaking of overrides, we would reiterate our preference for the Senate version of the senior relief bill and our opposition to the House version which excludes some seniors from paying for overrides in the hope that they won’t bother to vote and the overrides will pass. We heard Speaker Finneran say, in a repeat yesterday of an earlier appearance on Jon Keller’s WB56 program, that this would require that local voters create the exclusion, but this is not accurate; the selectmen alone would make the decision.

We do support the proposal to increase state funding for special education, which in many cases should be a human services instead of an education issue.

In summary:  a roll call and “nay” vote on any income tax hike, let’s get to the rate cut soon, let’s hope the Senate does more reforms, and “no” to a senior override exemption.

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