CLT
UPDATE
Friday, October 15, 2004
This calculated MTF report "isn't passing the sniff
test"
Timing, as they say, is everything. And frankly there have been some intriguing questions raised about the timing of the latest report from the Massachusetts Taxpayers Foundation.
There was a time when the group was a source of truly objective information about the state of the state's economy. But that time seems to have come and gone....
And it appears that's just fine with Widmer and MTF. Hence the rather suspect timing of the report as raised by
Citizens for Limited Taxation.
"The Legislature is not in session," said a CLT press release. "We are well into the fiscal '05 budget year and the fiscal '06 budget debate is months away. There is no imminent vote on the rollback issue. So why is it necessary to release yet another anti-rollback report right now?"
Well, there is the legislative election with some candidates committed to a tax rollback to 5 percent.
Now we rarely look for hidden motives or buy into conspiracy theories, but this latest MTF report isn't passing the sniff test.
A Boston Herald editorial
Thursday, October 14, 2004
Report's timing suspect
Balancing the budget this year was a little easier, which has encouraged Romney to push for finishing the job begun in 2000 and cutting the income tax rate, now stuck at 5.3 percent, down to 5 percent.
A report this week by the Massachusetts Taxpayers Foundation sheds useful light on this decision. The
MTF, a respected, non-partisan, business-funded group, found that despite the mild economic recovery, the Commonwealth is facing a growing structural deficit. The gap between revenue and spending, an estimated $170 million in fiscal 2004, is projected to grow to $750 million in 2005 and $910 million in 2006.
The $724 million in unanticipated revenues that helped balance the books this year and replenish the rainy day fund, doesn't mean the crisis has passed, MTF says. A large part of that revenue came from capital gains, stock options and bonuses attributable to the stock market's recovery in 2003, according to the MTF analysis, which is money we've already learned not to count on.
A MetroWest Daily News editorial
Wednesday, October 13, 2004
A growing budget gap
Trying to stop a Republican push to roll the income tax back to 5 percent next year, Democrats are insisting other tax cuts are on the way.
What they haven't highlighted, though, is that the cuts - if they happen at all - will likely not occur for many years. Under the best possible circumstances for tax cut proponents, the state income tax rate would not reach 5 percent until 2014, according to current laws....
At a recent campaign season press conference, Lt. Gov. Kerry Healey, joined by 11 Republican legislative candidates, repeated the Republican mantra calling for an immediate cut in the income tax rate to 5 percent. State officials estimate the annual worth of such a tax cut at $500 million to $540 million.
"Now is the time to uphold the will of the voters and return the income tax to 5 percent," she said. "Democrats argue that now is not the time, but if not now, when?"
While current laws make an income tax cut unlikely for many years, [House Taxation Committee chairman Paul] Casey said Democrats would "positively" look at accelerating the tax cut if the economy were to improve quicker than expected....
"The tax law is completely meaningless," said Barbara Anderson, head of
Citizens for Limited Taxation. "Can you even imagine 2014? We thought a three-year phase down of the income tax was a compromise. It's just ridiculous."
CLT was the sponsor of a ballot question in 2000 that was supposed to roll the income tax back to 5 percent over three years, but lawmakers froze it at 5.3 percent in 2002.
Democrats and a leading taxpayers group argue there is still a $750 million structural deficit, and cutting taxes now would be irresponsible and would result in more unpopular cuts to programs and services.
"The issue here is whether the state's finances are in sufficient stability to have a more accelerated tax cut," said Michael
Widmer, president of the Massachusetts Taxpayers Foundation.
MTF supported the 2002 tax law, and said the state is still operating in the red. "Our analysis shows there are still structural deficits and will be into 2006. It is not appropriate to have a large tax cut when we haven't established fiscal balance."
State House News Service
Wednesday, October 13, 2004
As GOP pushed $500M tax cut,
more gradual tax cut plan is on the books
Chip Ford's CLT
Commentary
Sometimes it takes a long time to peel back all the
layers, to strip away the polished veneer that's built up over years of
self-promotion. Erosion built the Grand Canyon but it didn't happen
overnight, and neither will exposing the so-called Massachusetts
Taxpayers Foundation and its over-vaunted reputation of
"non-partisan" and especially "highly-respected."
Our first sign of progress was years ago, when at
least news reports began identifying MTF as "business-backed"
instead of just some group of concerned taxpayers with no agenda other
than sound fiscal management. With Michael Widmer at the helm of MTF,
our enduring task has been made easier.
According to his biography on MTF's website, Michael
Widmer served "the first Dukakis administration as the Governor's Director of Communications and Deputy Chief Secretary,"
so it's quite easy to see where he's coming from -- and has been taking
us.
The more he's gotten away with insinuating himself
and MTF into statewide ballot campaigns as a leading proponent or
opponent -- despite MTF's tax-exempt status and without filing ballot
committees [See: CLT News Release, "Who's MTF protecting now?"
- Oct. 12] -- the more emboldened he seems to have become, the more
above-the-law. What once might have been devious is becoming a blight on
the organization he runs, an embarrassment.
The MetroWest Daily News editorial, "A growing budget gap,"
proclaimed:
The $724 million in unanticipated revenues that helped balance the books this year and replenish the rainy day fund, doesn't mean the crisis has passed, MTF says. A large part of that revenue came from capital gains, stock options and bonuses attributable to the stock market's recovery in 2003, according to the MTF analysis, which is money we've already learned not to count on.
And yet these were the very same types of revenue
that helped double the state budget during the roaring '90s
economic recovery -- when Widmer nonetheless railed against rolling back
the Dukakis "temporary" income tax hike of 1989. This tax hike
followed the fiscal crisis that MTF helped cause. [See: Some past MTF projections, State House News Service, Revenues - May 11, 1989]
Today MTF's assertions -- or at least the timing of
them -- have become increasingly suspect, and that's real progress for
us taxpayers. The canyon may not be grand quite yet, but the erosion of
MTF's credibility is still at work.
It's only a matter of time.
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Chip Ford |
The Boston Herald
Thursday, October 14, 2004
A Boston Herald editorial
Report's timing suspect
Timing, as they say, is everything. And frankly there have been some intriguing questions raised about the timing of the latest report from the Massachusetts Taxpayers Foundation.
There was a time when the group was a source of truly objective information about the state of the state's economy. But that time seems to have come and gone.
This week the Taxpayers Foundation issued its latest findings, citing a "structural budget deficit" of $750 million that could rise to $900 million in fiscal 2006.
"It's clearly the wrong time for a major tax cut or large spending increases," foundation head Michael Widmer told The Boston Globe over the weekend. "You can't have either without identifying areas you'll have to cut. There's still a large mismatch between ongoing revenues and ongoing spending."
The MTF findings note that income tax collections for the first half of fiscal 2004 were 15.4 percent above the same period in 2003, although personal income grew by a mere 4.5 percent. The growth, Widmer says, is largely attributable to tax receipts from capital gains, bonuses and stock options - to the tune of anywhere from $300 million to $500 million. Now to Widmer's way of thinking, the state is "too dependent on the stock market and those taxes."
Of course, we wonder if Widmer and company know something about the stock market we don't (and whether they prefer keeping their money under a mattress).
There is no question that the growth in state spending, especially for the virtually bottomless pit of Medicaid, needs to be brought under control. But the sad fact of life in Massachusetts is that the taxpayer always comes last. Tax cuts are always the last item on the agenda on Beacon Hill.
And it appears that's just fine with Widmer and MTF. Hence the rather suspect timing of the report as raised by
Citizens for Limited Taxation.
"The Legislature is not in session," said a CLT press release. "We are well into the fiscal '05 budget year and the fiscal '06 budget debate is months away. There is no imminent vote on the rollback issue. So why is it necessary to release yet another anti-rollback report right now?"
Well, there is the legislative election with some candidates committed to a tax rollback to 5 percent.
Now we rarely look for hidden motives or buy into conspiracy theories, but this latest MTF report isn't passing the sniff test.
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The MetroWest Daily News
Wednesday, October 13, 2004
A MetroWest Daily News editorial
A growing budget gap
The presidential campaign is grabbing most of the public's attention, but there's a state election coming up in three weeks as well. In it, the largest field of challengers in years is making a concerted effort to give Mitt Romney's Republicans a stronger voice in the state Legislature.
On issues, the battleground is familiar. Romney's Republicans pitch the need for reform, the arrogance of a state Legislature dominated by Democratic incumbents and the virtues of tax-cutting. The Democrats are left defending a record of more modest reforms, cuts in services and local aid that could have been worse and a $1 billion tax increase that helped balance the budget year before last.
There's an important debate to be had here about taxes and spending, one that requires a little history. Four years ago, when the high-tech boom and the stock market bubble had bestowed record surpluses on the Massachusetts treasury, then-Gov. Paul Cellucci convinced a majority of voters that we could roll the income tax rate from 5.95 percent to 5 percent without hurting state services. Soon thereafter, capital gains tax receipts dried up and the state budget plunged into a $3 billion deficit. Balancing the budget over the next two years required halting the income tax rollback, drawing down the state's rainy day reserves and cutting services -- including aid to cities and towns.
Balancing the budget this year was a little easier, which has encouraged Romney to push for finishing the job begun in 2000 and cutting the income tax rate, now stuck at 5.3 percent, down to 5 percent.
A report this week by the Massachusetts Taxpayers Foundation sheds useful light on this decision. The
MTF, a respected, non-partisan, business-funded group, found that despite the mild economic recovery, the Commonwealth is facing a growing structural deficit. The gap between revenue and spending, an estimated $170 million in fiscal 2004, is projected to grow to $750 million in 2005 and $910 million in 2006.
The $724 million in unanticipated revenues that helped balance the books this year and replenish the rainy day fund, doesn't mean the crisis has passed, MTF says. A large part of that revenue came from capital gains, stock options and bonuses attributable to the stock market's recovery in 2003, according to the MTF analysis, which is money we've already learned not to count on. Even so, the unbudgeted revenue didn't cover the $900 million in one-time revenues, including reserves, used to balance the budget.
Given this structural deficit, several tough questions should be asked of those who hope to serve in the Legislature:
l With the Commonwealth running this deep in the red, can we afford to cut the income tax to 5 percent, which would cost the treasury between $400 million and $600 million?
l Everyone favors reform in general, and there are some specific reforms Romney has proposed we support. But how much in recurring spending can really be saved if Romney's proposals are enacted?
l The Supreme Judicial Court heard arguments last week in a case that could throw the formula for state education aid out the window? How much will it cost to address the inadequacy of state aid and the inequity of the funding formula?
l Will reducing income taxes, if it results in cuts to local aid, only push property taxes higher? Which tax should the Legislature work harder to control?
While John F. Kerry and George W. Bush debate before millions of voters, candidates for state Legislature generally face off before tiny groups of voters who have already made up their minds. But it's your money and your state government. Now is the time to pin down the candidates on where they stand on on some tough issues.
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State House News Service
Wednesday, October 13, 2004
As GOP pushed $500M tax cut,
more gradual tax cut plan is on the books
By Cyndi Roy
Trying to stop a Republican push to roll the income tax back to 5 percent next year, Democrats are insisting other tax cuts are on the way.
What they haven't highlighted, though, is that the cuts - if they happen at all - will likely not occur for many years. Under the best possible circumstances for tax cut proponents, the state income tax rate would not reach 5 percent until 2014, according to current laws.
In the law that raised taxes by $1.2 billion in 2002, lawmakers included triggers designed to restore the income tax rate to 5 percent - it currently stands at 5.3 percent - and increase personal exemptions. The triggers, which predicate tax cuts on continued economic improvement, require exemptions to be increased first, which means the income tax rate would not begin to fall until at least 2009.
In light of the recent and continuing budget cycles marked by budget cuts and big gaps between spending and revenues, Democratic legislative leaders who wrote the tax law say it was designed to make sure tax cuts occur gradually, without removing too much money targeted for state programs and services.
"Republicans want this hidden, but the reality is taxes will be going down," House chairman Paul Casey (D-Winchester) told the News Service. "But we're not going to immediately sever the head of the tax monster. It is a law that was drafted carefully and rationally."
At a recent campaign season press conference, Lt. Gov. Kerry Healey, joined by 11 Republican legislative candidates, repeated the Republican mantra calling for an immediate cut in the income tax rate to 5 percent. State officials estimate the annual worth of such a tax cut at $500 million to $540 million.
"Now is the time to uphold the will of the voters and return the income tax to 5 percent," she said. "Democrats argue that now is not the time, but if not now, when?"
While current laws make an income tax cut unlikely for many years, Casey said Democrats would "positively" look at accelerating the tax cut if the economy were to improve quicker than expected.
"That would definitely be on the table," he said. "But we need to be cautious in taking a step toward that. We need to make sure we don't have a structural deficit and we need to rebuild the stabilization fund."
Under current law, the tax rate is set to decrease by .05 percent, from 5.3 percent to 5.25 percent in 2009, if certain economic "triggers" are met. If the state's economy improves steadily for six years after that, the rate would stand at 5 percent in 2014 and be held there.
But before the state can start reducing the income tax, a number of economic factors must be in place.
First, revenue collections must grow at 2.5 percent each fiscal year. Additionally, collections must remain positive during the last six months of the calendar year, a typically volatile period in the economic cycle.
If that happens, as is expected this coming January, taxpayers will see an automatic increase in their personal exemption, which defines the amount of income not subject to taxes.
State officials estimate the exemption increase will save taxpayers between $58 million and $62 million a year, nearly 10 times less than the value of immediately rolling the income tax to 5 percent.
If the fiscal requirements are met, personal exemptions will rise by $275 for individuals and by $550 for married couples for four consecutive years until exemptions are restored to 2002 levels, $4,400 for individuals and $8,800 for couples.
The current personal exemption is $3,300 for individuals and $6,600 for couples.
If these conditions are met for four years, the income tax will then begin to decrease by .05 percent every year until the rate reaches 5 percent, a process that will take a minimum of six years. The time frame could be longer if the revenue growth slows and fails to hit benchmarks.
The state is on track to begin the process Jan. 1. A September 15 report by the Department of Revenue says the inflation-adjusted baseline growth rate was 7 percent, 4.5 percent above the requirement to get the tax cut ball rolling.
Assuming the economy improves to the point where the personal exemption returns to pre-tax hike levels, and the tax rate hits 5 percent, a tax deduction for charitable donations, another voter-approved law, will be restored in 2015.
The economy has slowly begun to turn around, and Republicans and anti-tax groups contend the state saw a surplus this year. Taxpayers deserve to see the benefit in their wallets now, they argue, not in the future.
"The tax law is completely meaningless," said Barbara Anderson, head of
Citizens for Limited Taxation. "Can you even imagine 2014? We thought a three-year phase down of the income tax was a compromise. It's just ridiculous."
CLT was the sponsor of a ballot question in 2000 that was supposed to roll the income tax back to 5 percent over three years, but lawmakers froze it at 5.3 percent in 2002.
Democrats and a leading taxpayers group argue there is still a $750 million structural deficit, and cutting taxes now would be irresponsible and would result in more unpopular cuts to programs and services.
"The issue here is whether the state's finances are in sufficient stability to have a more accelerated tax cut," said Michael
Widmer, president of the Massachusetts Taxpayers Foundation.
MTF supported the 2002 tax law, and said the state is still operating in the red. "Our analysis shows there are still structural deficits and will be into 2006. It is not appropriate to have a large tax cut when we haven't established fiscal balance."
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