and the
Citizens Economic Research Foundation

Massachusetts House of Representative
Debate on Income Tax Rollback
April 25, 2005

State House News Service
House Session - Monday, April 25, 2005

CONVENES:  The House convened at 10:08 am, Speaker Salvatore DiMasi of Boston presiding. House Chaplain Robert Quinn offered the prayer and members and guests recited the Pledge of Allegiance....

INCOME TAX CUT:  Question came on amendment 774, offered by Rep. Perry. The amendment reads: establish charitable deductions when determining taxable income and reduces the income tax rate to 5 percent for taxable years beginning on or after Jan. 1, 2006.

Rep. Perry said I stand here today to take a trip down memory road back to 2000, when the voters clearly sent a message to the Commonwealth. The voters clearly stated that they wanted their income tax level to go back to 5 percent. In my county, the citizens voted 66 percent in favor. The second question in my amendment has to do with charitable deductions, which 1,834,305 or 67 percent of the people we represent said they wanted their donations to be deductible. A lot has happened since then. We've had elections, we've had terrorist attacks, and we've had fiscal crunches. And there have been a lot of excuses made as to why we can't do it. But quite frankly, those excuses have come to an end.

We heard after the terrorist attacks that we have declining revenues. But we should look at where we are today. At times, this state has had a $700 million surplus. And according to DOR, if my amendment is adopted, it'll cost $266 million, just one third of our excess revenue. Our founding fathers gave us the opportunity to redress the constitution through the ballot process. They told us in the Legislature what they wanted. Don't you think at some level it's dangerous for us to ignore the will of the voters? To say that we know better?

I stand here, five fiscal years in a row we have not listened to the voters. We have not honored their right to redress their government. I think that's one of the reasons why we get a black eye in this institution. I put this before you as two issues we have not yet resolved. All my constituents can see how I'm trying to address their will, and all of your constituents can see how you address their needs. That money will be put into our economy.

When we give money back, Americans have a tendency to spend that money. They will put it into our economy. They will eat more at our local restaurants. That will mean the state will collect more in meals tax, in sales tax. They will hire more employees to pay income tax. Although I admit there will be an impact during the first year, I'd like to suggest to you that we will see a net benefit to our Commonwealth, and create more opportunities for those who are struggling.

But at the core of this debate is the will of the voters. John Adams gave us that right. The time is right.

Rep. Balser said was it Yogi Berra that said it's déjà vu all over again? I gave my maiden speech against the GOP proposal to cut the income tax rate to 5 percent. I rise again to do the same. During the last five years we've had to live thorough one of the worst fiscal crises ever in the state. We all watched 14,500 teachers, police, firefighters, librarians and other officials be laid off. We've watched people lose their health care. We watched the universities of this state cut tremendously. We've seen detox beds cut, so people with addictions have no place to go. Today you read again about the mentally ill children without services. I don't have to tell you about all the cuts.

There were many reasons. One was the rollback of the income tax as far as it went. Michael Widmer points out that the ballot question was a piece of the perfect storm we have lived through. The voters did vote for this. And I remember that then governor and lieutenant governor campaigning that you can vote for this because we don't need the money. There will be no cuts to essential services. If that were true, I would vote for this. Who wouldn't?

I would love to see an honest debate with the GOP party between rolling back the income tax and cutting essential services as a result. That's a debate I would like to see. Would the people like to see the cuts to schools, human services hurting, health care hurting, environmental services hurting?

I rise not only to oppose this amendment, but I would in fact support an increase to 5.9 percent. It would bring in $1 billion. I would call your attention to that book that was on every member's desk today, with 1,300 amendments. Even with a ways and means budget that did as best as it could. How are we going to fund those amendments?

The minority party has it backwards. The state doesn't need us to roll back the income tax. I would like us to argue if we should all chip in a little more. Wouldn't it be something if for $150 we could have $1 billion more to spend?

I believe that government is here to provide the services that the people of the Commonwealth need and deserve. The amendments before you is irresponsible and would make it harder for us to provide the services. I urge you to defeat the amendment and have an honest debate. Do we all chip in a little bit, or do we cut back even more? I look forward to an honest debate someday with the minority party.

Rep. Flynn said I was a little surprised for my friend from the Cape to get up and talk about budget cuts. As one of the leading conservatives in this House, I think it would be one of the most irresponsible things that we ever try to do, to bring that back to 5 percent. I'm completely unaware of any surplus that exists here. I thought following the budgets of the last several years, even after we all agreed on a figure, I didn't know that was a surplus. I thought it was an amount of money that was available. It would seem to me, being reasonable people, I believe that vote today to reduce this - I don't think it would pass. I give people more credit than that. It seems to me that a tax cut at this time, I don't think it would open a fire station. I don't think it would hire a teacher. I urge members to dismiss this very quickly so we can get on with business.

Rep. Cabral said I rise in support of the will of the voters in my district. They voted this question down. They understand the responsibility of state government. When we approved this, we set a process in motion and it's working. If you did your taxes this year, you'll notice that exemptions have changed. That's part of the process. I think we need to really proceed in a way that is fiscally responsible. This amendment is not fiscally responsible because what we will do will be forever shifting the costs to the local communities. If we look at what is happening to property taxes, you will surely recognize what's happening. We cannot send back as much local aid as we'd like to. But to stand here and just state the will of the voters is misleading. Not all communities supported that question. I hope that you focus on fiscal responsibility. I'm surprised this comes from the minority party because they pride themselves on being fiscally responsible.

Rep. Festa said this is probably the most important amendment we will be talking about today and this week. It focuses directly on exactly what we're in this business to do. My friend is seeking a vote that is effectively going to put the membership on the line and make us stand up for what we believe in. I believe every one in this chamber is looking forward to that vote. The people who elected us expect of us the judgment that is best to run this state. They do not expect us to pander to them. They do not expect us to misrepresent the reality of the situation. Anyone who votes in favor of an amendment that takes away $266 million is sending a very clear message to the people that they don't care what the truth is.

Rep. Festa did not yield to Rep. Peterson.

Rep. Festa continued. Anyone that would be so bold as to file amendments that spend hundreds of millions of dollars and support this amendment - you are the ones that are misrepresenting the people. The reason why the people voted for this in the first place is because they were told misrepresentations of the fiscal truths of the state. They were told they could have it all. I know you all care about the people you represent. I know it's never easy to vote for any amendment that looks like you're voting for a tax increase. But in the end, it is the worst form of voting we can make. We still are not spending the money on drug treatment. How could you possibly vote for an amendment like this and be true to the people you represent? Lets be honest about this. We need this money. The people need this money.

Rep. Humason said I'd like to commend the chairman of ways and means. I'll be brief. There's so much we could say. But I want to address a comment that we are taking money away. We're giving money back. That money belongs to the people of the Commonwealth that elect us to run the government. I'm here because the people in my district asked me to make sure we run government as efficiently as possible. It's not an unlimited quantity of money. Surely we are all interested in helping the people that are less fortunate. But that's not the issue. Why is it okay to raise taxes in an emergency and never give them back? Now should be that time. We believe that if you give money back, they will spend it wisely. They will give to charities. That's what we want, the control to be in the hands of those in our districts. The people in my district voted strongly in favor of this. This is ridiculous.

Rep. Humason requested a roll call and there was sufficient support.

Rep. Binienda said the amendment before us would have a devastating effect on our economy. It would cost $226 million and next year over $600 million. When you spell that out that's teachers, fireman, highway workers. Where do we make those cuts? We've already lowered the income tax rate from 6.25 to 5.3 and we're already on our way to lowering it to 5 percent. We've already raised the personal exemption. I would like to offer a further amendment that I now offer to the clerk.

FURTHER AMENDMENT - STUDY:  Rep. Binienda offered a further amendment requiring a DOR study of the amendment's impact on the state's economy and the revenue.

Rep. Binienda said I'm asking this because members have bills that do exactly what this amendment would do. I think the committee process would be beaten back if we accept those amendments right now. All I'm asking is that we get a report from the DOR on the impact on this state and the taxpayers. I hope the further amendment is adopted.

Rep. Peterson said I hope the further amendment does not prevail. In the past, we've had clear up or down votes in favor of things or against. We'd gotten away from further amendments that confuse the constituents and make it a convoluted vote. Speakers got up and talked about consistency. Well, last session, it was then that he was talking about the will of the voters being understood, only to deal with the appointment of a US senator. We need the voters to make their will clear through a special election. They made their will clear with this issue, but we are not listening. Mass Taxpayers has an estimate of revenues of $17.3 billion. But that's not the estimate we're using here in the budget. We're using an estimate of $17.1. You don't know where that came from. In most cases people have started to adjust that upwards. I propose that we can afford this.

On the issue of local aid - that has not been determined. We will make that choice and we do have amendments that offer to increase that. I urge members to support us in that effort. I think that is a good thing. I urge the members to defeat the further amendment.

Rep. Rogers said I hope the further amendment is adopted. It is fiscally responsible. The main amendment is fiscally reckless. To take that amount of money out of the revenue stream, without assessing the impact on the budget, is reckless. The vote that the Legislature took in 2003 was to return to a 5 percent income tax rate. That is the law. However, tied to the health of the state economy here in the commonwealth. Despite what we hear, that can often be described as political rhetoric, is misleading to say the least. Massachusetts continues to struggle fiscally as does more than 40 states. That is a fact. We have a structural deficit of $800 million in this year's budget. The budget we're debating now takes $380 million from the rainy day fund, plus another $150 million from the tobacco fund that should otherwise go to the health care security trust. It makes no sense. For the last five years, the experts have all been wrong on the consensus revenue forecast. Revenue forecast comes down to one exercise - guessing. That's what it is, it's a guess. You have to guess how much money will come in next year. $17.1 billion is exceedingly responsible. All the experts will admit that what's contributing to the revenue spike here - capital gains, bonus payments and estate tax increases. These are all one-time increases in revenue. What continues to suffer is withholding and sales taxes. Between those two items, that's 80 percent of the tax revenue pie of Massachusetts. We don't have a handle on cap gains here in Massachusetts. We have no idea how much is going to be recurring next year.

Rep. Hill said point of parliamentary inquiry. Due to the fact that we now have a further amendment, does that prevent other members from offering other amendments dealing with the rollback of the income tax?

After a brief rostrum conference with the House clerks, Petrolati said this will refer the further amendment to a study and not preclude other amendments.

Rep. Evangelidis said I rise against the further amendment. When I ran for office, I made the voters one promise, and that was to listen to them. I told them, if that's what you wanted, I would be voting on their behalf. In 2000, my district voted 70 percent in favor of this question. In 2002, the voters had an opportunity to vote on eliminating entirely the income tax. 46 percent wanted to do away entirely with an income tax on that vote. If you don't find that very compelling, think about this. I find it very interesting they argue the taxpayers should be chipping in a little more. They can give a voluntary 5.9 percent. There's only been a few thousand people that have ever wanted to contribute that much. I think they're right. That number's gone nowhere but down during the last few years. I think the citizens of Massachusetts have a better way to spend the $23.6 billion than we do. I would ask you to look inside your souls and look inside your districts. I think they would support this.

Rep. Stanley said we're all elected to do what is responsible. We also have another amendment for $170 million in corporate loopholes. If that doesn't go through we'll have to find that revenue as well. We still have a structural deficit. We are still using one-time revenue to balance the state budget. We have been forced to sell surplus state property. That's not a fiscally responsible way to balance the budget. I hope the further amendment is adopted and the original amendment is not adopted.

Rep. Spellane said I agree that we need to look inside our districts. In the city of Worcester, nearly 100 layoffs in the school system. I see a school budget that will not be filled. I see a decreasing number of police. I see a need to cover the uninsured. The debate we are having right now would be better suited with the slogan from the Olympics - let the games begin again. If we were to have a clean debate about the issues, as the minority party has suggested, we wouldn't have nearly $330 million in budget amendments from the minority party. So let's have a clean discussion. Let's have some consistency in what we're debating right now.

Rep. Perry said the further amendment would preclude a clean vote. That was the purpose of my amendment. I said I was coming up here representing the taxpayers. I'm only asking us to vote our conscience. If you truly believe that we should not rollback the income tax, fine. I ask that we defeat this further amendment and we move on with this debate. We're talking about the priorities of our state budget.

Rep. O'Brien said I often wonder what the best way to cut through the arguments is. I rely heavily on the Mass Taxpayers Foundation, as I know a number of you do. I know we make independent decisions. But they have an interesting history of analyzing this situation. They have commented that we are facing the perfect storm. They said that given the fact that we had voted for 42 tax cuts over the last six years, that coupled with the vote to decrease the tax rate was creating the perfect fiscal storm. And that we needed to tread cautiously as we proceeded. We then voted to stop the decrease and put in the economic trigger. Recently they came out with another report, an analysis of Romney's House 1 proposal. It made the case that if we support the decrease, we are putting our local municipalities in jeopardy. I happen to agree with that. I am concerned that the impact we have experienced is too much. It would be fiscally irresponsible to support that decrease. I stand in support of my local communities.

Rep. Blumer said I rise in opposition to rolling back the income tax cut. That amendment translates into about $50 per family. In my own district, fees for kindergarten have gone from zero to $2,500. Bus fees are now imposed. People are talking about overrides to Proposition 2 1/2 to just maintain services. My own district has closed an elementary school in response to the cuts. People are losing health care coverage. At the state level, we're trying to figure out how to fund mental health services, all of the things that make individuals lives better. There are things we need to do in our local communities that we can only do through action collectively. People can't get together to donate $50 to save a school. We, as legislators, can raise the funds to put people back on health coverage.

Rep. Cabral said again, I have a great deal of respect for the voters of my district and their wisdom. And they voted against this question. I would say that please let me put across to all of you the wishes and the wisdom of my district. I too would like to vote on this question. It's a clean-cut question. I too have voted to roll back the taxes to 5 percent. We did it then in a very responsible way. We tied it to the economy. That's called fiscal responsibility. The voters in my district understood that.

Question came on the further amendment. Rep. Peterson requested a roll call and there was support.


Rep. Humason received unanimous consent to withdraw the roll call request on the Perry amendment.

By voice vote, amendment 774, as further amended, ADOPTED.

INCOME TAX CUT - 2007:  Rep. Jones offered amendment 791. The amendment deals with establishing for charitable deductions when determining taxable income and reduces the income tax rate to 5 percent for taxable years beginning on or after Jan. 1, 2007.

Rep. Binienda said I hope the amendment is not adopted. This would cost $113 million in the first year, $412 million the next year and $608 million in the next fiscal year. I do have before me a further amendment, which I place in the hands of the clerk.

FURTHER AMENDMENT - STUDY:  Rep. Binienda offered a further amendment requiring a study by the DOR on the effect of the amendment and requiring further approval from the House and Senate Ways and Means committees.

By voice vote, further amendment ADOPTED

By voice vote, amendment 791 as further amended, ADOPTED

INCOME TAX CUT - 2007:  Rep. Jones offered amendment 792. The amendment deals with establishing for charitable deductions when determining taxable income and reduces the income tax rate to 5 percent for taxable years beginning on or after Jan. 1, 2007.

Rep. Jones stood to be recognized, but Petrolati recognized Rep. Binienda.

Rep. Jones said point of order. Isn't the chair supposed to recognize the member seeking recognition?

Rep. Petrolati said the chair has the privilege to recognize any member rising from his seat.

Rep. Binienda said I would like to apologize to my good friend from North Reading. I gave the wrong figures for the last amendment. It would cost $235 million, $616 million and zero in the first year. I oppose this for the same reason. It takes too much money. For that reason, I offer a further amendment.

FURTHER AMENDMENT - STUDY:  Rep. Binienda offered a further amendment requiring a study by the DOR on the effect of the amendment and requiring further approval from the House and Senate Ways and Means committees.

By voice vote, further amendment ADOPTED

By voice vote, amendment 792, as further amended, ADOPTED

RECESSES: The House recessed at 9:42 pm, intending to return at 10 am Tuesday. Rep. Harkins said there will be a 10:30 am meeting Tuesday in Room 348 on the category of social services and there will be no roll calls until 11 am. There will be a Democratic leadership meeting in the Speaker's office at 11 am.

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