CLT
UPDATE
Thursday, November 10, 2005
Just how absurd will the Legislature
become?
The Legislature is quietly advancing its solution to
a problem of its own making, rewinding the effective date of a capital
gains tax hike from May 1, 2002, to Jan. 1 of that year to comply with a
court ruling....
The move puts Gov. Mitt Romney in a tight spot - just the way lawmakers
like it.... If he vetoes it, more taxpayers might be forced to pay,
since the under-$100 category won’t be exempt. He can try to amend the
bill, making the effective date Jan. 1, 2003, but he tried that once
already and the Legislature didn’t bite.
But in this case, the principle is worth any potential risk and the
governor simply must veto this bill. If nothing else, it will send a
clear message that the taxpayers can not be expected to make up for the
Legislature’s mistakes, and that a retroactive tax increase is, to use
Romney’s own words, fundamentally unfair.
A Boston Herald editorial
Friday, November 4, 2005
Tax fairness above all
There is no money for the income-tax cut voters overwhelming
approved five years ago. There is no money to fix the Legislature's mistake that
will force 40,000 people to pay an unfair retroactive capital gains tax. To
understand why, look no further than the current pigout, otherwise known as the
"economic stimulus bill."
State revenues are surging, and our elected leaders know what to do with the
windfall. We don't have a "Bridge to Nowhere," but Beacon Hill is ready to spend
$500 million on dozens of pet projects....
On Beacon Hill, things like this happen at times like these. In a pigout this
big, what's another $4.3 million -- certainly "not less" -- among friends?
The Boston Globe
Wednesday, November 9, 2005
The politics of pork
By Steve Bailey
The Massachusetts Department of Revenue began notifying
48,000 taxpayers yesterday that they owe capital gains taxes on the sale of
assets that occurred nearly four years ago, outraging consumer advocates and
business leaders who called the retroactive taxation plan unfair....
"I think there are a lot of people who are going to be shocked when they get
this bill," said Mark Bernardin, an Andover man who together with five friends
formed Citizens Against Retroactive Taxation. "This is not just taking a
windfall from rich people. It's hitting ordinary people, and it's not a good way
to run government." ...
Governor Mitt Romney and legislative Republicans urged lawmakers to set 2003 as
the starting date, which would have meant that many taxpayers would be owed a
rebate for taxes they had paid on transactions that occurred in the last eight
months of 2002. Democrats rejected that plan, however, arguing that the state
could not afford the roughly $275 million the refunds would cost....
Steven Buckley, a Canton lawyer who in 2002 sold a four-family house in South
Boston, was outraged when he learned from his accountant months ago that he owed
$19,000 in retroactive taxes on the transaction. He paid the money, but has been
hoping that Romney would prevail so he could get the money back.
"I paid approximately $19,000 in gains that I wouldn't have had to pay if I had
sold in 2001," Buckley said. "Had I known then what I know now, my decisions
would definitely have been different."
Michael J. Widmer -- president of the Massachusetts Taxpayers Foundation, a
business-backed watchdog group -- said he doubted that the bill to waive
interest payments would do much to appease those who receive new bills.
"This is arbitrary and capricious, and its impact is very uneven and unfair,"
Widmer said. "Individuals sell something under one set of rules; they suddenly
get hit with a substantial retroactive tax. That is not how the tax code is
supposed to work. It may be constitutional, but it is inequitable."
The Boston Globe
Thursday, November 10, 2005
State is sending notifications of retroactive taxes
48,000 residents face 2002 billings
Barbara Anderson's CLT Commentary
Along with all the other mysterious things that are
going on in the waning days of this legislative session, the retroactive
capital gains tax is on the agenda.
You may recall that in the middle of 2002, when the Legislature froze
our income tax rollback, it also increased the capital gains tax. This
was clearly unconstitutional so eventually the courts ruled that you
can’t change tax rates during a tax year: the state must either return
the new tax money that was collected from May-October, or collect it
from those who had capital gains from January-April. CLT supports
Governor Romney’s effort to return the money, rather than suddenly hit
taxpayers with a three-year retroactive tax.
If the Legislature doesn’t act, the court decision will cost
approximately 48,000 taxpayers an average of $4,200 each -- if the
state doesn't charge interest, $3,725! The Legislature’s new bill
would forgive the interest and forgive the retroactive tax
for those who owe $100 or less. Some people, who sold a business
planning to retire, could be hit with an unexpected retroactive bill for
thousands of dollars. Besides that injustice, word would go out to
investors across the nation that the Commonwealth of Massachusetts is a
very bad place in which to invest.
If the governor vetoes this bill, the court decision defaults to the
Jan. 1, 2002 date, and the taxpayers get hit. If he doesn’t veto,
everyone gets hit except those who would owe $100 or less.
If any of you had a capital gains tax levy in early 2002, and are
willing to help the governor’s office put a face to the problem, please
email us.
Our goal is to persuade the Legislature to set the capital gains
increase for Jan. 1, 2003 instead of the beginning of the retroactive
year.
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Barbara Anderson |
The Boston Herald
Friday, November 4, 2005
A Boston Herald editorial
Tax fairness above all
Dig deep, oh ye who earned capital gains back in early 2002. The state
is planning a retroactive raid on your bank accounts, to the tune of
$150 million plus.
The Legislature is quietly advancing its solution to a problem of its
own making, rewinding the effective date of a capital gains tax hike
from May 1, 2002, to Jan. 1 of that year to comply with a court ruling.
That means any taxpayer who paid the lower rate on the sale of a
business, a second home or other investments during that four-month
period will have to come up with extra dough, unless the gain was under
$100.
The move puts Gov. Mitt Romney in a tight spot - just the way lawmakers
like it. He simply can’t sign a retroactive tax increase into law, but
the measure is attached to a bill he proposed himself to raise $85
million by closing corporate tax loopholes. If he vetoes it, more
taxpayers might be forced to pay, since the under-$100 category won’t be
exempt. He can try to amend the bill, making the effective date Jan. 1,
2003, but he tried that once already and the Legislature didn’t bite.
But in this case, the principle is worth any potential risk and the
governor simply must veto this bill. If nothing else, it will send a
clear message that the taxpayers can not be expected to make up for the
Legislature’s mistakes, and that a retroactive tax increase is, to use
Romney’s own words, fundamentally unfair.
Return to top
The Boston Globe
Wednesday, November 9, 2005
The politics of pork
By Steve Bailey, Globe Columnist
The Boston Red Sox are in line to get theirs. And so is wealthy
developer Arthur Winn.
There is no money for the income-tax cut voters overwhelming approved
five years ago. There is no money to fix the Legislature's mistake that
will force 40,000 people to pay an unfair retroactive capital gains tax.
To understand why, look no further than the current pigout, otherwise
known as the "economic stimulus bill."
State revenues are surging, and our elected leaders know what to do with
the windfall. We don't have a "Bridge to Nowhere," but Beacon Hill is
ready to spend $500 million on dozens of pet projects. Among them: $20
million on a ramp to a Fall River industrial park that would be better
spent improving downtown Fall River. The House proposed $12.5 million
for transit improvements around Fenway Park, only to have the Senate
trump it with $55 million. When the mayor of Boston, a man who has never
seen a state dollar he couldn't use, starts complaining about loose
spending, something is amiss.
Then there is the mini-city, Columbus Center, Winn wants to build over
the Mass. Pike. The price just keeps going up on this monster, which is
to include 450 condos, a hotel, 900 parking spaces, retail, and more.
(Latest estimate: more than $500 million and rising.)
Winn spent nearly three years telling the community he had to build big
to justify the enormous cost of a deck over the turnpike. Consultant
McKinney & Associates ran economic models touting just that; all
included no public subsidies for this private project.
But buried deep in the Senate version of the economic stimulus bill are
these three lines: "Not less than $4.3 million shall be expended for the
purpose of an economic grant to the City of Boston for the Columbus
Center project." Can you imagine three scarier words than "not less
than" in a pork bill like this?
Incredibly -- or maybe not incredibly at all -- is that this "not less
than $4.3 million" gift was inserted in the bill by that poster girl for
good government, Senator Dianne Wilkerson -- the Boston Democrat who was
sentenced to six months of house arrest for failing to file federal
income taxes for four years and is now being sued by the attorney
general over alleged campaign finance violations.
In an interview, Wilkerson called Columbus Center "my favorite project,"
and said the funding was for "a very small gap" in the financing of the
deck over the turnpike. But she didn't know how much the deck would cost
and couldn't explain how she got to $4.3 million. "I think it may be a
little more than that," she said. Tip O'Neill once said something like
that about his own favorite project, the Big Dig.
What she didn't mention is that she is one of Winn's favorite
politicians. Winn, a prominent Republican moneybags, and his family gave
Wilkerson, a liberal Democrat, $3,750 from 2002 to 2004, according to
campaign finance records. Others on the Winn payroll gave, too, making
her one of the more unlikely beneficiaries of Winn largesse. Think about
it as one of the greatest returns on investment of all time.
A Columbus Center spokesman, Will Woodruff (a $500 Wilkerson donor),
said the developers will not comment on the financing until the package
is compete, and he didn't return my calls about the campaign donations.
"We have always said we would be pushing for public financing," he said.
They have been knocking on the door at the Massachusetts Housing Finance
Agency, which is expected to provide a low-interest loan of $15 million.
Reasonable people can differ on Columbus Center. Many like it as a way
of knitting Back Bay and the South End together again. I think it is
just too huge, part of the ongoing Manhattanization of Boston. The
rationale for that size was always the same: The cost of building over
the turnpike was the driving force. Now Winn will get his 35-story
tower, and the public will help foot the bill for the deck. Call it
Win-Winn.
On Beacon Hill, things like this happen at times like these. In a pigout
this big, what's another $4.3 million -- certainly "not less" -- among
friends?
Return to top
The Boston Globe
Thursday, November 10, 2005
State is sending notifications of retroactive taxes
48,000 residents face 2002 billings
By Raphael Lewis, Globe Staff
The Massachusetts Department of Revenue began notifying 48,000 taxpayers
yesterday that they owe capital gains taxes on the sale of assets that
occurred nearly four years ago, outraging consumer advocates and
business leaders who called the retroactive taxation plan unfair.
The average bill will total about $4,200, but would drop to $3,725 under
a measure the Legislature expects to send to the governor today. That
measure would waive any interest the taxpayers would owe and exempt
those who owe $100 or less.
According to Revenue Commissioner Alan LeBovidge, almost half of the tax
money the state will reap from the retroactive tax payments, about $78
million, is owed by just 278 wealthy individuals. Their average bill
will be about $281,000. But roughly one-third of those who will receive
the tax bills made less than $70,000 in 2002, he said.
"I think there are a lot of people who are going to be shocked when they
get this bill," said Mark Bernardin, an Andover man who together with
five friends formed Citizens Against Retroactive Taxation. "This is not
just taking a windfall from rich people. It's hitting ordinary people,
and it's not a good way to run government."
The mailings that began going out yesterday are preliminary bills that
inform taxpayers of the amount that the state will seek, LeBovidge said.
Once they receive the notice, taxpayers have 30 days to either pay the
bill or notify the Revenue Department that they dispute the amount they
owe.
"I'm going into hiding," LeBovidge joked. "I think we could get a lot of
calls."
The tax levies are the result of a 2004 Supreme Judicial Court ruling
that overturned a decision by the Legislature in 2002 to raise the
state's capital gains tax rate to 5.3 percent midway through that year.
The SJC ruled that the state could not change the rate in midyear,
leaving the state with the choice of making the higher rate effective in
January 2003 or January 2002.
Governor Mitt Romney and legislative Republicans urged lawmakers to set
2003 as the starting date, which would have meant that many taxpayers
would be owed a rebate for taxes they had paid on transactions that
occurred in the last eight months of 2002. Democrats rejected that plan,
however, arguing that the state could not afford the roughly $275
million the refunds would cost.
The alternative favored by the Democrats, making the tax increase
effective at the beginning of 2002, means that taxpayers now owe capital
gains taxes on transactions made during the first four months of the
year.
Yesterday, seeking to blunt the political fallout of the unusual tax
increase, House Democrats approved a Senate measure to waive interest on
the new capital gains payments and to exempt any taxpayer who owes $100
or less. That bill would shave about $45 million off the $150 million to
$205 million that the tax hikes will reap, LeBovidge said. It would also
reduce the number of people who owe money from 48,000 to 40,000, he
said.
But Romney and other Republicans blasted the interest waiver as a
transparent effort to mask a tax hike. Lawmakers also said they expected
Romney to send the bill back to the Legislature with an amendment that
again calls for the tax hike to become effective on Jan. 1, 2003.
"I don't want to discuss strategy, but it's fair to say the governor
intends to use every tool at his disposal to fight for the interests of
fairness," Romney communications director Eric Fehrnstrom said. He
added, "People who sold assets in 2002 did so based on the tax laws at
the time. For the state to come back three years later with a surprise
tax bill has the potential to create real economic hardship for
thousands of citizens."
Some taxpayers, bracing for the retroactive bills, have been trying to
fight the Legislature's plans.
Steven Buckley, a Canton lawyer who in 2002 sold a four-family house in
South Boston, was outraged when he learned from his accountant months
ago that he owed $19,000 in retroactive taxes on the transaction. He
paid the money, but has been hoping that Romney would prevail so he
could get the money back.
"I paid approximately $19,000 in gains that I wouldn't have had to pay
if I had sold in 2001," Buckley said. "Had I known then what I know now,
my decisions would definitely have been different."
Michael J. Widmer -- president of the Massachusetts Taxpayers
Foundation, a business-backed watchdog group -- said he doubted that the
bill to waive interest payments would do much to appease those who
receive new bills.
"This is arbitrary and capricious, and its impact is very uneven and
unfair," Widmer said. "Individuals sell something under one set of
rules; they suddenly get hit with a substantial retroactive tax. That is
not how the tax code is supposed to work. It may be constitutional, but
it is inequitable."
Return to top
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