CLT
UPDATE
Thursday, December 1, 2005
Retro Tax fight continues behind the
Beacon Hill scene
Taxes are unpopular enough without being imposed
retroactively. Massachusetts residents who are being hit with capital
gains tax bills from the first half of 2002 deserve a refund....
Wealthy or not, they should not be taxed retroactively. The Legislature
would send a strong message about its commitment to sound tax policy by
adopting the governor's plan.
A Boston Globe editorial
Tuesday, November 29, 2005
Taxing common sense
There's room to argue about tax policy, but all sides should
agree on some principles, one of the most important being this: Once you pay
your taxes based on the rules in place at the time, they should be considered
paid in full. No government should be able to come back years later and charge
you again....
The Legislature, now in recess, should get back to business before the end of
the year to straighten out this mess.
A MetroWest Daily News editorial
Wednesday, November 30, 2005
Fix the retro tax mess
Governor Mitt Romney yesterday filed legislation to return
approximately $250 million in 2002 state capital gains taxes to 145,000
investors, leading several strategists to suggest the Republican governor was
aiming his antitax message at presidential primary voters as much as
Massachusetts taxpayers....
Romney's proposal comes nearly two months after the Supreme Judicial Court ruled
that a 2002 change to the state's capital gains tax rate was unconstitutional
because it took effect on May 1, 2002, almost halfway into the tax year....
"It is fundamentally unfair to tax people retroactively," Romney said in a news
release yesterday. "If we are to keep faith with the taxpayers of Massachusetts,
we need to correct the constitutional error that occurred here." ...
"There's nothing unfair about saying our highest-earning taxpayers should pay at
the same rate on their capital gains income that ordinary taxpayers pay on their
wages," said Noah Berger, executive director of the Massachusetts Budget and
Policy Center, a liberal watchdog group....
Michael Widmer, president of the Massachusetts Taxpayers Foundation, a
business-backed watchdog group, agreed that rolling the effective date of the
capital gains rate change to Jan. 1, 2002, was "unfair." He said that Romney's
plan, however, would do damage to the fiscal health of the state and that the
money would have to come from reserve accounts.
Widmer added that he has strong doubts Democratic leaders in the House and
Senate have any intention or desire to go in the same direction as Romney in
response to the SJC ruling.
"There's talk of [higher funding for] early childhood education, higher
education fund restoration, and healthcare coverage expansion," Widmer said.
"There's enormous pressure and a lot of important needs to be addressed."
Barbara Anderson, executive director of the antitax group Citizens for
Limited Taxation, saw it differently.
"Massachusetts voters don't elect Republican governors to get things done: We
choose them to defend ourselves against things being done to us!" Anderson said
yesterday in an e-mail. "This cap gains issue is a perfect example of that."
The Boston Globe
June 11, 2005
Romney bill aims to rebate 2002 capital gains taxes
Governor's move sparks debate
The state's economic paucity of the last few years seems to be giving way to
an economic glut. Massachusetts has been taking in revenue at a fast clip,
including that from a record-breaking lottery year.
Some $1.7 billion in "rainy day" funds have already been tallied, with another
$1.3 billion expected to pour into the state's coffers before the end of the
fiscal year in the July.
With nearly $3 billion in — or nearly in — hand, lawmakers are naturally arguing
about where to spend it....
The tax rate should be rolled back; voters demanded it at the ballot box. But
not now. Not while the state's financial health is still precarious, and not
while towns and cities are still being shortchanged.
A North Adams Transcript editorial
Monday, November 28, 2005
Don't roll back
Chip Ford's CLT Commentary
When The Boston Globe and The MetroWest Daily News
both editorialize in favor of tax fairness, join the chorus calling for
an end to the unconscionable retroactive capital gains tax, nearly
everyone in the state is singing from the same hymn book. So how long is
it going to take "The Best Legislature Money Can Buy" to wake up to
reality and end this embarrassment; do the right thing, put it behind
them? Our "full-time" Legislature needs to admit its mistake and make it
right with the taxpayers they've unnecessarily put through hell during
this holiday season.
Almost everyone's pulling for the beleaguered taxpayer now that we know
that 48,000 innocent taxpayers are affected. CLT was the first to
express support for changing the date of the tax hike to 2003, back in
June, as the so-called
Massachusetts Taxpayers Foundation got in the way, as usual. Its
president, Michael Widmer, believed the state needs the money more than
taxpayers -- even if this means a retroactive tax. This is what we have
come to expect from Widmer, who served as Mike Dukakis's Director of
Communications and Deputy Chief Secretary. [see
MTF's website] I wonder what his Big-Business Fat-Cat members think
about his position on the retroactive capital gains tax -- or even if
they know what his public posture has been?
Maybe even The North Adams Transcript will come around on this one, but
I wouldn't hold my breath. Any newspaper that can lay out clearly why
the voters' tax rollback is so ripe for rolling back -- then shamelessly
editorialize that it shouldn't be rolled back anyway -- is probably a
hopelessly lost cause.
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Chip Ford |
Barbara Anderson's CLT Commentary
There are several roll calls relating to the
retroactive capital gains tax. Some of them are "procedural," which is
often merely a follow-the-leadership vote, not an indication of a
Democrat legislator's true position.
We plan to publish them all but this seems to be the
best
single indicator if you want to know which legislators are inclined
to vote to change the effective date of the capital gains tax hike to
January 1, 2003 instead of January 1, 2002.
This vote took place before the tax bill notice was sent to affected
taxpayers, before legislators were aware of the full impact, and before
the state knew about the strong September and October revenue growth, so
should be considered a starting point for lobbying. House Republicans,
led by Minority Leader Brad Jones (R-North Reading), George Peterson
(R-Grafton) and Vinny deMacedo (R-Plymouth, tried to amend a corporate
loophole-closing bill with the new date. The amendment was defeated
48-102. Nay is to tax retroactively, Yea to change the date to Jan. 1,
2003.
S2156 Roll Call Vote
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Barbara Anderson |
The Boston Globe
Tuesday, November 29, 2005
A Boston Globe editorial
Taxing common sense
Taxes are unpopular enough without being imposed retroactively.
Massachusetts residents who are being hit with capital gains tax bills
from the first half of 2002 deserve a refund.
The problem dates to the Legislature's vote in 2002 to raise capital
gains tax rates beginning on May 1 of that year. The Supreme Judicial
Court ruled in 2004 that, under the Massachusetts Constitution, taxes
cannot be raised midyear. The SJC gave the Legislature a choice: Put off
the tax increase to January 2003 or impose it retroactively to January
2002. The Legislature chose the latter path, which brought in more
revenue to the state but is unfair to residents who made financial
decisions, such as whether to sell a home, under one set of tax
expectations only to have them change after the fact.
Initially the Revenue Department delayed sending out the retroactive tax
bills, hoping that the Legislature would devise a solution. But
preliminary assessments went out earlier this month, and the only relief
from the Legislature was a plan to forgive the tax for people who would
pay $100 or less and a waiver of interest payments for everybody else.
That proposal was included in a broader bill closing tax loopholes.
Governor Romney sent the entire bill back with a suggestion that the
lawmakers reject retroactivity in favor of a phased-in refund -- about
$250 million spread over three years. The Legislature should adopt
Romney's plan.
It would involve a loss of revenue of about $85 million this fiscal year
as well as in 2007 and 2008, money that could be spent on education and
social programs. But the retroactive tax bills are so unfair that the
state should send back the money. A phased-in process would reduce the
strain on the budget, and revenues are growing sufficiently so the
refunds would not cause a crisis.
The governor's plan builds on suggestions by Senator Cynthia Creem, a
Newton Democrat who is cochairman of the Revenue Committee, and lawyers
for Engel and Schultz, a Boston law firm that brought the suit which
prompted the SJC decision. Creem's support shows that the plan enjoys
bipartisan backing. A spokesman for Engel and Schultz says the firm
would forgo another lawsuit if the Legislature adopted the governor's
plan. It's time to refund the money and get the question out of the
courts.
Many of the 157,000 people eligible for refunds are quite wealthy.
Romney himself might get one, which he said he would donate to charity.
But many are middle-class people who generated capital gains in 2002.
Wealthy or not, they should not be taxed retroactively. The Legislature
would send a strong message about its commitment to sound tax policy by
adopting the governor's plan.
Return to top
The MetroWest Daily News
Wednesday, November 30, 2005
A MetroWest Daily News editorial
Fix the retro tax mess
There's room to argue about tax policy, but all sides should agree on
some principles, one of the most important being this: Once you pay your
taxes based on the rules in place at the time, they should be considered
paid in full. No government should be able to come back years later and
charge you again.
That's exactly what is happening for some 50,000 Massachusetts
taxpayers, who are being billed now for taxes they weren't assessed back
in 2002. It's wrong, it's unfair and it should be fixed.
This turn of events is mostly unintentional. Faced with a budget crunch,
the Legislature raised the tax on capital gains in 2002 in the middle of
the calendar year. People who acquired capital gains during the first
four months of the year were taxed at one rate, while those who acquired
them after paid at a higher rate.
It was a sloppy piece of legislating that didn't hold up to a court
challenge. The Supreme Judicial Court ruled the state must tax all gains
during a particular tax year at the same rate, and ordered the higher
tax rate applied retroactively to Jan. 1, 2002.
Those bills are now going out, cutting a wide swath. Wealthy
entrepreneurs who sold businesses in early 2002 are looking at big
bills, as are struggling senior citizens who cashed in their investments
to pay medical bills and parents who sold mutual funds to scrape
together college tuition.
The inequity of these retroactive tax bills is widely recognized, but
not easily fixed. It would be best to simply cancel the retroactive
bills, or allow those paying them to deduct the costs from future tax
payments, but that would again create two classes of 2002 taxpayers.
Gov. Mitt Romney, always one to support a tax cut, wants to make the
higher tax rate effective Jan. 1, 2003, making all who paid 2002 capital
gains taxes at the higher rate eligible for refunds.
That option, however, would cost the state budget around $250 million.
Faced with that cost, the Legislature balked, approving just exemptions
for the smallest affected taxpayers and a break on interest payments.
Romney's bill makes more sense. Those receiving retroactive tax bills
would still have to pay them, but they would get refunds -- as would all
others who paid capital gains taxes at the higher rate in 2002. The
refunds would be spread out over three years, giving taxpayers and the
state Legislature the opportunity to build the payments into their
fiscal planning.
The Legislature, now in recess, should get back to business before the
end of the year to straighten out this mess.
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The Boston Globe
June 11, 2005
Romney bill aims to rebate 2002 capital gains taxes
Governor's move sparks debate
Raphael Lewis, Globe Staff
Governor Mitt Romney yesterday filed legislation to return approximately
$250 million in 2002 state capital gains taxes to 145,000 investors,
leading several strategists to suggest the Republican governor was
aiming his antitax message at presidential primary voters as much as
Massachusetts taxpayers.
Beacon Hill Democrats have shown little appetite to rebate the 2002
capital gains taxes, which are at the center of a Supreme Judicial Court
decision earlier this year. As a result, Democrats and Republicans alike
yesterday speculated that the governor, who is weighing a run for the
White House in 2008, was sending a signal to conservatives beyond the
Bay State.
"Primary voters and general election voters want to know, 'Do you cut
taxes when you have the chance, [and] have you fought for that hard?'"
said Grover Norquist, president of Americans for Tax Reform, a
politically influential antitax advocacy group based in Washington. "If
you've tried, you've signaled your intentions. It tells you, given a
Republican House and Senate [in Washington], these are the sorts of
things I'd be doing."
Norquist earlier this year was sharply critical of Romney's proposal to
close $170 million in corporate tax loopholes, saying the package was
tantamount to imposing "stupid tax laws in a Draconian way." Less than a
month later, Romney backed off his plan, saying it would hurt the
state's efforts to attract new employers.
In an interview yesterday, Norquist said Romney's staff has kept in much
closer contact with Americans for Tax Reform since then, and a month
ago, Romney took part in a nationwide conference call with the group's
members to discuss tax policy.
Romney's proposal comes nearly two months after the Supreme Judicial
Court ruled that a 2002 change to the state's capital gains tax rate was
unconstitutional because it took effect on May 1, 2002, almost halfway
into the tax year. The court said the Legislature had two options: roll
back the effective date of the rate change to Jan. 1, 2002, which would
mean collecting an additional $150 million from 120,000 taxpayers who
saw capital gains between Jan. 1, 2002, and April 30, 2002; or push the
effective date forward to Jan. 1, 2003, and return between $225 million
and $275 million in capital gains taxes the state has already collected.
Romney argues that pushing the date back to Jan. 1, 2002, which will
happen automatically under the terms of the SJC decision, would be
unfair because it would tax gains retroactively, to a period when
investors could not have been aware of the tax impact of their
transactions.
"It is fundamentally unfair to tax people retroactively," Romney said in
a news release yesterday. "If we are to keep faith with the taxpayers of
Massachusetts, we need to correct the constitutional error that occurred
here."
Democrats and a liberal watchdog group, however, said Romney's response
to the SJC ruling is even more unfair because it would wipe out any
taxes on a wide array of capital gains from 2002, even though low- and
middle-income wage earners paid 5.3 percent on their wages at that same
time. Under the old capital gains tax rate structure, gains on assets
held six years or more were not subject to any taxes, and gains on other
investments ranged from 1 percent to 5 percent.
"There's nothing unfair about saying our highest-earning taxpayers
should pay at the same rate on their capital gains income that ordinary
taxpayers pay on their wages," said Noah Berger, executive director of
the Massachusetts Budget and Policy Center, a liberal watchdog group.
Berger's organization, in analyzing 2001 state tax data, has determined
that three-quarters of the tax money that would be returned by Romney's
bill would go to households that averaged $1.5 million in annual income.
Some legislative Democrats view Romney's filing of the tax rebate bill
in purely political terms, and not as a bid to pad the wallets of the
rich in Massachusetts.
"The truth is, this is another example of Mitt Romney selling out the
people of Massachusetts in order to boost his credentials as a
hard-liner on the national stage as he gets ready for a presidential
run," said state Representative J. James Marzilli Jr., an Arlington
Democrat who took part in an unsuccessful effort to strike a compromise
solution to the capital gains dilemma.
"We don't have a quarter of a billion dollars to burn, and this money
belongs to the taxpayers of Massachusetts, and not a handful of
millionaires."
A Republican strategist with close ties to the Romney administration
said yesterday that he also tended to view Romney's tax-rebate bill as
more of a symbolic gesture than an earnest attempt to push though
legislation.
"It builds a record even if it goes nowhere," the strategist said of the
bill. "Tax cutting is certainly popular in Republican primaries, and
they got knocked around pretty good by Grover Norquist on the tax
loopholes. There's some sensitivity there."
Eric Fehrnstrom, Romney's communications director, said the governor was
only doing what he believes is right.
"This has nothing to do with politics and everything to do with treating
our taxpayers with the respect they deserve and maintaining a system of
taxation that is fair, honest, and transparent," Fehrnstrom said.
Michael Widmer, president of the Massachusetts Taxpayers Foundation, a
business-backed watchdog group, agreed that rolling the effective date
of the capital gains rate change to Jan. 1, 2002, was "unfair." He said
that Romney's plan, however, would do damage to the fiscal health of the
state and that the money would have to come from reserve accounts.
Widmer added that he has strong doubts Democratic leaders in the House
and Senate have any intention or desire to go in the same direction as
Romney in response to the SJC ruling.
"There's talk of [higher funding for] early childhood education, higher
education fund restoration, and healthcare coverage expansion," Widmer
said. "There's enormous pressure and a lot of important needs to be
addressed."
Barbara Anderson, executive director of the antitax group Citizens for
Limited Taxation, saw it differently.
"Massachusetts voters don't elect Republican governors to get things
done: We choose them to defend ourselves against things being done to
us!" Anderson said yesterday in an e-mail. "This cap gains issue is a
perfect example of that."
Return to top
The North Adams Transcript
Monday, November 28, 2005
A Transcript editorial
Don't roll back
The state's economic paucity of the last few years seems to be giving
way to an economic glut. Massachusetts has been taking in revenue at a
fast clip, including that from a record-breaking lottery year.
Some $1.7 billion in "rainy day" funds have already been tallied, with
another $1.3 billion expected to pour into the state's coffers before
the end of the fiscal year in the July.
With nearly $3 billion in — or nearly in — hand, lawmakers are naturally
arguing about where to spend it.
Republicans, led by Gov. Mitt Romney, want to lower the income tax rate
to 5 percent from its current 5.3 percent. Reasonable enough,
considering voters approved that back in 2000. At the time, the rate was
5.75 percent; it was to be rolled back over a three-year period.
But then came the terror attacks of 2001, and an economic meltdown in
the state. The Legislature wisely froze the rollback in 2002, saving the
state millions in revenue as it tried to fill a gaping deficit hole.
Some $3 billion in cuts still had to be made in the budget, much of it
on the backs of towns, cities and local school districts. Locally,
community and parent groups have raised money to fill the gaps left by
budget cuts affecting teacher positions, extracurricular activities and
athletics. Communities have put off road improvements and capital
projects, and hiring workers.
Lawmakers are right to be cautious about cutting taxes when those
projected revenues haven't been collected yet, and when communities are
still feeling the pinch from the last three years.
Rolling back the tax would be a small boon for most taxpayers — we're
talking three-tenths of a percent — but the toll would be paid by the
state's municipalities. The Massachusetts Taxpayers Foundation says,
based on 2005 dollar values, the state is actually distributing $750
million less in local aid than it did in 2002. Rolling back the tax
would cost about $600 million.
Financially strapped communities turn to property taxes and fees to ease
the burden, and to Proposition 2½ overrides. That has more of a direct
affect on most taxpayers' wallets than the rollback would.
The tax rate should be rolled back; voters demanded it at the ballot
box. But not now. Not while the state's financial health is still
precarious, and not while towns and cities are still being shortchanged.
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