CLT
ALERT!
Thursday, December 1, 2005
Retro Tax scrapped today!
Memo to taxpayers: disregard any recent notices to
retroactively pay capital gains taxes.
House and Senate leaders announced Thursday afternoon they plan next
week to cancel a retroactive tax hike that they said was never their
intent and was forced on them by Supreme Judicial Court rulings that
limited tax policy decisions. The retroactive tax hike would affect
48,000 taxpayers who earned profits on assets sold early in 2002.
Instead, the House and Senate plan to adopt an amendment similar to one
recommended by Gov. Mitt Romney that would cancel tax hikes on gains
realized between January and May of 2002 and rebate taxes paid on
capital gains realized between May and December 2002. About 157,000
taxpayers will receive rebates, state officials say....
Asked if legislative leaders were contemplating a similar
staggered, multi-year rollback of the 5.3 percent income tax to 5 percent, as
voters have called for, Travaglini said "no."
State House News Service
Thursday, December 1, 2005
Retroactive tax hike to be nixed,
rebates delivered, legislative leaders say
I want to extend my thanks and congratulations to Senate
President Travaglini and Speaker DiMasi for acting to spare thousands of
Massachusetts citizens from the unfairness of retroactive taxation. This is the
right thing to do, and while it will cost the state some money, we can manage
it. Far more costly in the long run would have been the public's loss of faith
in their own government.
Governor Romney Statement on Retroactive Taxation
December 1, 2005
The proposal, detailed by Senate
President Robert Travaglini and House Speaker Salvatore DiMasi, would
pay up to $275 million in tax rebates over four years to those who paid
capital gains taxes during the last eight months of 2002.
It would also absolve anyone from owing retroactive capital gains tax
hikes from the first four months of that year....
The state's top court struck down the tax, saying it was
unconstitutional to create a new tax midway through the year. The court
said the tax must go into effect either at the start of 2002 or 2003,
but not in between.
Republicans lobbied for the tax to go into effect on Jan. 1, 2003, which
would have given rebates to taxpayers who paid the tax on financial
transactions, such as sales of stocks or real estate, in the last eight
months of the year.
Instead, the Democrat-dominated Legislature made the tax go into effect
on Jan. 1, 2002....
Rank-and-file lawmakers said they had come under increasing pressure to
cancel the retroactive taxes.
"In the end it wasn't liberal or conservative, Democrat or Republican,
but everyone heard it so frequently and loud and clear," said Sen. Mark
Montigny, D-New Bedford, who had argued against the tax. "Ultimately
when people started to receive bills, the outcry was loud enough."
House Republican leader Brad Jones said the decision was a victory for
taxpayers and the GOP, which had pushed to block the retroactive taxes.
Associated Press
Thursday, December 1, 2005
House, Senate to cancel retroactive capital gains taxes
Chip Ford's CLT Commentary
Congratulations taxpayers, we won one today!
The unconscionable retroactive capital gains tax has
been decreed dead by House Speaker Salvatore DiMasi and Senate President
Robert Travaglini this afternoon, which means the tax won't happen.
"Legislative leaders said the decision was fueled by
several factors and developments." the State House News Service
reported. Among them, "Lawmakers have received a stream of calls from
taxpayers furious about being taxed retroactively."
Thanks to those who attended the Revenue Committee
hearing on November 15th and the Governor's
news
conference on November 19th and helped get this ball rolling, kept
it moving, and to those who wrote letters to the editors of their local
newspapers, made the multitude of phone calls and sent all the e-mail
messages to their state representatives and senators. On this issue,
they heard you loud and clear. The 48,000 taxpayers who
"owed" the retroactive tax but had yet to pay it, and another 157,000
who've already paid the tax on capital gains for 2002 but will get
refunds, owe you their gratitude!
It's nice to win one now and then. Now if we
can just get legislators to listen to the 1,541,771 voters who adopted
our tax rollback in 2000 and respect their constituents' mandate . . .
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Chip Ford |
State House News Service
Thursday, December 1, 2005
Retroactive tax hike to be nixed,
rebates delivered, legislative leaders say
By Michael P. Norton
Memo to taxpayers: disregard any recent notices to retroactively pay
capital gains taxes.
House and Senate leaders announced Thursday afternoon they plan next
week to cancel a retroactive tax hike that they said was never their
intent and was forced on them by Supreme Judicial Court rulings that
limited tax policy decisions. The retroactive tax hike would affect
48,000 taxpayers who earned profits on assets sold early in 2002.
Instead, the House and Senate plan to adopt an amendment similar to one
recommended by Gov. Mitt Romney that would cancel tax hikes on gains
realized between January and May of 2002 and rebate taxes paid on
capital gains realized between May and December 2002. About 157,000
taxpayers will receive rebates, state officials say.
"It was just a matter of fairness and equity for us," House Speaker
Salvatore DiMasi said during a meeting with reporters in Senate
President Robert Travaglini's office.
Said Travaglini: "We have decided that we will not pursue any
retroactive collections of increased taxes and we will pay out over time
the additional dollars" to those who paid taxes that were later called
into question by the court. "Anybody who got a retroactive notice is
going to get another notice saying disregard the first notice."
Department of Revenue spokesman Timothy Connolly, after the agreement
was announced, said: "We'll stop sending out notices."
The plans are a response to court rulings striking down the mid-year tax
increase and a second attempt to deliver tax amnesty to certain
taxpayers affected by the capital gains tax hike, which was originally
approved to help state government balance its books during the most
recent fiscal crisis.
The agreement moves the tax increase effective date up to Jan. 1, 2003,
preventing the retroactive tax and satisfying a court mandate that
taxpayers be assessed equally in the same calendar year. It will require
the state to forego the collection of $150 million and to rebate between
$56 million and $69 million per year over the next four years.
The accord will require the unanimous consent of the Legislature, which
is meeting until January in informal sessions, where the objections of a
single member can stop the progress of any bill.
The rebates would be delivered over four years, rather than the three
years suggested by Romney, who was in California Thursday attending a
Republican Governors Association meetings.
In a statement released by his aides, Romney thanked and congratulated
legislative leaders "for acting to spare thousands of Massachusetts
citizens from the unfairness of retroactive taxation."
"This is the right thing to do, and while it will cost the state some
money, we can manage it," Romney added. "Far more costly in the long run
would have been the public's loss of faith in their own government."
Legislative leaders said the decision was fueled by several factors and
developments. The state's improved fiscal condition is helping.
Lawmakers have received a stream of calls from taxpayers furious about
being taxed retroactively. And the idea of delivering rebates over
years, rather than a lump sum, appeared to be a deal maker.
According to DiMasi, lawmakers also want to advance to Romney a bill
that raises $84 million by closing loopholes corporations use to avoid
paying taxes. The capital gains compromise is part of that bill, which,
under legislative rules, would otherwise die at the end of December.
"That was another consideration," DiMasi said.
Avoiding further litigation on the issue is also a goal of legislative
leaders, they said.
Senate Ways and Means Committee Chairwoman Therese Murray (D-Plymouth)
said the state's improved fiscal condition made the capital gains
decision possible, but cautioned that November tax receipts, which
showed no gain over last November, are a sign that the economy here is
only "chugging" along.
Tax collections five months into fiscal 2006 are running $218 million
above original budget benchmarks, according to the Department of
Revenue, and 7 percent above actual collections during the same period
in fiscal 2005.
Romney proposed his capital gains amendment compromise two weeks ago.
Legislative leaders told reporters today that they have been privately
discussing a solution for weeks.
Business leaders have mounted a campaign in recent weeks to cancel the
retroactive tax increase, which has been hotly debated, and largely
opposed, on the talk radio circuit.
"They deserve high praise for their action," Massachusetts Taxpayers
Foundation President Michael Widmer said after the decision was
announced. "This was a problem not of anyone's making and I think this
is a very fair resolution of a difficult issue."
Asked if legislative leaders were contemplating a similar staggered,
multi-year rollback of the 5.3 percent income tax to 5 percent, as
voters have called for, Travaglini said "no."
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Associated Press
Thursday, December 1, 2005
House, Senate to cancel retroactive capital gains taxes
By Steve LeBlanc
Taxpayers who've received notices to pay retroactive capital gains taxes
from 2002 could soon be off the hook while thousands more will begin
receiving rebates under a plan unveiled by House and Senate leaders on
Thursday.
The proposal, detailed by Senate President Robert Travaglini and House
Speaker Salvatore DiMasi, would pay up to $275 million in tax rebates
over four years to those who paid capital gains taxes during the last
eight months of 2002.
It would also absolve anyone from owing retroactive capital gains tax
hikes from the first four months of that year.
"Anybody who got a retroactive notice is going to get another notice
saying disregard the first notice," Travaglini said.
The proposal closely mirrors a plan floated by Gov. Mitt Romney two
weeks ago and comes as lawmakers are under increasing pressure to fix
the tax glitch without resorting to retroactive taxes.
Romney praised lawmakers, saying the decision will spare thousands of
Massachusetts citizens unfair retroactive taxes.
"This is the right thing to do, and while it will cost the state some
money, we can manage it," Romney said in a written statement.
The problem dates back to the state's most recent fiscal crisis, when
lawmakers approved a capital gains hike set to begin in May 2002.
The state's top court struck down the tax, saying it was
unconstitutional to create a new tax midway through the year. The court
said the tax must go into effect either at the start of 2002 or 2003,
but not in between.
Republicans lobbied for the tax to go into effect on Jan. 1, 2003, which
would have given rebates to taxpayers who paid the tax on financial
transactions, such as sales of stocks or real estate, in the last eight
months of the year.
Instead, the Democrat-dominated Legislature made the tax go into effect
on Jan. 1, 2002. As a result, some 48,000 taxpayers would have had to
retroactively pay those taxes on transactions made during those four
months, totaling some $200 million.
About $78 million of the estimate was owed by just 278 wealthy people,
who would pay an average of $281,000 each. The average among the 48,000
taxpayers is about $4,200.
Democrats said they never intended a retroactive hike, but were forced
into it when the court struck down their efforts to create a tax amnesty
for the first four months of 2002.
Rank-and-file lawmakers said they had come under increasing pressure to
cancel the retroactive taxes.
"In the end it wasn't liberal or conservative, Democrat or Republican,
but everyone heard it so frequently and loud and clear," said Sen. Mark
Montigny, D-New Bedford, who had argued against the tax. "Ultimately
when people started to receive bills, the outcry was loud enough."
House Republican leader Brad Jones said the decision was a victory for
taxpayers and the GOP, which had pushed to block the retroactive taxes.
"Do I think that the advocacy of the constituents and the citizens of
the commonwealth and the near unanimity in the media had an influence on
public policy? Yes, I do," said Jones, R-North Reading.
The Legislature had tried to soften the blow of the retroactive tax.
An $85 million tax loophole bill sent to Romney this week includes a
provision that would have waived capital gains tax bills for less than
$100, as well as penalties and interest. Romney amended the legislation
with his proposal, and returned it to the Legislature.
At that point, lawmakers opted to agree with Romney's plan and abandon
the retroactive taxes.
Paying the rebates over four years will mean a loss of revenue of
between $56 and $69 million a year, according to Sen. Therese Murray,
D-Plymouth, chairwoman of the Senate Ways and Means Committee.
Anyone owed $1,000 or less will get a one-time lump sum rebate, she
said.
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