and the
Citizens Economic Research Foundation

Friday, April 21, 2006

Budget debate, "soaring appetites," and income tax rollback

To:  Members of the Massachusetts House
         April 21, 2006
Re:  Budget debate, "soaring appetites," and income tax rollback

Another year, another reminder: The Legislature promised in 1989 that the income tax hike would be temporary, that the traditional 5% rate would return in 18 months.

After eleven years of the broken promise, the voters finally restored the rate themselves overwhelmingly in November 2000, with 59% of the vote.

Being foolishly "reasonable," we provided a three-year phase-down. The Legislature took advantage of this by freezing the rate at 5.3%, with another promise to defrost it as soon as the fiscal crisis was over – a fiscal crisis that was created by overspending of excess tax revenues during the "Roaring ‘90s" during which the rollback still was "unaffordable."

The temporary tax is now 17 years old, and five-and-a-half years have passed since the voters – your constituents – mandated the rollback. The state had a surplus last year, and will have another more than billion dollar surplus for this fiscal year. The rainy day fund is approaching record level.

Refusing to restore the 5% rate can now only be defined as blatant contempt for the voters – your constituents – evidence that the Legislature can never be trusted to keep its word.

Even some Democrats who opposed the rollback in the past are seeing the real issue. Most notably, former Senate President Tom Birmingham, who initiated the 2002 "freeze," was quoted by Boston Globe columnist Steve Bailey in October 2005: "The referendum happened. We had a full and fair debate. The side that supported 5 percent prevailed and by a sizeable majority ....It is about keeping faith with the voters. In a democracy it has to be ‘thy will be done.’"

"Eventually," he added, "the shifting rationale (for not complying with the vote) suggests something more in the nature of an excuse than a justification."

Thank you, Tom Birmingham. It’s never too late to respect the voters.

Now if the so-called Massachusetts Taxpayers Foundation would show the same understanding of the issue, instead of merely shilling for fat cats who want their employees to pay more while they resist taxes on themselves. Instead, MTF actually recommends more state borrowing from those lucky banks who get easy, risk-free interest backed up by a high tax burden – 4th highest per capita in the nation, 19.7% above the national average.

MTF deplores "soaring appetites" and has some good ideas for savings, but no one listens to them so long as there are budget surpluses. After watching the state stuff itself, creating fiscal crises time and again, you’d think MTF would finally get a clue.

Local aid isn’t the issue either. When the state spends itself into a fiscal crisis, which it is again on its way to doing, local aid gets cut. Using some of the state surpluses for a tax cut is the only way to prevent this from recurring.

Property taxes are not going up because the income tax is too low. Property taxes go up because the Legislature hasn’t addressed state mandates and other issues that increase local costs. But even so, local voters at least have a chance to determine overrides and their ultimate local tax burden. They already gave their opinion on the income tax rate.

So here is the choice. Vote to rollback the income tax rate to 5% -- now, at long last -- or vote to continue showing your contempt for the voters and for legislative promises and spend us into another local aid-cutting crisis inevitably down the road.

We hope that some pro-rollback legislators will stand up during the budget debate and vigorously fight against voter contempt and broken promises. It’s never too late to look like a real representative of your constituents.

Thank you for your attention.

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