CITIZENS   FOR  LIMITED  TAXATION
and the
Citizens Economic Research Foundation

CLT UPDATE
Monday, September 25 2006

MetroWest's Rick Holmes is sadly mistaken


So it looks like weíre going to have another gubernatorial campaign dominated by posturing over taxes. But can we at least advance the discussion beyond "gimme back my money" and "gimme back my money because the people voted for it"? ...

But the payoff would be much higher than $200 for a millionaire. On a $1 million salary, the rollback would be worth more like $3,000. Maybe thatís why the well-heeled interests that bankroll CLT are more committed to cutting income taxes than controlling property taxes....

The MetroWest Daily News
Sunday, September 24, 2006
Taxes: A lesson in history and math
By Rick Holmes/Opinion Editor


Rick Holmes' recent column, "Taxes: A lesson in history and math" (Sep. 24), needs some balance and especially some factual corrections. The difficulty is in where to begin, so let's start with facts.

He wrote: "Maybe thatís why the well-heeled interests that bankroll CLT are more committed to cutting income taxes than controlling property taxes." He couldn't be any more inaccurate, ignorant, or perhaps even disingenuous.

Throughout his column, he quotes "facts" provided by the Massachusetts Taxpayers Foundation.  If he instead had applied "well-heeled interests that bankroll" to MTF he'd have been quite accurate.... Mr. Holmes somehow failed to mention that. MTF opposed CLT's Proposition 2Ĺ in 1980 -- the now-institutional definition of property tax relief -- CLT's tax rollback in 2000, and about every other tax cut for average taxpayers.  [MTF's] interests are with what's best for its fat-cat sponsors, period.

By comparison, Citizens for Limited Taxation is funded by voluntary contributions from pretty much regular taxpayers:  its annual membership is $35; its average membership contribution this year is $62.19....

The MetroWest Daily News
Letters to the Editor
Submitted Sep. 25, 2006
By Chip Ford


Chip Ford's CLT Commentary

A revised 250-word version of my response (below) is supposed to be published as a letter to the editor, and I've been invited to submit an expanded version to MetroWest Daily News as an op-ed column.  Rick Holmes, the editorial page editor, was most gracious and hospitable; a professional who was a pleasure to work with.

Chip Ford


The MetroWest Daily News
Sunday, September 24, 2006

Taxes: A lesson in history and math
By Rick Holmes/Opinion Editor


So it looks like weíre going to have another gubernatorial campaign dominated by posturing over taxes. But can we at least advance the discussion beyond "gimme back my money" and "gimme back my money because the people voted for it"?

Before we get to the math, letís have some history, beginning with the referendum of 2000, when the people voted to roll back the stateís income tax rate to 5 percent. Those were the good old days, when the state treasury was flush with cash, mostly from year-end bonuses and capital gains tax receipts from the technology stock boom.

The stock bubble began bursting in the spring of that year, but tax revenue lags behind economic activity. So when Gov. Paul Cellucci and the Citizens for Limited Taxation took to the campaign trail to push their income tax cut plan, they could point to state budget surpluses from the prior year and project them out as far as the eye could see.

We can afford to cut taxes, they said, with no reduction in services. Besides, itís our money.

It sounded like all gain and no pain to the voters, and the referendum passed. If you ask people whether they want more money, what do you expect them to say?

But almost overnight, the surpluses vanished. The stock market tanked, capital gains were replaced by capital losses, and state revenues fell through the floor.

The state legislature did what it usually does in such crises: It cut local aid to cities, towns and school districts. Before you knew it, police and teachers were being laid off, road repairs were postponed, class sizes grew.

Thatís not exactly what the people thought they were buying when they voted for the rollback, but they voted for it, and the vote of the people is sacred, right?

But think of it this way: If the people vote to have their cake and eat it too, who gets stuck with the bakery bill?

Answer: the property taxpayer.

For a typical family, the income tax bill over has held steady over the last six years. As a percentage of gross earnings, according to the best guess of the number-crunchers at the Massachusetts Taxpayers Foundation, state income taxes paid by a typical family dropped from 4.5 percent in 1999 to 3.9 percent in 2005.

Meanwhile, the average single-family property tax bill grew by 36 percent between 2000 and 2005. In lots of MetroWest towns, it went up a lot more than that.

Youíd have to be willfully blind -- or a self-interested Beacon Hill insider -- to believe thereís no relation between cutting income taxes at the state level and rising property taxes at the local level.

There are some important differences between property taxes and income taxes. If you lose your job, for instance, you stop paying income taxes. But the property tax bill doesnít care whether youíre a wealthy CEO or a frail senior dependent on Social Security.

Tom Reilly obscured the discussion in the last days of the Democratic primary campaign. Noting that the income tax rollback would mean about $200 in the pocket of the average taxpayer, he said, "$200 doesnít mean much to millionaires like Chris (Gabrieli) or Deval (Patrick)."

But the payoff would be much higher than $200 for a millionaire. On a $1 million salary, the rollback would be worth more like $3,000. Maybe thatís why the well-heeled interests that bankroll CLT are more committed to cutting income taxes than controlling property taxes.

That brings us to the current standoff. Republican nominee Kerry Healey promises to roll back the income tax rate to 5 percent. Democrat Deval Patrick wants to keep the rate where it is, arguing that property tax rates, not income tax rates, are the problem. He hasnít proposed a property tax solution, arguing instead that deferring the rollback will support local aid levels that will help keep property tax rates in check.

Meanwhile, thereís already an income tax rollback on the books. Almost nobody knows it, but at the time the legislature froze the rate at 5.3 percent, it wrote into law an increase in the personal exemption, phased in over four years, to be followed by a reduction of the rate from 5.3 percent to 5 percent, phased in over six years. Those rate cuts are dependent on state revenues meeting specific goals, similar to the compromise Chris Gabrieli pushed on the primary campaign trail.

Thatís not nearly fast enough for Kerry Healey and the give-us-back-our-money crowd. They want the rollback and they want it now. Not that the rollback is the governorís to give. Mitt Romney has wanted the rollback for four years, but he couldnít get the Legislature, dominated by anti-rollback Democrats, to go along.

And the rollback comes at a price, estimated at $675 million. Whereís that money going to come from, local aid?

Healey, still working from old campaign scripts, says the state has a billion-dollar surplus. You can have tax cuts without cuts in services, she says.

But there is no surplus, argues Mike Widmer of the Taxpayers Foundation. Last yearís budget was built on conservative revenue projections, and receipts beat the estimates for several months this spring -- once again, mostly because of capital gains and stock-market-related bonuses, not rising salaries. But no sooner did those surpluses appear than the legislature spent them, approving $800 million for an economic stimulus bill and a supplemental budget.

The budget for the year that started July 1 was built on less conservative revenue assumptions, Widmer says, and the early returns show much less growth than the state was seeing last spring. Even with the growth, the current budget relies on $600 million from the stateís reserve funds.

So if a surplus appears, the first $600 million of it is already promised to replenish the reserves. Things donít get any rosier in the long run. In a report to be released tomorrow, the MTF sees trouble ahead:

"Despite the better-than-expected revenue performance in fiscal 2006, the stateís leaders will soon have to grapple with a large and rapidly growing disparity between available resources and the costs of a broad array of important priorities," the report states. "Dealing with this challenge is likely to dominate the financial decision making of the next Governor and Legislature for the foreseeable future."

A hotly-contested campaign is no time for lessons in either history or math. Candidates are more likely to promise lower taxes and higher spending than share frank talk about balancing the books.

But the least we voters can do is to keep reminding the candidates that income taxes arenít the only things eating at our wallets. Itís no coincidence that kids now have to pay hundreds of dollars to ride the school bus or play on the basketball team. Massachusetts trails almost every other state when it comes to state aid to local school districts. What the Legislature wonít support, parents and property taxpayers must make up.

Everybody hates taxes. We ought to make the candidates discuss which taxes they hate the most -- and tell us what are they going to do about it.

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To:  MetroWest Daily News
Letters to the Editor [submitted Sep. 25, 2006]
Re:  "Taxes: A lesson in history and math," by Rick Holmes (Sep. 24)


Dear editor:

Rick Holmes' recent column, "Taxes: A lesson in history and math" (Sep. 24), needs some balance and especially some factual corrections.  The difficulty is in where to begin, so let's start with facts.

He wrote:  "Maybe thatís why the well-heeled interests that bankroll CLT are more committed to cutting income taxes than controlling property taxes."  He couldn't be any more inaccurate, ignorant, or perhaps even disingenuous.

Throughout his column, he quotes "facts" provided by the Massachusetts Taxpayers Foundation.  If he instead had applied "well-heeled interests that bankroll" to MTF he'd have been quite accurate.  It's funded entirely by the largest corporations, public utilities, insurance companies, health care interests, and public relations firms in the state.  Mr. Holmes somehow failed to mention that. MTF opposed CLT's Proposition 2Ĺ in 1980 -- the now-institutional definition of property tax relief -- CLT's tax rollback in 2000, and about every other tax cut for average taxpayers.  Its interests are with what's best for its fat-cat sponsors, period.

By comparison, Citizens for Limited Taxation is funded by voluntary contributions from pretty much regular taxpayers:  its annual membership is $35; its average membership contribution this year is $62.19.

In a July fundraising letter to our membership, we freely disclosed the salaries of CLT's four staffers:  "In case youíve ever wondered, CLTís after-tax weekly salaries are $675 for Chip Ford, $557 for Chip Faulkner, $489 for Loretta, our admin. assistant, and $471 for me [Barbara Anderson]."  To most folks in that income range, a voter-mandated tax rollback which puts almost half a week's pay back into our pockets is significant and welcome.

CLT operates on a shoestring budget.  It has survived for three decades by existing literally hand-to-mouth.  At the time of that letter, the staff was working with two weeks of no salaries whatsoever.  "Well-heeled" indeed.  Too bad he didn't check the facts before making wild and inaccurate accusations so easily disproved.

"But can we at least advance the discussion beyond 'gimme back my money' and 'gimme back my money because the people voted for it'?" Mr. Holmes asked in his opening.  That's like asking if we can begin negotiating peace in the Middle East without bringing up Israel!  Failure to discuss "because the people voted for it" only adds to the unacceptable disrespect the Legislature has demonstrated for those voters, its alleged constituents, and democracy itself.

When the Legislature decided to overturn the voters' "Clean Elections" law which it despised, it rightfully put it back on the ballot for them to reconsider, where it failed on the second go-around.  That was at least proper, if unfitting and self-serving.  The Legislature knows better than to put the rollback of its 17-year old "temporary" income tax hike back on the ballot:  A recent poll of likely primary voters taking a Democrat ballot indicated that 57% of them still support the rollback, down only 2% from the 2000 ballot question vote.

Holmes in passing at least did recognize, "But no sooner did those surpluses appear than the legislature spent them, approving $800 million for an economic stimulus bill and a supplemental budget."  But somehow he failed to see the taxpayers' position or chose to ignore it; that if our money's on its table, the Legislature will squander it. One Boston daily identified some of that profligate pork spending, "such as $200,000 to install Victorian-style street lights in Melrose and $100,000 to build a gazebo on Sunset Lake in Braintree."

"Meanwhile, thereís already an income tax rollback on the books," Holmes naÔvťly observed, as though it will happen.  There's always been one -- but the Beacon Hill pols simply keep moving the goal post further down the field when it's within reach, with new "triggers."  Remember, this has been ongoing for 17 years.

If Holmes honestly believes that voters have changed their minds, if he truly believes the results would be different today than they were six years ago, then let him lead the charge for putting it back on the ballot -- without us citizens having to do all the heavy lifting of signature collecting this time, only to have the democratic process, the election results, again overthrown.

Chip Ford --
Director of Operations
Citizens for Limited Taxation

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