CLT UPDATE
Friday, April 11, 2008
Pols' solution to latest "fiscal
crisis":
Borrow, tax, and spend billions more!
It's often said that in a democracy, we get the
government we deserve. But when it comes to debt, we don't deserve the
treatment we're getting from government.
Massachusetts and the nation are slipping into recession. Part of that
has to do with the cyclical nature of the economy, but it's exacerbated
by the fact that we're in debt up to our ears.
Massachusetts faces staggering liabilities. When you add up the debt
that's on the commonwealth's books, those of various quasi-public
authorities like the MBTA and the Massachusetts Turnpike, our unfunded
pension and retired public employee liabilities, and huge infrastructure
maintenance backlogs, the total liability comes out to more than $12,550
for every person in the Bay State. And that doesn't even count the
liabilities of some quasi-public authorities and the commonwealth's 351
cities and towns....
For years, Massachusetts has capped its annual borrowing at $1.25
billion. It's not unreasonable to bump that number up some, given
inflation. But a Patrick administration proposal to hike the debt cap to
$2 billion annually by 2012 is more than we can afford.
By virtually any measure — such as per-capita debt and debt as a
percentage of personal income — the state is deeper in hock than almost
any other state. Debt service is one of the largest line items in our
annual budget and one of the drivers of a structural deficit that has
topped $1 billion in each of the last two years.
The New Bedford Standard-Times
Wednesday, February 27, 2008
State swamped in debt
By Charles D. Chieppo and Steve Poftak
Governor Deval Patrick plans today to unveil a $3.8 billion
bond proposal to repair 411 deteriorating bridges throughout the state over the
next eight years, a project he will argue not only improves road safety but also
pumps cash into the economy to buffer Massachusetts from a recession....
The move could prove controversial. It would add to a state debt burden that is
already the highest per capita in the country. Patrick plans to pay for the
projects by floating bonds in the next eight years, which would need legislative
approval and would renew debate over how deeply the state should go into debt,
and how vital the bridge repairs are.
There are already several other major bond projects before the Legislature,
including $2 billion targeted for higher education and $1.4 billion for
environmental projects. In addition, a $3.5 billion transportation bond bill
that the House approved yesterday would help fund 397 additional bridges.
Lawmakers, reacting with caution yesterday in advance of Patrick's speech, said
they will closely scrutinize the proposed debt plan - but the idea of spreading
money in legislative districts around the state for safety projects is sure to
have a certain political appeal....
The debate over fixing bridges will come at a time when the state has been
struggling to find enough sources of new revenue to keep existing services and
fund several ambitious spending programs. The state is facing a budget gap of
$1.3 billion.
The Boston Globe
Wednesday, April 9, 2008
Governor seeks $3.8b to fix bridges
Says bond plan would bring 23,000 jobs
State Treasurer Timothy P. Cahill yesterday disagreed with
the governor's $3.8 billion plan to repair 411 bridges across the state, saying
the proposal would excessively mortgage the state's financial future, and
suggested the bond amount be cut by half.
"We're not going to break the bank to do it," Cahill, who is in charge of
managing state debt, said in an interview. "This is big and it's big on top of a
lot of other big proposals. It may not be the time to take on something this
large."
Despite Cahill's reservations, the proposal picked up key backers immediately,
including House Speaker Salvatore F. DiMasi, Senate President Therese Murray,
and organized labor....
To pay for the bridgework, Patrick would increase the state's bonding capacity.
The state currently has a self-imposed limit for newly issued bonds of $1.5
billion a year, which is scheduled to increase to $2 billion a year in 2012. In
order to pay for the projects sooner, the Patrick administration would frontload
$2.8 billion that the state would otherwise spend from 2014 to 2028, and spend
the money over the next eight years instead.
The state would also refinance $366 million in outstanding debt from 20 years to
30 years, freeing up another $1 billion now but costing more over the long run
because the state would be paying interest for 10 additional years....
There are several other major bond projects before the Legislature, including $2
billion targeted for higher education and $1.4 billion for environmental
projects....
Cahill estimates that the $3.8 billion bond would require $3.2 billion in
interest payments, putting the overall cost for the governor's bridge proposal
at $7 billion, a figure the Patrick administration did not dispute.
The Boston Globe
Thursday, April 10, 2008
Cahill: Bridge plan too costly
But Patrick's $3.8b proposal gains key backing
The budget is $1 billion in the red. The Legislature won’t
sign onto his “shake down the gambling addicts” funding plan. The economy is
slowing.
So what does [Gov. Patrick] do?
He blows the doors off with a $3.8 billion roads and bridges spending blast. You
can practically hear the union members in the background, chanting “To-ga! To-ga!
To-ga!”
And well they should.
At the height of Big Dig spending, there were only 5,000 people getting
government checks from that boondoggle.
The Patrick plan is to put 23,000 people - mostly union members - on the
taxpayer’s dime.
Some future taxpayer’s dime that is, because Patrick wants to borrow every
dollar.
Massachusetts taxpayers are already on the hook for more state debt, per person,
than any state in the union. How do I know? I read the Patrick administration’s
own report, released last summer.
We are paying $2 billion per year on debt service right now - that’s a monthly
payment of $167 million on the commonwealth credit card. And no frequent flier
miles, either.
The Boston Herald
Thursday, April 10, 2008
Debt will be gov’s permanent record
By Michael Graham
House lawmakers last night gave approval to $392 million in
tax increases for smokers and the state's largest corporations, providing
Governor Deval Patrick with a major political victory while drawing fire from
business leaders.
The legislators' 131-23 vote capped a long crusade by Patrick and his allies in
the Legislature, who convinced House Speaker Salvatore F. DiMasi to back away
from a more business-friendly plan and approve the state's most momentous tax
increase since 2002....
The cigarette increase would give Massachusetts the second-highest cigarette tax
behind New Jersey ...
Proponents argued that the increase would fill state coffers and discourage
residents from smoking, while critics said the state would lose money from
smokers, who would travel to New Hampshire and Rhode Island to buy cheaper
cigarettes....
Massachusetts has the country's fourth-highest corporate tax rate, which
business leaders argue has damaged the state's reputation and discouraged
companies from locating here....
"A tax is a tax is a tax!" yelled Representative Jeffrey D. Perry, a Sandwich
Republican. "This is taking money from our constituents, and harming our
economy!" ...
The governor has proposed an additional $166 million in new revenues through
additional taxes and increased enforcement of tax collections. Those proposals
will come up in about two weeks as part of the House debate on the overall
budget.
The Boston Globe
Friday, April 11, 2008
Mass. House OK's big tax hikes
$392m in new levies on business, smokers
The state last increased the cigarette tax in 2002, when it
was virtually doubled to $1.51 a pack. The increase to $2.51 a pack would go
into effect July 1, if it is approved by the Senate and signed by Gov. Deval
Patrick....
Proponents of raising the cigarette tax cited statistics that said it would
encourage more smokers to quit as well as help pay for the negative health
effects of cigarettes.
"This is a compelling argument," said Rep. Rachel Kaprielian, D-Watertown. "Not
only do we get money for the product, we also see a corresponding decline in
smoking."
The Cape Cod Times
Friday, April 11, 2008
House endorses cigarette tax hike
State officials celebrated the second anniversary of state’s
health insurance reform law yesterday, and the House voted 131–23 to impose an
additional $1 per pack on cigarettes to help meet spiraling unanticipated costs
of the program....
The insurance program, now providing the state share of free or subsidized
health insurance to an estimated 350,000 income-eligible people, is expected to
increase in cost from $472 million this year to $869 million in fiscal 2009....
The author of the cigarette tax increase, state Rep. Rachel Kaprielian,
D-Watertown, defended the increase against critics who said the state would lose
massive revenues and risk job losses because smokers would cross state lines to
buy cheaper cigarettes.
She said studies of tax increases on cigarettes in other states have shown that
smokers only go for out-of-state cigarettes for a short time after a tax
increase and then return to buying them in-state. Moreover she said, the state
should “go after” such “tax cheats.”
The Telegram & Gazette
Friday, April 11, 2008
House OKs cigarette tax hike
Money needed for health insurance
The cigarette tax would generate an estimated $175 million
and would go into effect in July if the bill becomes law....
Backers said the cigarette tax would not only bring in needed revenue with the
state facing a $1.3 billion budget gap, but would also sway some young people
against taking up the habit -- and encourage older smokers to quit....
An amendment approved during the debate would dedicate the revenues of the
cigarette tax to health care to help ease financial pressure on the state's
landmark health care law, which is struggling with a larger than expected
enrollment....
[Critics] also said the new tax would increase the cost of a carton of
cigarettes to about $68 dollars -- compared with about $33 in New Hampshire --
and would send smokers fleeing over the border.
Associated Press
Friday, April 11, 2008
$1 A Pack Cigarette Tax Hike Passes Hurdle
Mass. House Approves, Passes To Senate
Currently, there is a legislative proposal that would add $1
to the levy on cigarettes. Its passage would add about $150 million to state
coffers, which would enable the Legislature to continue healthcare reform, as
well as reduce the incidence of smoking rates overall. Data shows that for every
10 percent increase in the cost of a pack of cigarettes, the overall smoking
rates decrease 4 percent....
Critics of the increase say that it will push sales to states that tax less.
They also say it is a regressive tax that will dwindle over time. Neither is
true. Convenience stores in border towns noticed a slight dip in business after
past increases, but, over time, found that buyers returned. This makes sense
since cigarettes, like gum, candy, and soda, are typically purchases of
convenience.
The Boston Globe
Thursday, April 10, 2008
The benefits of a higher cigarette tax
By Rachel Kaprielian and Herman Hamilton
Massachusetts' legislators need to look beyond the state's
borders to understand that increasing the cigarette tax will likely result in
killing the goose that lays the golden eggs. In the past 18 months, five states
that raised cigarette taxes have either collected less tax revenue than before
the latest increase or collected far less than expected. In other words, the
projected $152 million in extra tax revenue that some Massachusetts lawmakers
expect the state to collect will simply not materialize....
Massachusetts legislators need to accept the reality of the situation and step
back from the claim that raising cigarette taxes will raise $152 million to fund
health care. The experience in other states demonstrates that a cigarette tax
increase may very well make budget deficits worse. Then, where will elected
officials look for more tax revenue?
The Salem News
Thursday, April 10, 2008
State in danger of killing golden tobacco goose
By Thomas A. Briant, Executive Director
National Association of Tobacco Outlets
Minneapolis, Minn.
Chip Ford's CLT Commentary
Who can keep up with this tidal wave of Beacon Hill
craziness? We're having a hard time just following this current
geyser of fiscal absurdities, ridiculous illogic, and contradictory
rhetoric that's being advanced as public policy. It's become so
irrational and senseless it's like trying to hit a moving target, or an
invisible one. State House pols are just spouting platitudes
without any conception of, never mind concern for, consequences.
All we've heard for the past year is that the sky is
falling, the state is looking at a whopping deficit -- some $1.3 billion
-- in the fiscal year ahead. This fear-mongering comes despite FY
2007's revenue receipts which already surpass last year's at this time
and revenue projections
this year
exceeding expectations by likely close to a billion dollars before
the year is out. Massachusetts
meanwhile has the largest debt burden of any state in the US. But
spending has only increased.
The cost of the state's "landmark"
health-insurance-for-all program is -- surprise! -- running way
over the predictions used to achieve its passage. Isn't it funny
how we at CLT predicted cost overruns were inevitable even as the new
law was signed with great celebration. In my commentary back then
in the CLT Update of Apr. 7, 2006 ("Big
Dig" comes to Mass. healthcare) I wrote:
And as we in greater-Boston certainly should have
learned, the Robert Moses philosophy of government spending again
confronts us: First dig the hole; then worry about filling it
in someday.
"To Moses' critics, however, he will always be remembered for
believing that . . . 'if the ends don't justify the means, what
does?'"
How is it that we saw the inevitable coming, expected
it -- but "The Best Legislature Money Can Buy" and other alleged bright
lights on Beacon Hill claim to be caught unawares, are surprised, we're
supposed to believe?
The state has discovered it really can't afford the
last huge program, so what's it do? Does it terminate an overly
expensive, unaffordable program? Does it cut it back to where it
is affordable? Of course not. It does exactly as we
predicted: Raises taxes to keep it rolling -- just as it did with
the Big Dig. Then it borrows billions more to spend on even more
huge new programs.
Here's where the craziness really reveals itself:
Jacking up the tax on cigarettes again by a buck a pack. Hey, it
worked during the last economic slowdown in 2002, when it was doubled to
$1.51 a pack. (It was but part of the Legislature's
$1.14 billion package of tax increases, including "temporarily
freezing" the voters' income tax rollback). A whole lot of good
that additional revenue did for the state's current fiscal situation a
mere six years later.
Rep. Rachel Kaprielian, (D)-Watertown, sticks to her
ridiculous assertion that hiking the tax won't affect revenue
collections, that even if smokers smartly cross the border to New
Hampshire to buy their cigarettes at less than half the price of
Massachusetts, they'll soon be back buying them locally.
Again I
ask, if this is true, if this anti-smoking zealot's prediction is
accurate, if she truly believes this nonsense, then why not jack up the
tax by ten dollars a pack? If the buck a pack tax increase
will annually raise $175 million in additional revenue, then ten bucks a
pack will bring in an additional $1.750 billion. The state
budget crisis will be instantly eliminated with a surplus left over the
pols can pocket in even more perks or squander elsewhere!
In the last full fiscal year (2006), the Department
of Revenue reports collecting $439.9 million from the state tobacco
excise tax -- almost half a billion dollars. Apparently
that's not a large enough "fair share" for smokers to be contributing
into the state coffers. Rep. Kaprielian and the vast majority of
her colleagues intend for them to pay $610 million in FY2008, beginning
in July. And this doesn't include the state's annual $125 million
payment from the
tobacco settlement, funded by a 50¢ per pack increase imposed on
smokers by the tobacco companies since 1999.
The schizophrenic rationale for this latest cigarette tax
hike is again that it'll encourage more smokers to quit. Ten bucks
a pack would accomplish this better, but if
enough smokers do quit, who's going to fund the health-insurance-for-all program?
Ultimately we'll all be taxed more anyway as its cost continues to
escalate. If "killing the tobacco golden goose," as the Salem News
termed it, should succeed then everyone will just be paying higher taxes
sooner.
Nobody has a clue yet just how much that
pie-in-the-sky healthcare boondoggle -- the latest predictable sinkhole in the Massachusetts budget
-- will ultimately cost. So what does Governor Patrick propose and
Legislature adopt next? Despite the highest state debt burden in
the nation, the pols are lifting the state's self-imposed borrowing cap.
Some "cap"! When more borrowing is desired than permitted, the
restriction is simply elevated to satisfy more spending. During
the last "fiscal crisis" taxes were hiked while spending was increased
as well -- and has climbed ever since by some billion dollars each year
to get us into this one.
None of what's going on at the State House makes any
sense to anyone but a politician intent on spending other people's money. Anyone with even a touch of
common sense recognizes borrowing and taxing is no solution for a
recession. Whatever they're smoking and drinking in the thin air
atop Beacon Hill ought to be highly taxed. That'd bail out the
state overnight!
We taxpayers are once again being set up for a big
hit.
 |
|
Chip Ford |
The New Bedford Standard-Times
Wednesday, February 27, 2008
State swamped in debt
By Charles D. Chieppo and Steve Poftak
It's often said that in a democracy, we get the government we deserve.
But when it comes to debt, we don't deserve the treatment we're getting
from government.
Massachusetts and the nation are slipping into recession. Part of that
has to do with the cyclical nature of the economy, but it's exacerbated
by the fact that we're in debt up to our ears.
Massachusetts faces staggering liabilities. When you add up the debt
that's on the commonwealth's books, those of various quasi-public
authorities like the MBTA and the Massachusetts Turnpike, our unfunded
pension and retired public employee liabilities, and huge infrastructure
maintenance backlogs, the total liability comes out to more than $12,550
for every person in the Bay State. And that doesn't even count the
liabilities of some quasi-public authorities and the commonwealth's 351
cities and towns.
That $12,550 per capita gift from the state becomes even more
debilitating when you realize that the average family has less than
one-third of its income left with which to try and pay it down.
According to the Tax Foundation, a nonprofit fiscal policy watchdog,
taxes consume a little over a third of what Americans earn. Servicing
debts like mortgages and equity loans eats up just over another third.
For years, Massachusetts has capped its annual borrowing at $1.25
billion. It's not unreasonable to bump that number up some, given
inflation. But a Patrick administration proposal to hike the debt cap to
$2 billion annually by 2012 is more than we can afford.
By virtually any measure — such as per-capita debt and debt as a
percentage of personal income — the state is deeper in hock than almost
any other state. Debt service is one of the largest line items in our
annual budget and one of the drivers of a structural deficit that has
topped $1 billion in each of the last two years.
Anyone who dismisses the impact of debt run amok need only look at the
MBTA, which pays as much in debt service each year as it collects in
fares.
The administration plan includes provisions designed to prevent the
state from falling into a similar quagmire of liability, such as a cap
on debt service as a percentage of state revenue. But the limitation can
be easily avoided by simply extending debt out over a longer term. It
would reduce annual payments, but put our children even deeper in the
hole.
The plan assumes state revenue will grow 3 percent annually. But the
fact is that our expenditures are growing much faster. Over the last
five years, the state's pension costs have grown at an annual rate of
more than 13 percent, and debt service — even without the proposed
increase in the debt cap — has grown an average of 11 percent per year.
Looking back 10 years, annual Medicaid growth has been over 8 percent.
Basic laws of arithmetic apply, even to bond funds. With the
administration making a number of multi-billion dollar proposals that
would only increase debt service costs, New Bedford's Mark Montigny,
Senate chair of the Joint Committee on Bonding, Capital Expenditures and
State Assets, has rightly called on Gov. Patrick to provide a
comprehensive list of anticipated capital expenditures so the
Legislature can figure out whether we can afford them.
The governor also plans to increase the term on some state borrowing
from 20 to 30 years. It's not a bad idea, as long as the longer-term
bonds are used to finance assets whose useful life matches the term of
the bond. Today, precious capital dollars are used to finance
short-lived assets like computers and police cars. Some are even used to
make payroll.
Anyone who thinks that interest payments don't add up should take note
of the fact that a typical credit card purchase ends up costing more
than twice as much as buying with cash. Given the staggering debt we
already face and the difficult economic times that are upon us, we
should be very careful about taking steps that would put us even deeper
in the hole.
Charles D. Chieppo is a senior fellow and Steve Poftak director of
research at the Pioneer Institute, a non-partisan Massachusetts public
policy think tank.
The Boston Globe
Wednesday, April 9, 2008
Governor seeks $3.8b to fix bridges
Says bond plan would bring 23,000 jobs
By Matt Viser
Governor Deval Patrick plans today to unveil a $3.8 billion bond
proposal to repair 411 deteriorating bridges throughout the state over
the next eight years, a project he will argue not only improves road
safety but also pumps cash into the economy to buffer Massachusetts from
a recession.
The massive repair and reconstruction of bridges in virtually every
corner of the state would create 23,000 direct construction jobs,
according to a preliminary draft of the governor's plan, which is
significantly higher than the 5,000 employed at the height of the Big
Dig.
The proposal will be introduced at a major speech this morning at MIT's
Sloan School of Management, the first economic outline Patrick will
present since the Legislature defeated his plan to create tens of
thousands of jobs by licensing three casinos around the state. Those
briefed on the plans say the bridge-repair blueprint will be the
centerpiece of today's speech.
"He will talk about the need to invest in our infrastructure in order to
maintain our competitiveness and grow our economy," said Cyndi Roy, a
Patrick spokeswoman who declined to comment further.
The move could prove controversial. It would add to a state debt burden
that is already the highest per capita in the country. Patrick plans to
pay for the projects by floating bonds in the next eight years, which
would need legislative approval and would renew debate over how deeply
the state should go into debt, and how vital the bridge repairs are.
There are already several other major bond projects before the
Legislature, including $2 billion targeted for higher education and $1.4
billion for environmental projects. In addition, a $3.5 billion
transportation bond bill that the House approved yesterday would help
fund 397 additional bridges.
Lawmakers, reacting with caution yesterday in advance of Patrick's
speech, said they will closely scrutinize the proposed debt plan - but
the idea of spreading money in legislative districts around the state
for safety projects is sure to have a certain political appeal.
"My initial reaction is actually very favorable," said Senator Mark C.
Montigny, a New Bedford Democrat and chairman of the Joint Committee on
Bonding, Capital Expenditures and State Assets, who normally opposes
similar bonding plans. "It's dealing with a public safety issue where
there could be great peril if we don't deal with it."
The administration plans to argue that embarking on the projects now
will save money in the long run, because construction costs are
escalating. The borrowing plan would front-load state indebtedness,
resulting in an accelerated schedule for new debt that would restrict
the ability of future state leaders to borrow, according to sources
briefed on the proposal by administration officials.
"The governor has put forward a thoughtful proposal to help finance a
reconstruction of the state's bridges," said David Guarino, spokesman
for House Speaker Salvatore F. DiMasi, who was briefed on the proposal
yesterday. But, he added, DiMasi will "fully analyze it and look at the
financial impact it may have on our bond rating and future capital
projects."
Fixing bridges has been a perennial problem in Massachusetts, which has
one of the oldest transportation infrastructures in the nation, with 200
bridges that were built in the 19th century.
The Globe reported in August that approximately 10 percent of the 5,500
bridges in Massachusetts are classified under federal standards as
"structurally deficient," including 65 well-traveled bridges with such
serious defects that they may need to be replaced. The Longfellow Bridge
over the Charles River is among the most high-profile of the spans, as
well as the Merrimack River bridge in Haverhill and the bridge that
carries the Fitchburg commuter rail over Route 62 in Concord.
The Pioneer Institute last year released a report titled "Our Legacy of
Neglect," documenting a lack of funding for transportation
infrastructure in Massachusetts.
There are 608 structurally deficient bridges right now, according to
state officials, but that figure grows each year. Under the governor's
proposal, and current spending plans, 808 bridges would be repaired over
the next eight years, bringing the number of structurally deficient
bridges down to 450. If no work were done over the next eight years,
there would be 1,264 problem bridges.
Patrick this morning will also announce the creation of regional
districts throughout the state where the state will help streamline new
developments, a plan based on the redevelopment of Fort Devens in Ayer.
The debate over fixing bridges will come at a time when the state has
been struggling to find enough sources of new revenue to keep existing
services and fund several ambitious spending programs. The state is
facing a budget gap of $1.3 billion. DiMasi yesterday postponed a
much-anticipated debate on Beacon Hill over several tax proposals that
are intended to help balance the budget.
Amid a flurry of last-minute lobbying and uncertainty over vote counts,
DiMasi put debate off until tomorrow on whether to implement $379
million in tax increases on smokers and the state's largest
corporations. The House was expected to vote on the plan yesterday, but
business leaders and a cadre of Republicans offered a preemptive strike
in the debate around noon, charging that the plan would hurt businesses
amid a looming recession.
"We have a fundamental problem with the timing, scope, and nature of the
bill," said the House minority leader, Bradley H. Jones, a North Reading
Republican. "This tax package will be nothing but the death knell for
the state's economy."
The proposals would tighten corporate tax laws - bringing in $204
million next year - and would raise $152 million by increasing the
state's cigarette tax by $1 per pack. The cigarette hike would give
Massachusetts the second highest cigarette tax behind New Jersey,
although New York is planning to trump both states with a $2.75-per-pack
increase.
DiMasi outlined the proposals two months ago in an effort to compromise
with Patrick, who since taking office last year has called for closing
so-called corporate tax loopholes.
Patrick and DiMasi have both backed a plan to tighten the corporate tax
codes, but they have significant differences over how deep corresponding
reductions in corporate tax rates should be.
Overall, DiMasi's plan would mean that businesses would pay about $204
million more next year, but by 2011 would be back to what they pay now.
Because Patrick's plan does not lower the tax rate as quickly or
dramatically, businesses would still end up paying $280 million more
once his plan is fully implemented in 2012.
The Boston Globe
Thursday, April 10, 2008
Cahill: Bridge plan too costly
But Patrick's $3.8b proposal gains key backing
By Matt Viser
State Treasurer Timothy P. Cahill yesterday disagreed with the
governor's $3.8 billion plan to repair 411 bridges across the state,
saying the proposal would excessively mortgage the state's financial
future, and suggested the bond amount be cut by half.
"We're not going to break the bank to do it," Cahill, who is in charge
of managing state debt, said in an interview. "This is big and it's big
on top of a lot of other big proposals. It may not be the time to take
on something this large."
Despite Cahill's reservations, the proposal picked up key backers
immediately, including House Speaker Salvatore F. DiMasi, Senate
President Therese Murray, and organized labor. Legislative support is
crucial because it will require passage of a special bond bill.
Governor Deval L. Patrick officially unveiled yesterday the proposal to
accelerate bridge repairs across the state, which administration
officials believe would spur the economy and allow the state to fix its
infrastructure at a lower cost than if it waited.
"By acting now, we can cut that deficient bridges backlog in half in
eight years, avoid construction inflation, and create thousands of
jobs," Patrick told academics, students, and business and political
leaders yesterday during an economic address at MIT's Sloan School of
Management. "Our plan to address deficient bridges will have shovels in
the ground and people at work in 90 days."
A Globe story published yesterday, citing preliminary draft documents
distributed by the administration this week in advance of the speech,
said the governor expected the initiative to create 23,000 construction
jobs. The administration yesterday avoided using that figure publicly,
with one aide suggesting the estimate was "10,000 to 15,000 jobs" and
others saying they preferred to use "thousands."
Overly optimistic job-creation estimates bedeviled Patrick's ill-fated
proposal to license three casinos around the state.
In his speech yesterday, Patrick outlined the general sketches of his
plan but avoided specifics, an indication that the final price tag - and
how that would affect the job estimates - is under negotiation.
Administration sources said the governor is willing to accept a lower
number than $3.8 billion in borrowing.
To pay for the bridgework, Patrick would increase the state's bonding
capacity. The state currently has a self-imposed limit for newly issued
bonds of $1.5 billion a year, which is scheduled to increase to $2
billion a year in 2012. In order to pay for the projects sooner, the
Patrick administration would frontload $2.8 billion that the state would
otherwise spend from 2014 to 2028, and spend the money over the next
eight years instead.
The state would also refinance $366 million in outstanding debt from 20
years to 30 years, freeing up another $1 billion now but costing more
over the long run because the state would be paying interest for 10
additional years.
The strategy makes sense, administration officials said, because the
state will save money by putting construction out to bid sooner, before
inflation drives the prices up. Administration officials suggest that
the state would save $1.8 billion over 20 years, based on a 7 percent
inflation rate.
But Cahill and other fiscal watchdogs argue that Patrick's plan would
add to a state debt burden that is already the highest per capita in the
country.
There are several other major bond projects before the Legislature,
including $2 billion targeted for higher education and $1.4 billion for
environmental projects. In addition, a $3.5 billion transportation bond
bill that the House passed Tuesday would help fund 397 additional
bridges.
Cahill estimates that the $3.8 billion bond would require $3.2 billion
in interest payments, putting the overall cost for the governor's bridge
proposal at $7 billion, a figure the Patrick administration did not
dispute.
Cahill unveiled in January his own plan to fix 10 bridges that are most
in need of repair, which he said would cost $700 million, and he added
yesterday that he supports the goal of the governor's plan. But the
treasurer, after a briefing from administration officials, said he
advised Patrick late Tuesday afternoon against the $3.8 billion plan.
"We have been tempted too often to figure out how to get dollars now
that have repercussions for the future. We're borrowing against the
future," said Michael Widmer, president of the Massachusetts Taxpayers
Foundation. "That's a significant downside to the proposal."
DiMasi applauded the plan yesterday, and when asked whether the state
could afford the bonding, said, "Yes, I think we can."
The speaker, who often tweaks the governor even when he is complimenting
him, also said the borrowing plan should have been put forward earlier -
instead of Patrick's failed casino gambling plan.
"This is the kind of focus that I thought we should [have been] taking
in the last three or four months instead of other issues that were
dominating the landscape at the time," DiMasi said.
Murray left the speech without addressing reporters, but later put out a
statement saying "by taking action now, we can start to make up for
decades of neglect." Her spokesman said she supports the governor's
proposed price tag of $3.8 billion.
The debate over fixing bridges is occurring at a time when the state has
been struggling to find enough sources of new revenue to keep existing
services and fund several ambitious spending programs.
In his 25-minute speech yesterday, Patrick used optimistic rhetoric to
calm fears of a looming recession and outline several initiatives that
could help the state prepare for rocky economic times, including the
creation of 16 regional districts throughout the state where his
administration will help streamline permitting for new developments.
The state's Department of Housing and Community Development would create
a $20 million fund to purchase, redevelop, and sell foreclosed and
vacant properties.
"We must continue to take actions that will keep the Commonwealth's
economy moving forward," Patrick said. "Government alone cannot create
new jobs, but we create conditions that foster a culture of
opportunity."
The Boston Herald
Thursday, April 10, 2008
Debt will be gov’s permanent record
By Michael Graham
Forget Beacon Hill. Deval Patrick is living in Delta House.
Remember the movie “Animal House,” when Bluto, Otter and the gang were
facing expulsion, their fraternity charter was revoked and the guys knew
there was no way to avoid facing the consequences of their irresponsible
actions? Their solution:
“Road trip.”
Well, “Flounder” Patrick and his pledge pin are facing the hard, fiscal
realities of Massachusetts.
The budget is $1 billion in the red. The Legislature won’t sign onto his
“shake down the gambling addicts” funding plan. The economy is slowing.
So what does he do?
He blows the doors off with a $3.8 billion roads and bridges spending
blast. You can practically hear the union members in the background,
chanting “To-ga! To-ga! To-ga!”
And well they should.
At the height of Big Dig spending, there were only 5,000 people getting
government checks from that boondoggle.
The Patrick plan is to put 23,000 people - mostly union members - on the
taxpayer’s dime.
Some future taxpayer’s dime that is, because Patrick wants to borrow
every dollar.
Massachusetts taxpayers are already on the hook for more state debt, per
person, than any state in the union. How do I know? I read the Patrick
administration’s own report, released last summer.
We are paying $2 billion per year on debt service right now - that’s a
monthly payment of $167 million on the commonwealth credit card. And no
frequent flier miles, either.
Now, $3.8 billion is a lot of money for Massachusetts, even when times
are good. Any liberal would be proud to propose it.
But “No Down Payment” Deval isn’t just another liberal. According to
Sen. Richard Tisei, he had already proposed $20 billion in new spending
before this. He’s the Bluto Blutarsky of budget-blowing Bay State
politicians.
Patrick tries to explain all this away by claiming that, by structuring
the borrowing this way or that, we can somehow borrow billions of
dollars painlessly.
Forgive me if I remain skeptical. Painless?
I’m one of those people who finds the $2 billion we’re spending on debt
service right now “mildly discomforting.”
After all, that’s $2 billion that could be going to property tax relief
and police salaries.
If Massachusetts had a leader for a governor, he’d be proposing tough
choices and real cuts in spending. He’d force the Legislature to
prioritize spending with the threat of vetoes.
Can anyone even imagine a scenario in which Beacon Hill sends Deval
Patrick a “for the children” spending package that he would veto? No
way. The official Patrick Economic Program appears to be: “If you’ve got
money, spend it. If you don’t, spend even more.”
In fact, this economic recklessness raises real questions about the
character of our governor. One has to ask what kind of person looks at
our current, shaky economic conditions and says, “You know what we need?
More workers, more debt and more expenses!”
The same kind of person who, as governor, earns $140,000 a year but has
a $27,000 per month mortgage.
He does understand that, at some point, all this money has to be paid
back. That “I’ll just get another book deal” isn’t a rational fiscal
policy for an entire commonwealth. Unless he plans on borrowing the
entire $3.8 billion from his pals at Ameriquest, eventually this bill is
going to come due.
Unfortunately, unlike his casino bill, Patrick’s Mastercard Moment will
be greeted with cheers by the boys on Beacon Hill. The good thing about
bridges is that they’re scattered across many a winding legislative
district. And so are the dollars to repair them.
The unions will get their payday, the politicians will get their pork,
and the taxpayers will be abandoned somewhere along the road.
The Boston Globe
Friday, April 11, 2008
Mass. House OK's big tax hikes
$392m in new levies on business, smokers
A gain for Patrick; Senate action next
By Matt Viser
House lawmakers last night gave approval to $392 million in tax
increases for smokers and the state's largest corporations, providing
Governor Deval Patrick with a major political victory while drawing fire
from business leaders.
The legislators' 131-23 vote capped a long crusade by Patrick and his
allies in the Legislature, who convinced House Speaker Salvatore F.
DiMasi to back away from a more business-friendly plan and approve the
state's most momentous tax increase since 2002.
It also ended two days of furious lobbying by banks and business groups
and marked a legislative victory by the governor, who has been trying to
improve his fortunes after the defeat of his plan to license resort
casinos.
"We appreciate the House's willingness to move closer to the governor's
proposal," said Doug Rubin, the governor's chief of staff. "When you
look at where we started in this process, and the House and the Senate
and the governor, for us to see that enacted is a good example of
everybody working together."
After the House voted around 10:15 last night, DiMasi left without
speaking to reporters but released a statement praising legislators for
supporting a plan to help the state balance next year's budget.
"The members of the House have rolled up their sleeves, tackled
difficult issues head-on, and provided common sense, fiscally
responsible solutions to our budget challenges," he said.
The proposals would tighten corporate tax laws and prohibit several
practices the governor called "loopholes," bringing in $217 million next
year. It would also raise $175 million by increasing the state's
cigarette tax by $1 per pack, to $2.51.
The cigarette increase would give Massachusetts the second-highest
cigarette tax behind New Jersey, although New York legislators this week
voted to trump both states with a $2.75-per-pack increase.
Proponents argued that the increase would fill state coffers and
discourage residents from smoking, while critics said the state would
lose money from smokers, who would travel to New Hampshire and Rhode
Island to buy cheaper cigarettes.
The average price of a pack of cigarettes in Massachusetts would go up
nearly 20 percent, to $6.41.
The Senate, which has been supportive of the tax increases, plans to
take up the proposals within weeks. If there aren't significant
differences, they could be signed by the governor shortly after.
The corporate tax changes, which would take effect Jan. 1, 2009, would
prevent corporations from declaring some profits in states with more
favorable tax rates.
Patrick had been seeking the changes since he took office, but his
proposals had been repeatedly rebuffed by DiMasi, who said that the tax
increases would send the wrong message to businesses.
DiMasi backed the plan this year, but maintained significant differences
with Patrick over how deep corresponding reductions in corporate tax
rates should be.
In exchange for tightening the state's corporate tax codes, Patrick had
proposed gradually reducing the state's corporate tax rate from 9.5
percent to 8.3 percent by 2012. DiMasi went further, proposing a
reduction to 7 percent by 2011.
The plan the House approved yesterday strikes a compromise by lowering
taxes from 9.5 percent to 7.5 percent by 2012.
Massachusetts has the country's fourth-highest corporate tax rate, which
business leaders argue has damaged the state's reputation and
discouraged companies from locating here.
Administration officials estimate that up to 3,000 businesses -
generally the larger ones - will pay more taxes under their plan, while
at least 15,000 businesses would pay less.
After a flurry of lobbying by high-powered banks, the House also added a
provision to reduce the tax rate for financial institutions, which under
earlier proposals were exempt.
Their tax rates will be reduced from 10.5 percent to 9 percent by 2012.
"We're extremely pleased," said Kevin Kiley, chief operating officer of
the Massachusetts Bankers Association, which represents 200 banks
throughout the state, including Bank of America, Fidelity, and Citizens
Bank. "It's a big step for the banking industry."
Facing uncertainty over vote counts, DiMasi had put off debate earlier
this week to rejigger his game plan. The House had been expected to vote
on the plan Tuesday, but business leaders and a cadre of Republicans
criticized the plan, charging it would hurt businesses amid a looming
recession.
Lobbyists and legislators yesterday roamed the hallways aimlessly for
hours, as House leaders met behind close doors.
By late yesterday afternoon, it became clear that DiMasi's proposal did
not have the votes . About 40 members of the Democratic caucus supported
closing loopholes, but without any corresponding reduction in the
corporate tax rate. Another 28 members were going to vote against
DiMasi's plan because they thought it was too favorable to businesses.
Once debate began around 4 p.m., Republicans tried several legislative
tactics to delay the vote, and launched into long speeches blasting the
tax increase as harmful to businesses during a fragile economic time.
"A tax is a tax is a tax!" yelled Representative Jeffrey D. Perry, a
Sandwich Republican. "This is taking money from our constituents, and
harming our economy!"
The proposal comes at a time when the state has been struggling to find
new sources of revenue to keep services and fund several ambitious
spending programs. Cities and towns are also cutting services, and
asking legislators for help.
And in a year when all legislators have to run for reelection, they are
searching for ways to deliver for their communities.
The governor has proposed an additional $166 million in new revenues
through additional taxes and increased enforcement of tax collections.
Those proposals will come up in about two weeks as part of the House
debate on the overall budget.
The Cape Cod Times
Friday, April 11, 2008
House endorses cigarette tax hike
By David Kibbe
The House overwhelmingly approved a $1 per pack increase in the
cigarette tax last night, following a lengthy debate about whether
smokers were being targeted unfairly.
The tax bill that cleared the House would also close two so-called
corporate tax loopholes, while cutting the overall corporate tax rate,
based partly on economic triggers. Altogether, corporate taxes would
still go up $217 million for the next fiscal year, which begins July 1.
The cigarette tax would bring in an additional $175 million to help pay
for subsidized health care for poor and low-income families.
The tax bill, which passed the House by a vote of 131-23, now moves to
the Senate. If approved, the increase in the cigarette tax would go into
effect in July.
Republicans accused the House's Democratic leaders of not doing an
analysis of the economic effects of the tax bill before holding the
vote. It was the first major tax bill to move on Beacon Hill since 2002.
"This is taking money from our constituents, harming our economy, and
driving business underground," Rep. Jeffrey Perry, R-Sandwich, told the
House.
Rep. Susan Williams Gifford, R-Wareham, said the House was
discriminating against cigarette smokers.
"Ladies and gentlemen, I ask you, why are we targeting tobacco users?"
Gifford asked. "Why aren't we targeting those who enjoy the adult
alcoholic beverage? Why aren't we attacking those who enjoy their junk
food?"
Gifford said that if she had time to offer an amendment, it would be a
"Twinkie tax."
The state last increased the cigarette tax in 2002, when it was
virtually doubled to $1.51 a pack. The increase to $2.51 a pack would go
into effect July 1, if it is approved by the Senate and signed by Gov.
Deval Patrick.
Incentive to quit
Proponents of raising the cigarette tax cited statistics that said it
would encourage more smokers to quit as well as help pay for the
negative health effects of cigarettes.
"This is a compelling argument," said Rep. Rachel Kaprielian,
D-Watertown. "Not only do we get money for the product, we also see a
corresponding decline in smoking. Smoking kills you and it compromises
your health seriously."
Patrick has said the state is facing a $1.3 billion revenue shortfall in
next year's budget to maintain current services.
The state is also dealing with the escalating cost of its health care
law, which requires residents to have either private or state subsidized
insurance, depending on their income.
Senate President Therese Murray, D-Plymouth, supports the cigarette tax
hike, but has been waiting to see what the House's corporate tax package
looks like.
Patrick has proposed closing the same corporate tax loopholes, but he
would cut the overall corporate tax rate less deeply than the House.
Under "combined reporting," multistate corporations would be stopped
from shifting profits from Massachusetts to other states for tax
reasons.
Under "check the box," businesses would have to claim the same tax
status — such as filing as a corporation or a partnership — on both its
federal and state tax returns. Currently, they can file as a corporation
on one return and as a partnership on another to pay less in state
taxes.
"Fair compromise"
The bill would also cut the corporate tax rate from 9.5 percent to 8.75
percent next year. A further cut, eventually to 7.5 percent, would kick
in if certain economic triggers are met. The triggers are based on
inflation and increases in corporate revenue.
The tax rate for financial institutions would also be cut by a
half-percent a year based on similar triggers. The rate for financial
institutions is currently 10.5 percent. It could drop as low as 9
percent under the triggers.
"I think it's a fair compromise," said Rep. John Binienda, D-Worcester,
the House chairman of the Revenue Committee. "It will give us the
revenue we need, and at the same time it will show sensitivity to the
corporate structure, both corporate and financial."
The Telegram & Gazette
Friday, April 11, 2008
House OKs cigarette tax hike
Money needed for health insurance
By John J. Monahan
State officials celebrated the second anniversary of state’s health
insurance reform law yesterday, and the House voted 131–23 to impose an
additional $1 per pack on cigarettes to help meet spiraling
unanticipated costs of the program.
In addition, the House approved changes in corporate taxes that would
close two major tax loopholes used by national firms to shift tax
payments to other states, and a series of cuts in general corporate tax
rates over the next three years.
The bill would slash corporate tax rates over three years from 9.5
percent to 7.5 percent for most companies, and from 10.5 percent to 9
percent for large banks and financial institutions. Even with the
corporate tax rate rollbacks, the package would raise an estimated $392
million in new state revenue in fiscal 2009.
The insurance program, now providing the state share of free or
subsidized health insurance to an estimated 350,000 income-eligible
people, is expected to increase in cost from $472 million this year to
$869 million in fiscal 2009.
With no reduction in state costs for the uninsured, which the
administration expects to hit $454 million next year, and more people
qualifying for subsidized insurance than expected, the program has
become far costlier than anticipated when the law was passed.
The House stipulated in the new tax bill that the cigarette tax,
supported by Gov. Deval L. Patrick and Senate President Therese Murray,
would go into effect starting July 1. Under the House bill, an estimated
$175 million in new revenues from smokers would go to the Commonwealth
Care insurance program.
The increase would make Massachusetts’ cigarette taxes the second
highest in the nation.
Mr. Patrick said yesterday he has not supported raising state gasoline
taxes at this point because, “It is a tough time to be asking people to
pay more.” But he said he would support the cigarette tax hike because
raising the price of a pack of cigarettes could result in fewer young
people smoking. Minority Leader Bradley H. Jones Jr., R-North Reading,
complained that Democrats were raising taxes, even though revenue
estimates have projected more than $1 billion in new revenue next year,
without any tax increases.
The corporate tax changes arose from a House compromise with the
governor to go along with his proposals to close “check the box” and
“combined reporting” loopholes used by large national companies to shift
tax payments on operations here to lower tax states, if the loophole
closings were combined with a general tax cut for business.
Democrats scrambled to hash out several versions of the corporate tax
rollback over the last two days and throughout the day yesterday in
closed-door caucuses outside of public view. The final version was
presented to the members by House Revenue Committee Chairman John J.
Binienda, D-Worcester, shortly after 7 last night.
While the first phase of the corporate tax rate rollbacks would start
Jan. 1, 2009, the second and third year of the annual rollbacks
corporate tax rates would be triggered only if state saw minimum gains
in corporate tax revenues. Together the rollbacks would save companies
about $79 million in the first year.
Eliminating the “check the box” and “combined reporting” loopholes would
bring the state an estimated $289 million in additional revenue in
fiscal 2009, and up to twice that in following years.
“It’s never easy to ask the people we represent to pay more,” said Mr.
Binienda, acknowledging the cigarette tax hike is “a very controversial
measure”. But he said the additional revenues are needed to pay for
state programs. Republicans tried repeatedly without success to postpone
the vote on the tax package yesterday.
State Rep. Paul K. Frost, R-Auburn, said a one-week postponement would
allow lawmakers to learn more from constituents and businesses about the
impact the tax changes would have. “I think we are going to lose jobs,”
because of the changes, Mr. Frost said.
The author of the cigarette tax increase, state Rep. Rachel Kaprielian,
D-Watertown, defended the increase against critics who said the state
would lose massive revenues and risk job losses because smokers would
cross state lines to buy cheaper cigarettes.
She said studies of tax increases on cigarettes in other states have
shown that smokers only go for out-of-state cigarettes for a short time
after a tax increase and then return to buying them in-state. Moreover
she said, the state should “go after” such “tax cheats.”
“Not only do we get money from taxing the product, we will also see a
decline in smoking,” she insisted.
Rep. Peter J. Koutoujian, D-Waltham, said the per-pack cost is even
higher for state taxpayers footing the bill for smoking-related
illnesses. He said the federal Centers for Disease Control and
Prevention estimated that the state spends $3.5 billion a year on
smoking-related diseases.
That translates into more than $19 per pack in health costs for
taxpayers, said Koutoujian, who supports the bill.
Tax hike proponent Frank M. Hynes, D-Marshfield, said the higher prices
would prevent 46,000 children from taking up smoking and pressure 26,000
adults to quit.
George N. Peterson Jr., R-Grafton, however, said many of the people who
smoke cannot afford the new taxes, are addicted to nicotine, and will
have to give up other purchases to pay the higher tax. Other opponents
said smokers may no longer be able to afford health insurance and the
state would have to pick up the cost of providing them coverage.
State Rep. Paul J. Kujawski, D-Webster, who opposed the bill, said he
expected the higher cigarette tax would hurt retailers and drive more
people to shop out-of-state.
State Rep. Harold P. Naughton Jr., D-Clinton, said he voted for the
cigarette tax hike because his mother who smoked, died a painful death
at age 76 from lung cancer.
Associated Press
Friday, April 11, 2008
$1 A Pack Cigarette Tax Hike Passes Hurdle
Mass. House Approves, Passes To Senate
House lawmakers on Thursday approved a package of tax hikes, including a
dollar increase on a pack of cigarettes and a series of business tax
loophole closings -- the first major tax package since 2002.
The cigarette tax would generate an estimated $175 million and would go
into effect in July if the bill becomes law. It sparked some of the
sharpest exchanges during the hours-long debate on the floor of the
House, which finally approved the measure by a vote of 131-23.
Backers said the cigarette tax would not only bring in needed revenue
with the state facing a $1.3 billion budget gap, but would also sway
some young people against taking up the habit -- and encourage older
smokers to quit.
"Smoking kills you. It compromises your health and it kills you. It's
something we have to be mindful of," said Rep. Rachel Kaprielian,
D-Watertown, a supporter of the bill.
An amendment approved during the debate would dedicate the revenues of
the cigarette tax to health care to help ease financial pressure on the
state's landmark health care law, which is struggling with a larger than
expected enrollment.
Critics said they agreed smoking is bad, but said hiking taxes doesn't
make any sense in the face of a looming recession.
They also said the new tax would increase the cost of a carton of
cigarettes to about $68 dollars -- compared with about $33 in New
Hampshire -- and would send smokers fleeing over the border.
Rep. Colleen M. Garry, D-Dracut, said the bill could end up killing
mom-and-pop stores in her district.
"It's less then a mile from the New Hampshire border," she said. "What
happens to the jobs and what happens to the businesses in my district?"
Others said it's unfair of the state to put so heavy a tax burden on a
narrow class of people -- particularly since those backing the law agree
that nicotine is addictive.
Rep. George Peterson, R-Grafton, is a former smoker and said he knows
how hard it is to quit. He said a person with a two-pack-a-day habit
will end up spending an additional $720 a year under the bill.
"It is an addiction. It is extremely difficult to overcome," he said.
Rep. Peter Koutoujian, D-Waltham, said the per-pack cost is even higher
for state taxpayers footing the bill for smoking-related illnesses. He
said the federal Centers for Disease Control estimated that the state
spends $3.5 billion a year on smoking-related diseases.
That translates into more than $19 per pack in health costs for
taxpayers, said Koutoujian, who supports the bill.
Lawmakers made some changes to the business portion of the bill before
approving it.
The initial version of the bill softened the impact of the loophole
closings by mandating a gradual cut in the corporate income tax rate
over several years down to 7 percent.
The final bill wouldn't cut the tax rate quite as deeply -- stepping
down to 7.5 percent over several years -- and would link the individual
cuts to minimum annual gains in corporate tax revenues.
The changes bring the bill closer to Gov. Deval Patrick's version, which
cuts the rate to 8.3 percent.
House Speaker Salvatore DiMasi said the bill would increase revenues and
reduce the tax burden on businesses.
"We will soon take up the other key portions of my balanced budget plan,
difficult cuts of at least $100 million, savings and efficiencies in
state government and modest use of our stabilization fund," DiMasi said.
Republicans objected to the loophole closings, calling them a business
tax hike by another name.
"We are not only losing jobs, we are losing population and you want to
raise taxes on business?" said Rep. John Lepper, R-Attleboro. "Is that
sensible?"
The loophole closings are estimated to produce about $217 million for
the fiscal year starting in July.
The bill still needs the approval of the Senate and Gov. Deval Patrick's
signature.
Senate President Therese Murray has said the Senate firmly backs the
cigarette tax hike and Patrick said he's also supportive of both the
cigarette tax and the loophole closings, but wants to see the final
version of the bill before saying whether he'd sign it.
The Boston Globe
Thursday, April 10, 2008
The benefits of a higher cigarette tax
By Rachel Kaprielian and Herman Hamilton
Each year, as the Legislature sets the state budget, members are
confronted with making tough and balanced choices while remaining
steadfast to sound public policy. Nowhere is that more evident than in
the state's commitment to ensuring the success of its landmark
healthcare reform law, an initiative that is providing insurance to the
uninsured but carries with it a price tag of nearly $400 million in
fiscal year 2009.
Now is not the time to backtrack on the law, a national model that other
states are working to emulate. A basic component to this success is in
its inclusion of prevention measures that seek to improve the overall
public health - today and down the road.
Cigarette smoking is the leading cause of preventable death and disease
in Massachusetts. Twenty-five people die each day in the state from
tobacco-related illnesses, and thousands of others suffer from related
ailments - emphysema, heart disease, cancer - many unable to work or
enjoy quality of life. Its wrath results in great personal, physical,
societal, and fiscal cost. To combat this reality requires a
multi-faceted and fiscally responsible approach: one that brings in
needed revenue while adding immeasurable benefits toward prevention and
cessation of smoking.
Currently, there is a legislative proposal that would add $1 to the levy
on cigarettes. Its passage would add about $150 million to state
coffers, which would enable the Legislature to continue healthcare
reform, as well as reduce the incidence of smoking rates overall. Data
shows that for every 10 percent increase in the cost of a pack of
cigarettes, the overall smoking rates decrease 4 percent.
Perhaps more compelling, raising the price of smoking will discourage
children, who are still the tobacco companies' main target, from picking
up the habit in the first place. That will lower future healthcare costs
and help break the cycle of addiction. A leading study shows that nearly
every adult who smokes (almost 90 percent) took his or her first puff at
or before age 18. If passed, this legislation would translate into
46,000 fewer future kid smokers coupled with 25,000 fewer adult smokers.
Every year, Massachusetts spends over $3.5 billion to treat sick
smokers. These are critical dollars that could be spent on other health
priorities, prevention programs, or other important needs in our state.
Critics of the increase say that it will push sales to states that tax
less. They also say it is a regressive tax that will dwindle over time.
Neither is true. Convenience stores in border towns noticed a slight dip
in business after past increases, but, over time, found that buyers
returned. This makes sense since cigarettes, like gum, candy, and soda,
are typically purchases of convenience.
And other states, most notably Michigan and Alaska, have found that even
with an increase in the cigarette tax, their revenues have steadily
increased, not decreased.
But raising the tobacco tax saves money here too. The child with asthma
whose parent stops smoking today will have fewer asthma-related
complications from secondhand smoke tomorrow. An expectant mother
encouraged to kick the habit by higher prices will give birth to a
healthier baby. The teenager who doesn't start smoking becomes the adult
with fewer chances of getting lung cancer, emphysema, or chronic heart
disease.
And from a strict fiscal analysis, it would save the state over $1
billion in long-term healthcare costs.
So an increase in the tobacco levy simply makes sense. It deters
children from smoking. It helps taxpayers, heathcare providers,
hospitals, and insurance ratepayers. And it extends a helping hand to
those hard-pressed families and individuals who are working but lack
health insurance.
Representative Rachel Kaprielian, Democrat from Watertown, is lead
sponsor of the legislation; Rev. Herman Hamilton is president of the
Greater Boston Interfaith Organization and pastor of Roxbury
Presbyterian Church.
The Salem News
Thursday, April 10, 2008
Letter to the editor
State in danger of killing golden tobacco goose
To the editor:
With the economy likely heading into a recession and taxpayers already
facing soaring prices on gas and food, a tax increase of any kind is the
last thing Massachusetts residents need right now. Even so, some
Massachusetts lawmakers and Gov. Deval Patrick believe that increasing
the state's cigarette tax by $1 a pack to $2.51 per pack would generate
an extra $152 million in tax revenue.
Massachusetts' legislators need to look beyond the state's borders to
understand that increasing the cigarette tax will likely result in
killing the goose that lays the golden eggs. In the past 18 months, five
states that raised cigarette taxes have either collected less tax
revenue than before the latest increase or collected far less than
expected. In other words, the projected $152 million in extra tax
revenue that some Massachusetts lawmakers expect the state to collect
will simply not materialize.
If Massachusetts' current cigarette tax of $1.51 per pack is raised by
another $1, this kind of over-taxation could very well backfire on the
state. This March, the state of Tennessee reported that cigarette tax
collections for the current fiscal year are $47 million less than
expected after Tennessee lawmakers raised the cigarette tax by 42 cents
a pack last July to a new rate of 62 cents per pack.
A more foreboding scenario has played out in New Jersey, which reported
collecting $23 million less in cigarette tax revenue than before the
state's latest cigarette tax increase to $2.575 per pack. Also, Arizona,
Maine and South Dakota have reported budget shortfalls after raising the
cigarette tax.
In short, states are beginning to realize that there is a point of
diminishing returns with further cigarette tax increases, which can lead
to collecting less tax revenue than if the rate were left unchanged. How
can Massachusetts elected officials support such a huge tax increase and
claim that $152 million will be collected to fund health care when the
recent experience in five states is proof positive that a cigarette tax
hike will not result in raising the kind of money these legislators
expect?
The explanation for this phenomenon is quite simple. Smokers don't
necessarily stop smoking, but will drive across the border to another
state with lower taxes like New Hampshire at $1.08 per pack, order
cigarettes over the Internet to escape any state cigarette tax, or buy
from black-market dealers. The real losers in this case will be the
hard-working Massachusetts retailers, and ironically, the state as well,
because potential tax revenue will evaporate.
Massachusetts legislators need to accept the reality of the situation
and step back from the claim that raising cigarette taxes will raise
$152 million to fund health care. The experience in other states
demonstrates that a cigarette tax increase may very well make budget
deficits worse. Then, where will elected officials look for more tax
revenue?
Thomas A. Briant, Executive Director
National Association of Tobacco Outlets
Minneapolis, Minn.
NOTE: In accordance with Title 17 U.S.C. section 107, this
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