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Friday, March 15, 2013

 New taxes for Mass.?
Pro and Con



Manage money from previous tax hikes first
By Barbara Anderson

There they go again, the hordes of tax-hike advocates, spreading out across the Commonwealth to urge support for Governor Patrick’s $1.9 billion tax package.

I’ve met these kinds of advocates on the tax trail before, beginning in 1980 with their opposition to property tax limits in Proposition 2½. Today, though, I offer “institutional memory” on just the income tax.

In 1989, Governor Michael Dukakis returned from the presidential campaign trail and demanded tax hikes to fund a billion-dollar budget increase; supporters rallied at the State House, some of them dressed as giant crayons, to protest potential cuts to the arts. The legislative leadership was able to get the votes for the tax package only after promising that the new income tax rate, increased from 5 percent to 5.75 percent, would be temporary. The Legislature raised the rate again the next year, “temporarily,” to 6.25 percent.

In 1990, a coalition, calling itself the Tax Equity Alliance for Massachusetts, defeated a ballot question to repeal the Dukakis tax hikes. However, Bill Weld, who supported it, was elected governor, and oversaw a reduction in the rate to 5.95 percent in 1992.

In 1998, despite opposition from a group now called the Campaign for Massachusetts’ Future, voters approved a reduction of the investment income rate to the same rate as wage income, and in 2000 they approved a rollback of the income tax rate to 5 percent over three years. Two years later the Legislature “temporarily” froze rollback and investment rates at 5.3 percent after heavy lobbying by pro-tax groups. Then Campaign for Our Communities was formed, and called for a return to the 5.95 percent income tax rate.

Governor Patrick’s offset offer of a reduction in the sales tax rate is hard to credit from the governor who raised that rate from 5 percent to 6.25 percent just two years ago.

Instead, in 2011 a formula created in 2002 dropped the rate to 5.25 percent, where it remains — 24 years after the first “temporary” increase, and 12 years after the voters demanded a rollback to 5 percent.

Now Governor Patrick is proposing to increase the income tax rate to 6.25 percent again, as part of a $1.9 billion tax package. The Campaign for Our Communities has been fanning out across the state in support, and held a huge rally this week at the State House.

Who are these teams and campaigns for equity, our future, and communities? The list is long, made up of the many public employee unions, both national and statewide with their local affiliates, various human service providers, individual Democratic town committees and city councils. For them, it seems, taxes will never be high enough.

Patrick’s offset offer of a reduction in the sales tax rate is hard to credit from the governor who raised that rate from 5 percent to 6.25 percent just two years ago. Come the next fiscal crisis, the sales tax will likely be hiked again.

Personal exemptions have been increased in the past to sell a rate increase, only to disappear at the next fiscal crisis. Deductions come and go, depending on what special-interest lobbyists are doing on Beacon Hill.

The Massachusetts tax burden is the fourth highest in the nation per capita, eighth highest relative to personal income. The state is not suffering from a lack of taxes; it is suffering from a lack of accountability for the taxes already paid. The ongoing scandal over electronic-benefits cards is a maddening example of this.

With cuts coming from our dysfunctional federal government, there will be many pleas for revenue increases to address not only transportation but the operating budget and local aid. Eventually the easy “new revenue solution” will be exhausted, and a better-managed state will be essential. Why not do the better management now?

Tax advocates carry signs saying “invest” to hearings on new taxes. First we need to invest in respect for voters and taxpayers, who have been awaiting the return of the 5 percent income tax rate they were promised in 1989 and voted for in 2000. If they ever find reason to respect their government again, we as a commonwealth will benefit.

Barbara Anderson is executive director of Citizens for Limited Taxation.

Like the New Deal, this plan shows leadership
By James Roosevelt Jr.

I imagine that most people, at some point in their lives, have wished that they had a crystal ball to see into the future. There are many moments where a little prescience would be useful, but it seems that it would come in especially handy when faced with a tough choice. It wouldn’t surprise me if my grandfather, President Franklin D. Roosevelt, longed for a sneak peek into the months and years ahead as he crafted the New Deal to pull America out of the Great Depression. Nor would it surprise me if the representatives and senators on Capitol Hill at that time lay awake at night wondering how it would all turn out. Would this plan create jobs? Would this new infrastructure lead to growth? Only history, not a crystal ball, would show that the New Deal would lead to the greatest expansion of opportunity and growth in the history of the world.

At the time it was impossible to know that, and legislators had to decide how to vote in an atmosphere that was filled with resistance to Roosevelt’s proposal. Naysayers were vocal and visible. Boldfaced names like Charles Lindbergh and William Randolph Hearst came out against the New Deal, and were joined by the heads of corporate giants such as General Motors, Sun Oil Company, and DuPont. They criticized my grandfather for overreaching and overspending. Even by the time of the Second New Deal, the opposition remained ardent. The Republican Party platform of 1936 said that the New Deal was “guilty of frightful waste and extravagance.”

And yet, the New Deal came to pass, and relief, recovery, and reform followed. Legislators, many of whom may have been skeptical at first, and almost all of whom undoubtedly faced extreme pressure to reject this “extravagance,” joined the president in investing in America. They embraced their responsibility, not just to their current constituents who were so desperate for opportunity, but also to the generations to come who would benefit from their foresight and sacrifice.

Legislators on Beacon Hill might also be longing for a sneak peek into the months and years ahead as they wrestle with Governor Patrick’s 2014 budget. They have been asked to make a sizeable investment in education, transportation, and innovation in Massachusetts, while countless critics are making the case that the investments are too generous and the amount of revenue required too jarring.

The legislators may not have a crystal ball to tell them how a yea or nay vote will impact their districts, but they do have a rearview mirror. In it they will see that throughout our nation’s and our Commonwealth’s history, investments in education, transportation, and innovation have led to growth and opportunity. The New Deal is just one example of that. A glance into the past will also show that history favors those with an eye to the future. We celebrate President Eisenhower for his advancement of the highway system and President Kennedy for propelling us into space. Sustainably funding the MBTA may not be the moon landing, but it is a vital contribution to the economic future of the generations to come.

They embraced their responsibility, not just to their current constituents but also to the generations to come who would benefit from their foresight and sacrifice.

The governor is looking to fund early education, extend the school day in gateway cities, and make college more affordable for our young people so that Massachusetts will continue to have the brain power that has been our secret weapon for so long. He is calling for us to restore our roads and infrastructure, and expand mass transit to forgotten corners of the Commonwealth. A recent study released by the Massachusetts Taxpayers Foundation and the Massachusetts Business Roundtable makes the critical link between investments in transportation and the state’s economic competitiveness. This is about quality of life and economic growth.

President Roosevelt and his colleagues in government made a choice to give Americans the resources they needed to succeed, both in the immediate aftermath of the Great Depression and for generations to come. With no crystal ball in their arsenal, some may call what they did taking a leap of faith. I call it leadership. Whatever you call it, the Massachusetts Legislature shouldn’t let this opportunity to make history pass by.

James Roosevelt Jr., the grandson of Franklin D. Roosevelt, is CEO of Tufts Health Plan.

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Citizens for Limited Taxation    PO Box 1147    Marblehead, MA 01945    508-915-3665