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CLT UPDATE
Wednesday, March 27, 2013
Chip
Faulkner's After-Action Report:
The Joint Committee on Revenue Hearing
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With a major tax proposal baked into the
governor’s budget and legislative leadership also gearing up to
raise revenues, a full discussion of taxation is bound to move from
behind closed doors to the House and Senate floors. On Tuesday,
lawmakers, economists and members of the public offered their
alternatives, endorsements and critiques of Patrick’s tax proposal.
Economists who agree with Gov. Deval Patrick’s
plan to raise $1.9 billion in new revenue for education and
transportation suggested some tweaks to the governor’s plan on
Tuesday.
Patrick, who has said he is open to alternate
proposals, submitted a budget in January that would increase the
income tax 1 point, to 6.25 percent; lower the sales tax 1.75 points
to 4.5 percent; double the personal income tax exemption; and
eliminate 44 personal income tax deductions. Patrick’s plan also
calls for $499 million in new corporate taxes, according to a
Massachusetts Taxpayers Foundation analysis.
Two economists who signed on to a letter of
support for the governor’s proposal said that it could be improved,
primarily by increasing the income tax by a lesser amount and
keeping the sales tax closer to its current rate.
“I’m in favor of highly progressive taxes,” Barry
Bluestone, director of the Dukakis Center at Northeastern
University, told the Joint Committee on Revenue. He told the News
Service that contrary to some beliefs, the sales tax is “actually
not a regressive tax, overall.”
Bluestone proposed a tax overhaul would raise the
income tax to 5.95 percent, keep most personal deductions, keep the
sales tax at 6.25 percent, raise the gas tax by 9 to 11 cents per
gallon, and lower corporate taxes by “a point or two.” ...
Chip Faulkner, of Citizens for Limited
Taxation, proposed lowering both the income and sales taxes to 5
percent, and noted that voters had approved a ballot measure to
lower the income tax to 5 percent in 2000 but the Legislature halted
the gradual decrease at 5.3 percent. It later dropped to 5.25
percent.
“In terms of taxes, we’re not suffering from a
dearth of taxes,” said Faulkner. “According to the Tax Foundation,
our state and local tax burden is fourth per capita in the United
States.” ...
The Revenue Committee met for roughly four hours,
taking in a variety of proposals to raise revenues or to cut
taxes....
Faulkner and Sen. Gale Candaras (D-Wilbraham)
took opposing tacks on legislation (S 1311) that she said would
exempt a casino from the strictures of Proposition 2˝, which limits
the amount that cities and towns can raise property taxes.
“Absent the exemption from the operation of Prop
2˝, the city of Springfield would most likely lose, because it’s at
its levy limit, probably lose somewhere in the neighborhood of $20
million,” Candaras said.
“In terms of the Prop 2˝ law, it got passed in
1980 and over the decades our organization has been critical of the
Legislature on a variety of things. We’ve never been critical on the
state Legislature of the way they’ve handled Prop 2˝,” Faulkner
said, calling the Springfield bill a “violation” of the law, which
was passed by a voter referendum.
State House News Service
Tuesday, March 26, 2013
With taxes in the air, lawmakers hear alternatives to Guv's plan
Springfield Mayor Domenic J. Sarno pleaded
with state lawmakers on Tuesday to approve legislation that
would exempt a proposed casino's land from the state's
tax-limiting law, allowing Springfield to collect an additional
$15 to $20 million in annual property taxes.
Sarno and top aides met at the Statehouse
with the chief of staff for House Speaker Robert A. DeLeo, a
Winthrop Democrat, and Sen. Stephen M. Brewer of Barre, chairman
of the Senate Ways and Means Committee. Sarno also testified on
the bill before the Legislature's Joint Committee on Revenue.
Because Springfield is taxing at the limit of
Proposition 2˝, it cannot collect property taxes from "new
growth," as the law would otherwise allow, said Sarno, who came
to the Statehouse with Timothy J. Plante, the city's acting
chief administrative and financial officer, and Jennifer
Winkler, the city's acting budget director....
Sarno met with the two sponsors of the
legislation, Democratic Sens. Gale D. Candaras of Wilbraham and
James T. Welch of West Springfield....
Barbara Anderson, executive director
of Citizens for Limited Taxation, said the organization
opposes the bill, saying it might be unfair.
"Why would you make an exception for casinos
and not all businesses?," Anderson said. "Why a casino?"
According to Proposition 2˝, a municipality's
levy, or the total amount of property taxes, can increase no
more than 2.5 percent a year.
The law does allow a community to tax new
growth above that levy limit ― unless the tax rate itself is at
a second ceiling under the law.
Under the law, a tax rate never can be more
than 2.5 percent of the value of all taxable properties in the
city. Springfield has apparently hit this limit, she said.
The Springfield Republican
Tuesday, March 26, 2013
Springfield Mayor Domenic Sarno urges approval of legislation
to exempt casino property taxes from Proposition 2˝
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Chip Faulkner's CLT
Commentary
I attended the Joint Committee on Revenue hearing
in the Statehouse on March 26th. CLT was focused on that hearing
because officials from Springfield were sponsoring a bill – S-1311 –
on the Committee agenda that was a clear violation of Proposition
2˝. The bill was an attempt to raise revenue above the absolute
limit under the 2˝ law, which is 2.5% of the current market value of
a community.
Also on the agenda were several bills reducing both the state income
tax and sales tax to 5%, including the two bills CLT had filed
through Sen. Bruce Tarr.
The hearing started at 10:30 am. Before I testified, Committee
members had to hear from a long lineup of the usual parasites living
off the state budget. Prominent among their bills was S1313, "An Act
to Invest in Our Communities." This bill would hike the state income
tax to 5.95% starting in 2014, along with an 8.95% rate for capital
gains, interest and dividends. During the over two hours of weeping
and gnashing of teeth by these people, never once was heard mention
of “tax hike” or “increase.” Instead it was always about
“investment.”
When called to testify, I first talked about the income tax increase
from July of 1989 which was supposed to be “temporary." The
Committee was reassured by yours truly that CLT still had all the
press clippings from that 1989 tax debate which characterized
the increase as “temporary.” It was also pointed out that the voters
approved a three year income tax reduction down to 5% on the 2000
state ballot. To defuse the argument that we are no longer “Taxachusetts,”
as mentioned by an earlier speaker, I pointed out that the Bay State
nationally is 4th per capita in state and local taxes and 8th
relative to personal income.
Next I went after the Springfield bill. Starting off this
discussion, I stated that CLT over the years has been critical of
the Legislature on several issues, but has actually complimented
them on legislators' handling of Proposition 2˝. Although there’s
been some tinkering around the edges, they have left the law more or
less intact. This, of course has been a tremendous benefit to any
homeowner in Massachusetts. Therefore, there’s no reason to change
the law now – to its detriment.
I also made sure the Committee knew that Springfield, of all places,
shouldn’t be given any extra money – especially from a violation of
Prop. 2˝. The city, described by me, was a “fiscal train wreck over
the last twenty years. CLT's former chairman of our board of
directors, Paul Nicolai, a Springfield resident, used to regale our
board with a litany of the city’s spending abuses going back to the
early 1990s.”
After my testimony, there were no questions asked of me from the
Committee. I did, however, ask the Joint Committee's House chairman,
Rep. Jay Kaufman (D-Lexington), about an earlier statement he made
during the hearing. He said, in referring to Prop. 2˝, that there
has to be some “outside the box thinking,” and more ominous, that
“it’s time to take a look at Proposition 2˝.“
I told him “statements like that send a shiver up
my spine, Barbara Anderson’s and every homeowner's in Massachusetts
– or, I asked, “am I being paranoid?”
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Chip Faulkner
Associate Director |
Joint Committee on
Revenue Public Hearing — March 26, 2013
Bills Heard
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State House News Service
Tuesday, March 26, 2013
With taxes in the air, lawmakers hear alternatives to Guv's plan
By Andy Metzger
With a major tax proposal baked into the governor’s budget and
legislative leadership also gearing up to raise revenues, a full
discussion of taxation is bound to move from behind closed doors to
the House and Senate floors. On Tuesday, lawmakers, economists and
members of the public offered their alternatives, endorsements and
critiques of Patrick’s tax proposal.
Economists who agree with Gov. Deval Patrick’s plan to raise $1.9
billion in new revenue for education and transportation suggested
some tweaks to the governor’s plan on Tuesday.
Patrick, who has said he is open to alternate proposals, submitted a
budget in January that would increase the income tax 1 point, to
6.25 percent; lower the sales tax 1.75 points to 4.5 percent; double
the personal income tax exemption; and eliminate 44 personal income
tax deductions. Patrick’s plan also calls for $499 million in new
corporate taxes, according to a Massachusetts Taxpayers Foundation
analysis.
Two economists who signed on to a letter of support for the
governor’s proposal said that it could be improved, primarily by
increasing the income tax by a lesser amount and keeping the sales
tax closer to its current rate.
“I’m in favor of highly progressive taxes,” Barry Bluestone,
director of the Dukakis Center at Northeastern University, told the
Joint Committee on Revenue. He told the News Service that contrary
to some beliefs, the sales tax is “actually not a regressive tax,
overall.”
Bluestone proposed a tax overhaul would raise the income tax to 5.95
percent, keep most personal deductions, keep the sales tax at 6.25
percent, raise the gas tax by 9 to 11 cents per gallon, and lower
corporate taxes by “a point or two.”
That would raise the same $1.9 billion, Bluestone said, agreeing
that the state needs to increase funding for transportation and
education. Bluestone said corporate taxes are often passed along in
the forms of higher prices and lower wages.
Officials from the credit rating agency Moody’s have cautioned that
the governor’s plan could leave the state too reliant on the income
tax, making it account for more than 70 percent of the state’s
revenue.
Alan Clayton Matthews, an economist at Northeastern University who
also signed the statement supporting the governor’s plan, gave some
credence to the criticism, telling the News Service, “That’s one of
the reasons for not lowering the sales tax.”
Chip Faulkner, of Citizens for Limited Taxation,
proposed lowering both the income and sales taxes to 5 percent, and
noted that voters had approved a ballot measure to lower the income
tax to 5 percent in 2000 but the Legislature halted the gradual
decrease at 5.3 percent. It later dropped to 5.25 percent.
“In terms of taxes, we’re not suffering from a dearth of taxes,”
said Faulkner. “According to the Tax Foundation, our state and local
tax burden is fourth per capita in the United States.”
Noah Berger, of the Massachusetts Budget and Policy Center, said
higher education is closely correlated to high wages, a change from
the 1970s when industrial hubs led the nation in wages.
The MBPC has proposed four alternatives to the governor’s plan that
it said would raise $1.9 billion in revenue. One proposal would
match the governor on an income tax increase, while lowering the
sales tax by a smaller amount and maintaining income tax deductions.
Another would follow the governor’s lead for income, but keep
short-term capital gains taxes at 12 percent, and maintain
deductions. A third would increase the income tax to 6.25 percent,
lower the sales tax to 5.25 percent, and would raise the personal
income tax exemption by half, where the governor plans to double it.
Finally, the MBPC proposed increasing the income tax to 6.25
percent, keeping short-term capital gains at 12 percent, lowering
the sales tax to 4.5 percent and keeping the personal income
exemption at its current level.
The Revenue Committee met for roughly four hours, taking in a
variety of proposals to raise revenues or to cut taxes.
Wayne Harper, a Republican state senator from Utah, lobbied in favor
of House Revenue Chairman Jay Kaufman’s bill (H 2629) that Harper
said would allow Massachusetts to join a multi-state cooperative
agreement to collect sales tax on internet sales.
Harper told the News Service he expects Congress to act on federal
legislation regarding internet sales taxes, and said the Senate,
which had previously featured “more opposition to the bill,”
included the legislation in the budget it sent to the House.
Even if Congress doesn’t act, Massachusetts could start collecting
$15 to $20 million by joining the group of 24 states.
“Our goal is to get every state on board,” Harper said. States that
join would be able to prepare their revenue departments for the
potential change, he said.
Faulkner and Sen. Gale Candaras (D-Wilbraham) took opposing tacks on
legislation (S 1311) that she said would exempt a casino from the
strictures of Proposition 2˝, which limits the amount that cities
and towns can raise property taxes.
“Absent the exemption from the operation of Prop 2˝, the city of
Springfield would most likely lose, because it’s at its levy limit,
probably lose somewhere in the neighborhood of $20 million,”
Candaras said.
“In terms of the Prop 2˝ law, it got passed in 1980 and over the
decades our organization has been critical of the Legislature on a
variety of things. We’ve never been critical on the state
Legislature of the way they’ve handled Prop 2˝,” Faulkner said,
calling the Springfield bill a “violation” of the law, which was
passed by a voter referendum.
Lawmakers pushing for an income tax increase to fund transportation
and education (S 1313/ H 2687), a plan similar but distinct from the
governor’s proposal, said people around the state want better
infrastructure and education, and are willing to pay for it.
“When I ran last fall, I was able to pick this up as something that
I held very closely to my heart,” said Rep. Mary Keefe
(D-Worcester), who said she was labeled the “tax candidate” and
received 40 percent of the vote in a five-way primary.
Rep. Randy Hunt (R-East Sandwich), who is a certified public
accountant, has proposed a study (H 2606) to look into simplifying
the personal income tax code.
“Hopefully we’ll have something that’s easy to manage and builds
into it a level of progressivity in the tax system that we aren’t
getting today,” Hunt said.
The Springfield Republican
Tuesday, March 26, 2013
Springfield Mayor Domenic Sarno urges approval of legislation
to exempt casino property taxes from Proposition 2˝
By Dan Ring
Springfield Mayor Domenic J. Sarno pleaded with state lawmakers on
Tuesday to approve legislation that would exempt a proposed casino's
land from the state's tax-limiting law, allowing Springfield to
collect an additional $15 to $20 million in annual property taxes.
Sarno and top aides met at the Statehouse with the chief of staff
for House Speaker Robert A. DeLeo, a Winthrop Democrat, and Sen.
Stephen M. Brewer of Barre, chairman of the Senate Ways and Means
Committee. Sarno also testified on the bill before the Legislature's
Joint Committee on Revenue.
Because Springfield is taxing at the limit of Proposition 2˝, it
cannot collect property taxes from "new growth," as the law would
otherwise allow, said Sarno, who came to the Statehouse with Timothy
J. Plante, the city's acting chief administrative and financial
officer, and Jennifer Winkler, the city's acting budget director.
"The Legislature has provided for a potentially huge economic driver
in our city in the form of a casino," Sarno told members of the
committee. "We all know that the benefits of a casino are still a
few years away, but if we are lucky enough to have one, our benefits
are even further away than you think due to the constraints of
Proposition 2˝ and its rules around how new growth is calculated."
Sarno met with the two sponsors of the legislation, Democratic Sens.
Gale D. Candaras of Wilbraham and James T. Welch of West
Springfield.
Sarno is currently negotiating with two casino companies that are
each proposing estimated $800 million casino resorts for
Springfield. MGM Resorts International is planning a casino in the
South End of the city and Penn National Gaming is planning a casino
in the North End including on properties owned by The Republican.
Candaras said that the bill would permit the assessed value of a
casino's land to be exempt from Proposition 2˝, which was approved
by voters in 1980.
Candaras said the bill matches a goal of the state's 2011 casino law
to allow a community to fully benefit from a casino that could be
located within its borders.
Candaras said the bill will be difficult to pass on Beacon Hill,
because the tax-limiting law is sacred at the Statehouse.
Sen. Michael R. Knapik, a Westfield Republican and member of the
revenue committee, said the mayor is offering an "intriguing idea"
and did a good job in testifying about the issues confronting
Springfield.
Knapik said the debate on the legislation is coinciding with
deliberations of the Massachusetts Gaming Commission, which is
planning to award the single casino license for Western
Massachusetts as early as February of next year.
The Mohegan Sun, which is proposing a casino for Palmer, and Hard
Rock International, which is proposing casino in West Springfield on
the grounds of the Eastern States Exposition, are also competing for
the license for Western Massachusetts.
Barbara Anderson, executive director of Citizens for
Limited Taxation, said the organization opposes the bill, saying
it might be unfair.
"Why would you make an exception for casinos and not all
businesses?," Anderson said. "Why a casino?"
According to Proposition 2˝, a municipality's levy, or the total
amount of property taxes, can increase no more than 2.5 percent a
year.
The law does allow a community to tax new growth above that levy
limit ― unless the tax rate itself is at a second ceiling under the
law.
Under the law, a tax rate never can be more than 2.5 percent of the
value of all taxable properties in the city. Springfield has
apparently hit this limit, she said.
If the city's tax rate remains at the ceiling of Proposition 2˝ and
a casino property goes on the tax rolls, the city would then need to
slightly lower the rate for all businesses in order to stay at the
ceiling, Anderson said. The mayor could use that as a selling point
for a casino, she said.
In an interview and in his testimony, Sarno painted a grim picture
of the city's finances. He said he has made difficult decisions to
balance the budget, but further reductions would be even more
draconian.
"If I have to keep cutting, I'm going to go into core services," he
said.
During the last two years, he said, the city has eliminated 190
jobs, partly by leaving open vacancies and partly by layoffs. Other
measures include instituting furloughs for employees, eliminating
pay increases, closing a fire company, reducing library hours and
discontinuing maintenance of 10 city parks, the mayor said.
Since he became mayor in 2008, Sarno said, he has cut the budget six
years in a row. On the city side of the budget, there were 1,589
full-time equivalent employees in 2008. Now, there are about 1,200,
with 60 percent of those front-line public safety employees such as
firefighters and police, he said.
Springfield, which counts heavily on state aid, currently has about
$550 million budget, including about $326 million for schools.
Sarno said the city is currently facing an estimated $25 million
shortfall for the fiscal year that starts July 1.
The city's reserves total about $35 million, but Sarno said he is
leery of using any of that money because such a move might hurt the
city's bond rating and therefore prompt higher interest rates on
borrowing.
Sarno emphasized that the city has adopted recent financial-relief
tools approved by Gov. Deval L. Patrick and lawmakers including .75
percent local tax on the sale of restaurant meals.
Moreover, property taxes in Springfield were reduced by the
foreclosure crisis, storms such as the 2011 tornado and a gas
explosion in the downtown last year, the mayor said.
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NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Citizens for Limited Taxation ▪
PO Box 1147 ▪ Marblehead, MA 01945
▪ 508-915-3665
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