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CLT UPDATE
Friday, November 8, 2013

Some welfare reform, maybe a little income tax cut


After hours of meetings between House leaders and liberal members and debate between Democrats and Republicans that was contentious at times, the House passed a welfare reform bill Wednesday night.

The House bill will likely head to a conference committee with the Senate, which passed its welfare system changes in June....

Critics of the current system say Massachusetts lags other states in its work requirements for public assistance enrollees and the system needs stronger checks and balances to prevent benefit fraud and abuse. Lawmakers are also advancing new supports to move welfare recipients off the rolls and into jobs....

As the chamber stood at standstill for much of the afternoon and early evening, House Speaker Robert DeLeo and House Ways and Means Chairman Brian Dempsey spent hours talking to members of the progressive caucus in the House, before the bill passed 152-0, as several amendments from both parties were adopted by voice vote and many others were withdrawn....

Amendments sought by Rep. Shaunna O’Connell, a Taunton Republican who has led the charge for more anti-fraud measures in the welfare system, were voted down on party lines, during a debate in which several Democrats heaped on indignation and sarcasm.

“If we pursue this, we should probably organize a secret police and have an agent go with the recipients and make sure they get a job,” said Rep. Benjamin Swan, a Springfield Democrat, spoofing an O’Connell amendment, which would require the DTA to obtain a copy of a welfare recipient’s job application and “verify” they are seeking work. He said, “I guess some of us have more trust in the human being.”

Democrats greeted the broadsides with applause, and Republicans defended their proposals and described them as, in many cases, mere provisions for greater information from DTA.

“Every time we ask for reports these days, we're mean. We're punitive,” said Rep. James Lyons, an Andover Republican....

The Republican amendments that were brought up for debate were roundly criticized.

Rep. Jay Kaufman, a Lexington Democrat, called O’Connell’s job application amendment “abusive and offensive,” and Rep. Anne-Margaret Ferrante, a Gloucester Democrat, suggested another amendment for a DTA study on recipients who are green card holders of less than five years would be an “embarrassing punishment” and put a “scarlet letter” on those individuals – though Republicans argued they only sought the number, not the names of people in that category.

Rep. Ruth Balser, a Newton Democrat, said amendments suggest welfare’s problem is “people ripping off the system,” when she said it is actually “horrendous poverty.”

Republicans secured some quiet victories, as the House adopted without debate Minority Leader Brad Jones’ amendments to cut off benefits to people who spend 90 days a year out of state, and another that required establishment of an all-electronic benefits system by 2019....

The House adopted another Jones measure that would prohibit people who would not be eligible under the more stringent federal standards from receiving state public housing in place of someone who does meet the federal standards.

State House News Service
Thursday, November 7, 2013
House adopts welfare reform bill after reshaping it


State tax collections in October rose 11 percent, or $154 million above October 2012 receipts, the Department of Revenue announced on Tuesday.

Collections over the first four months of fiscal 2014 are up $616 million or 9.5 percent over the same period in fiscal 2013...

Tax collections in October surpassed the monthly benchmark by $75 million, with business collections up $73 million over last October and beating the monthly benchmark by $84 million. Tax receipts over the first four months of the fiscal year are running $273 million above benchmark.

State House News Service
Tuesday, November 5, 2013
Biz tax settlements propel October tax collections


The state’s recent surge in income tax collections could prove a double-edged sword for Gov. Deval Patrick and Massachusetts lawmakers as they scramble to plug various holes in the current year’s budget. The reason: State law mandates that, should the good times continue to roll, the commonwealth’s income tax rate will automatically adjust down to 5.2 percent, effective Jan. 1.

What that will ultimately cost the state in lost tax revenue is still up for debate, but the Department of Revenue’s early estimates indicate the change will likely rip a $60 million-to-$70 million hole in the fiscal 2014 budget when all is said and done. That estimate is based on the net change in tax collections that would result if the levy is lowered from its current 5.25 percent rate. As things stand, the state is on track to haul in about $13 billion in income tax receipts at the current 5.25 percent rate....

Between July 1 and Oct. 30 — the first four months of fiscal 2014 — Massachusetts tax collections totaled $7.1 billion, a 9.5 percent increase from 2012’s corresponding period and some $273 million ahead of prior forecasts. Roughly half of those collections, some $3.89 billion, were from net income tax receipts, which were up 7.4 percent year-over-year and were around $90 million ahead of earlier estimates.

According to a state law passed in 2002, the state’s income tax rate is set to automatically adjust down by 0.05 percentage points if certain collections benchmarks are met. Those triggers will remain in place until a minimum income-tax threshold of 5 percent is reached.

According to DOR, three of the law’s five required revenue benchmarks have already been hit this year....

The DOR said its next confirmation statement is scheduled for Nov. 15, and if necessary a final statement on the November collections will be issued Dec. 16.

The Boston Business Journal
Thursday, November 7, 2013
State braces for $65M revenue loss as drop in income-tax rate looms


Stay with us on this one, but CHEERS to the state’s recent uptick in income tax collections.

Why is it good news that the state will likely bring in $12 billion in income tax revenue this year? Well, as the Boston Business Journal explains it, the robust rate of collection this year will likely trigger a tax cut next year.

“According to a state law passed in 2002,” the Business Journal writes, the state’s income tax rate is set to automatically adjust down by 0.05 percentage points if certain collection benchmarks are met. These triggers will remain in place until a minimum income-tax threshold of 5 percent is reached.”

So, be happy — you’ve likely been taxed into a tax cut, though we’re sure lawmakers are already looking for ways to recoup the “lost” state revenue. It won’t be lost, of course. It will be back where it belongs — in the pockets of taxpayers.

A Salem News editorial
Friday, November 8, 2013
Cheers, jeers for recent newsmakers


Chip Ford's CLT Commentary

On Wednesday night the Massachusetts House of Representatives passed its version of welfare reform by a unanimous 152-0.  It's a step in the right direction but still leaves too many loopholes and opportunities for any serious taxpayer to feel satisfied. Some of the amendments CLT supported were adopted, but many reform amendments that seemed obvious and clearly necessary were summarily rejected by the Democrat majority.

Next, this House version just passed will need to be "reconciled" with the welfare reform bill passed by the state Senate in June. That'll require both bills being sent to a six-member conference committee made up of senators and representatives appointed by each chamber's leaders. With only 12 days left until formal sessions of the Legislature end for 2013, this will likely occur next week.


"State tax collections in October rose 11 percent, or $154 million above October 2012 receipts . . .

"Collections over the first four months of fiscal 2014 are up $616 million . . .

"Tax receipts over the first four months of the fiscal year are running $273 million above benchmark . . .

"Between July 1 and Oct. 30 — the first four months of fiscal 2014 — Massachusetts tax collections totaled $7.1 billion, a 9.5 percent increase from 2012’s corresponding period and some $273 million ahead of prior forecasts."

Tax revenue is pouring into the state's coffers, so much so fast, that it's created a serious Bacon Hill crisis:  All those billions of our dollars piling up might trigger another downtick in the state income tax rate gasp, it might again be unavoidable!

The last time the Legislature found itself unavoidably confronting this crisis was in 2011.

In the CLT Update of December 16, 2011 (Five One-Hundredths of One Percent Tax Reduction: 45 more years before voters, taxpayers prevail?) I wrote:

Twenty-two years after the "temporary, 18-month" income tax hike from 5 percent, eleven years after the voters' overwhelmingly demanded it be rolled back to its historic rate, it will be reduced to 5.25 percent on January 1st. Twenty-two years after the promise that the hike would be only "temporary," that promise remains broken.

Nine years ago the Legislature unilaterally "froze" the voters' mandate that it be rolled back to 5 percent, giving taxpayers another Beacon Hill middle-finger salute. Instead of returning the income tax rate to its historic 5 percent in 2003, as 60% of the voters ordered in 2000, next month the "freeze" will thaw for the first time  a whole five one-hundredths of one percent.

When it comes to defrosting a tax cut “freeze” we Massachusetts taxpayers have no fear of global warming; polar bears don't live long enough to be effected.

Five one-hundredths of one percent.  That equates to 5/100ths of a penny on every dollar we pay in state income tax.  Pardon me for not popping the champagne cork yet. As the Boston Business Journal concluded in its closing understatement, "Yay."

At this rate  five one-hundredths of one percent over nine years  the celebration won't happen for another 45 years. The champagne can continue to age until 2057, when the "temporary" tax hike will turn 68-years old.

If you're wondering how to spend your .05 percent income tax cut, just apply it toward the 25 percent sales tax hike of 2009.

Last year the pols found a way to maneuver around and avoid letting it happen again.

In the CLT Update of November 17, 2012 (Promised income tax rollback "snuffed out" again) I wrote:

After hiking the income tax rate in 1989  with the promise that it'd be only "temporary," then revert to its historic 5%  and even after the voters in 2000 mandated that it finally be rolled back to 5% — twenty-three years later and going into Year Twenty-Four, that false promise again will not be kept.

Never mind that last year the Bacon Hill pols couldn't wiggle out of the arcane, convoluted formula they created, had to reduce it by 5/100ths of one percent (from 5.3% to 5.25%). Two years in a row of even such a miniscule reduction was too much for them to allow. Two years in a row might create expectations, hope that even twenty-five years later we taxpayers could possibly be closing in on their long-broken promise, approaching what voters demanded a dozen years ago which the pols simply refused to honor and accept.

Why am I not surprised?

I expect the state Department of Revenue's machinery is cranking and smoking on Beacon Hill burning midnight oil in a race to find another excuse for again breaking the 1989 "Temporary Income Tax Hike" promise, another dodge to again deny taxpayers any amount of relief whatsoever.

Twenty-five years ago the Legislature promised taxpayers that Beacon Hill's income tax rate hike from 5% would be "only temporary" "would only be in place for 18 months and that revenue generated would only go towards past bills."

A quarter of a century later the promise remains broken, the rate is still above its historic 5%.

It's been thirteen years since CLT put the income tax rollback on the ballot and voters overwhelmingly demanded the rate be returned to 5%.

Eleven years have passed since the Legislature gave that vast voting majority the middle-finger Beacon Hill salute and "temporarily froze" the voters' ballot question victory, replacing it with this arcane, convoluted formula that's almost impossible to ever achieve.

The very least the insatiable pols can do is toss us unwashed masses another crumb; reduce the income tax rate by another one five-hundredths of one percent to 5.2 percent.

Pols brazenly lying to their constituents to get what they want ("If you like your health care plan you can keep your health care plan, period!") is becoming much too common and increasingly infuriating.

Chip Ford


 

State House News Service
Thursday, November 7, 2013

House adopts welfare reform bill after reshaping it
By Andy Metzger


After hours of meetings between House leaders and liberal members and debate between Democrats and Republicans that was contentious at times, the House passed a welfare reform bill Wednesday night.

The House bill will likely head to a conference committee with the Senate, which passed its welfare system changes in June. The House added key provisions backed by Boston Mayor Tom Menino and the liberal wing of the body along with several reporting requirements backed by Republicans.

Critics of the current system say Massachusetts lags other states in its work requirements for public assistance enrollees and the system needs stronger checks and balances to prevent benefit fraud and abuse. Lawmakers are also advancing new supports to move welfare recipients off the rolls and into jobs.

House Democratic leadership agreed to allow public and private education to apply to the welfare system’s work requirement, increase from 30 to 60 days the period when applicants must commence a job search, give more discretion to the Department of Transitional Assistance on medical waivers for the disabled, and add assistance in applying for Social Security – a requirement for those who receive a disability waiver.

The new version of the bill also relaxes a provision that past welfare recipients comply with a DTA plan while off benefits before seeking those benefits anew.

As the chamber stood at standstill for much of the afternoon and early evening, House Speaker Robert DeLeo and House Ways and Means Chairman Brian Dempsey spent hours talking to members of the progressive caucus in the House, before the bill passed 152-0, as several amendments from both parties were adopted by voice vote and many others were withdrawn.

“They spent hours engaging, not only myself, but also the progressive caucus. There was a lot of us who really had a lot of access and conversation,” Rep. Marjorie Decker, a Cambridge Democrat who backed many of the changes, told the News Service. She said, “What the leadership did is to say, we’re listening. Let’s talk, and they made the changes we needed them to make, and I’m proud of them.”

The bill did not include a change Decker sought to remove the job-search requirement for pregnant women in their third trimester.

Amendments sought by Rep. Shaunna O’Connell, a Taunton Republican who has led the charge for more anti-fraud measures in the welfare system, were voted down on party lines, during a debate in which several Democrats heaped on indignation and sarcasm.

“If we pursue this, we should probably organize a secret police and have an agent go with the recipients and make sure they get a job,” said Rep. Benjamin Swan, a Springfield Democrat, spoofing an O’Connell amendment, which would require the DTA to obtain a copy of a welfare recipient’s job application and “verify” they are seeking work. He said, “I guess some of us have more trust in the human being.”

Democrats greeted the broadsides with applause, and Republicans defended their proposals and described them as, in many cases, mere provisions for greater information from DTA.

“Every time we ask for reports these days, we're mean. We're punitive,” said Rep. James Lyons, an Andover Republican.

The bill imposes greater requirements on welfare recipients to seek work and adds job placement services and increased information sharing in an effort to maintain the integrity of the system. It includes $20 million in expenditures.

The Republican amendments that were brought up for debate were roundly criticized.

Rep. Jay Kaufman, a Lexington Democrat, called O’Connell’s job application amendment “abusive and offensive,” and Rep. Anne-Margaret Ferrante, a Gloucester Democrat, suggested another amendment for a DTA study on recipients who are green card holders of less than five years would be an “embarrassing punishment” and put a “scarlet letter” on those individuals – though Republicans argued they only sought the number, not the names of people in that category.

Rep. Ruth Balser, a Newton Democrat, said amendments suggest welfare’s problem is “people ripping off the system,” when she said it is actually “horrendous poverty.”

Republicans secured some quiet victories, as the House adopted without debate Minority Leader Brad Jones’ amendments to cut off benefits to people who spend 90 days a year out of state, and another that required establishment of an all-electronic benefits system by 2019.

"I am pleased that the House of Representatives has taken yet another step toward achieving a taxpayer-funded Electronic Benefits Transfer program which serves those citizens who are in need of assistance, and who have taken the necessary and lawful steps to secure those benefits,” Jones said in a statement. “The reform package approved by the House demonstrates the majority party’s recognition that by including Republican-led amendments aimed at eliminating all levels and degrees of waste, fraud, and abuse within the EBT program, we as a legislature can play a pivotal role in facilitating a path to self-sufficiency for people currently receiving assistance.”

The House adopted another Jones measure that would prohibit people who would not be eligible under the more stringent federal standards from receiving state public housing in place of someone who does meet the federal standards.

The House passed a similar provision to its housing bond bill, but it was dropped in the conference committee, and House Assistant Majority Leader Byron Rushing previously argued it would exclude many categories of legal immigrants and said, of the proposal, "I am sure that if we had all been able to study that amendment, we would not have overwhelmingly approved it.”

“Something very similar is in the Senate,” Massachusetts Immigrant and Refugee Advocacy Coalition State Policy Director Shannon Erwin told the News Service, saying if the provision becomes law it would result in “domestic violence victims returning to their abusers.”

A member of the House progressive caucus said the caucus was “more organized” heading into the welfare debate than it has been ahead of other floor debates.


State House News Service
Tuesday, November 5, 2013

Biz tax settlements propel October tax collections
By Michael Norton


State tax collections in October rose 11 percent, or $154 million above October 2012 receipts, the Department of Revenue announced on Tuesday.

Collections over the first four months of fiscal 2014 are up $616 million or 9.5 percent over the same period in fiscal 2013, good news for state budget managers who swept $160 million in budgeted revenues off the table over the summer when they repealed a sales tax on technology services.

The Patrick administration estimates that non-tax revenues, such as federal funds and fee revenue, could fall $150 million short of estimates. Revenue department officials attributed the jump in October tax collections to one-time tax settlements and better than expected estimated individual income tax payments and motor vehicle sales tax collections.

Tax collections in October surpassed the monthly benchmark by $75 million, with business collections up $73 million over last October and beating the monthly benchmark by $84 million. Tax receipts over the first four months of the fiscal year are running $273 million above benchmark.


The Boston Business Journal
Thursday, November 7, 2013

State braces for $65M revenue loss as drop in income-tax rate looms
By Craig Douglas


The state’s recent surge in income tax collections could prove a double-edged sword for Gov. Deval Patrick and Massachusetts lawmakers as they scramble to plug various holes in the current year’s budget. The reason: State law mandates that, should the good times continue to roll, the commonwealth’s income tax rate will automatically adjust down to 5.2 percent, effective Jan. 1.

What that will ultimately cost the state in lost tax revenue is still up for debate, but the Department of Revenue’s early estimates indicate the change will likely rip a $60 million-to-$70 million hole in the fiscal 2014 budget when all is said and done. That estimate is based on the net change in tax collections that would result if the levy is lowered from its current 5.25 percent rate. As things stand, the state is on track to haul in about $13 billion in income tax receipts at the current 5.25 percent rate.

The DOR’s lost-revenue estimate equates to around 0.2 percent of the state’s $34 billion budget for fiscal 2014. That calculation accounts for the tax-rate reduction taking effect for the final six months of the fiscal year. On an annualized basis, the tax-rate cut would likely cost the state around $130 million in lost revenue, based on DOR estimates.

Despite its modest impact on total revenue, the required drop in the income tax rate is ill-timed, as it is scheduled to occur just months after lawmakers and Patrick repealed a controversial sales tax on technology services. The repeal is expected to cost the state around $160 million in budgeted tax revenue this year.

To be sure, many lawmakers were counting on the state’s stronger-than-expected tax collections in the current fiscal year to offset the lost revenue from the software-tax repeal.

Between July 1 and Oct. 30 — the first four months of fiscal 2014 — Massachusetts tax collections totaled $7.1 billion, a 9.5 percent increase from 2012’s corresponding period and some $273 million ahead of prior forecasts. Roughly half of those collections, some $3.89 billion, were from net income tax receipts, which were up 7.4 percent year-over-year and were around $90 million ahead of earlier estimates.

According to a state law passed in 2002, the state’s income tax rate is set to automatically adjust down by 0.05 percentage points if certain collections benchmarks are met. Those triggers will remain in place until a minimum income-tax threshold of 5 percent is reached.

According to DOR, three of the law’s five required revenue benchmarks have already been hit this year. To reach those milestones, the state was required to reach or exceed tax-growth targets in fiscal 2013 as well as the three-month periods that ended Aug. 31 and Sept. 30. State officials confirmed Wednesday that each of those targets were met. Based on October's collections, it appeared as of this week that a fourth benchmark had been reached, although DOR said official confirmation will not be issued until Nov. 15.

In fiscal 2013, tax revenue growth was 3.99 percent, well above the law’s threshold requirement of 2.5 percent. Likewise, in each of the three-month periods that ended Aug. 31 and Sept. 30, tax revenue outpaced the law’s required year-over-year growth threshold of zero percent, according to DOR. To hit its fourth and fifth thresholds to trigger the automatic decrease in the income tax rate, the state must record inflation-adjusted tax revenue growth of greater than zero percent for each of the three-month periods that end Oct. 31 and Nov. 30, according to the statute.

The DOR said its next confirmation statement is scheduled for Nov. 15, and if necessary a final statement on the November collections will be issued Dec. 16.

 

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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