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CLT UPDATE
Wednesday, May 20, 2015
Another Tax Hike and Another
"Promise"
|
The Boston Herald
Wednesday, May 20, 2015
A Boston Herald editorial
A promise betrayed
The state Senate has coughed up a bad tax policy
two-fer — a plan that both violates the explicit will of
Massachusetts voters and is built on a weak legal foundation.
It’s quite an inauspicious beginning for new state Senate President
Stan Rosenberg and his leadership team.
During a debate on their budget plan yesterday
senators approved an amendment to expand the earned income tax
credit for low-income families, which they pay for by freezing the
state’s personal income tax rate at 5.15 percent. The rate freeze
would be accompanied by an increase in the personal income tax
exemption.
Now, perhaps senators believe it’s been so long
since voters passed a law mandating a rollback in the income tax
rate to 5 percent — it was back in 2000 — that they simply have
forgotten about it. Good luck with that.
Senators who backed the plan dressed it up in
elaborate rhetoric about income inequality. And they tied themselves
in knots explaining why the scheme doesn’t really break faith
with voters. Sen. Michael Rodrigues (D-Fall River) suggested that
while voters in 2000 supported a tax cut, they didn’t say how
their taxes should be cut.
In fact — they did.
Voters were very clear that the rate
should be set at 5 percent. Senators may claim otherwise, but those
who voted for the amendment yesterday were giving those voters the
stiff-arm.
The Senate’s broad goal — to assist low-income
families — is perfectly admirable. In fact Gov. Charlie Baker had
the same idea. But he paid for his proposal to expand the
EITC by suspending the state’s film tax credit program. We are fans
of the film credit, but it is much easier to justify that revenue
offset than it is to upend the tax system in what is, let’s face it,
a scheme to establish a back-door graduated income tax.
Keep in mind that under the state Constitution
so-called “money bills” must originate in the House. But even if the
Senate can prove it’s on solid ground with this plan it is setting
up a fight with the House, potentially pushing budget talks well
past the July 1 start of the fiscal year.
Is this really how Rosenberg wants to begin his
tenure?
The Senate on Tuesday approved a package of tax
cuts aimed at helping the working poor and middle class, dismissing
objections from Republicans and some Democrats that their vote would
renege on a 15-year-old promise to voters to gradually roll back the
income tax to 5 percent.
To pay for increased personal tax exemptions for
individuals and married couples and a 50 percent expansion of the
earned income tax credit for low-income families, senators voted
29-11 to permanently freeze the income tax rate at its current 5.15
percent rate....
Senate Minority Leader Bruce Tarr, whose
amendment to double the EITC to 30 percent without freezing the
income tax failed, said Democrats were "breaking faith with the
voters" who in 2000 approved a reduction of the income tax to 5
percent that has never been fully realized.
Tarr said Republicans support tax relief for
low-income families, but argued that the EITC expansion could be
paid for without freezing the income tax. "We can't find some room
to be able to afford the EITC?" Tarr asked, suggesting other
spending choices in the $38 billion budget could be revisited, while
also asserting there's a $163 million surplus in the fiscal 2015
budget.
The Gloucester Republican said Democrats had a
"hidden agenda" of protecting the income tax as a revenue source
while also "redistributing" wealth without having to amend the
Constitution to implement a graduated income tax.
Sen. Viriato deMacedo, of Plymouth, also said
that senators supporting the income tax freeze would not only be
violating the trust of the voters and setting up a "challenging"
negotiation with the House and governor, but would be going back on
what he called a "balanced plan" from 2002 to gradually reduce the
income tax burden without sacrificing services....
[Sen. Michael] Rodrigues, who said the budget
amendment would guarantee a tax cut for every filer in Massachusetts
next year, defended the freezing of the income tax rate.
"The voters did choose to reduce their personal
income tax liability, but they were given no choice on the method.
We are providing the same amount of tax relief to the voters of the
Commonwealth by a different method. It's not a matter of if we
provide that tax relief, but how we provide that tax relief,"
Rodrigues said.
To make it into law, the House would need to
agree to the Senate's tax policy changes and they would need to be
signed by Gov. Charlie Baker. The governor, who opposes higher
taxes, and the House did not include any major tax increases or
reductions in their budget proposals, and House Speaker Robert DeLeo
doesn't believe the Senate should even be allowed to consider tax
changes, which must originate in the House....
Massachusetts voters in 2000 passed a ballot
question ordering the state income tax rate to be reduced from 5.95
percent to 5 percent. Lawmakers halted the reduction in 2002, when
the rate was 5.3 percent, as part of a package of tax increases.
Economic triggers have been hit in recent years, causing the income
tax rate to fall to its current 5.15 percent.
Barbara Anderson, executive director of
the group Citizens for Limited Taxation, called the income
tax freeze to pay for the tax cuts "foolishness," suggesting that
Baker had baited Democratic lawmakers when he proposed to trade the
EITC expansion for the repeal of the film tax credit.
"They're just doing this to tweak the governor
with the game that he started when he came up with this way too cute
idea about doing a trade off," said Anderson, a driving force behind
the 2000 ballot question to lower the income tax to 5 percent.
"They went the next step to throw it back at him.
Let's see what we can trade with the governor before he breaks his
pledge on the EITC. That's the new game," she said. "I can only hope
after they've teased him they will remember it was the voters who
said they wanted the income tax to go back to 5 percent."
Anderson also noted that the House showed "no
interest in messing with the income tax rollback" during its budget
debate, and she said doesn't think Baker will ultimately go along
with a tax increase.
State House News Service
Tuesday, May 19, 2015
Senate approves income tax freeze to fund targeted tax relief
Senate Minority Leader Bruce Tarr wants to keep
ratcheting down the state's personal income tax, proposing a budget
measure that requires a rollback to 5 percent in the tax rate by
2017.
The Gloucester Republican's plan gradually
reduces the tax rate over two years, from 5.15 percent this year to
5 percent, a level approved by voters 15 years ago. His is one of
nearly 1,000 proposed amendments to the Senate's $38 billion
spending plan for the budget year that begins July 1. The Senate's
budget debate is set to begin Tuesday.
Tarr, whose proposal is backed by other
Republicans, said Democrats in the Legislature have repeatedly
failed to honor the will of voters by declining to lower the
personal income tax to 5 percent.
"The voters have waited long enough," he said.
In 2000, voters overwhelmingly approved a
referendum to reduce the tax rate from 5.95 percent to 5 percent
over three years. The referendum aimed to lower the tax rate to 1998
levels.
Two years later, despite the vote, legislators
froze the rollback at 5.3 percent and added a mechanism allowing the
rate to fall only if growth in annual revenues met certain
benchmarks.
Rollback supporters blasted lawmakers for defying
the voters.
Since then, the income tax rate has trickled down
to its current rate of 5.15 percent.
Tarr's plan faces long odds in the Democratic-led
Senate, which has rejected previous efforts to reduce the tax rate.
Lowering to 5 percent would mean a $500 million
hit to the state, according to the Department of Revenue. The most
recent drop, from 5.2 to 5.15 percent, reduces tax collections in
the next fiscal year by $145 million.
Fiscal watchdogs are worried that the Legislature
will find more reasons to delay the tax reduction.
"Our concern is that they'll try to freeze the
rate or even raise taxes again," said Barbara Anderson,
president of Citizens for Limited Taxation, a
Marblehead-based group that advocated the 2000 ballot initiative.
"We should have been down to 5 percent years ago, but they've put it
off again and again. It's time to honor the voters' will."
The Salem News
Wednesday, May 20, 2015
State Sen. Bruce Tarr wants tax rate lowered to 5 percent
Senate Democrats argued that under the
state's flat tax system, the income tax cuts overwhelmingly
favored wealthier individuals over working families. They also
said every taxpayer would enjoy some tax relief on their 2015
taxes since their proposal also calls for increasing personal
exemptions.
"Fourteen years ago the Red Sox were still
talking about the Curse of the Bambino," said Sen. Benjamin
Downing, a Pittsfield Democrat referring to the years passed
since the ballot question. "We honored the will of the voters by
continuing to make sure we have the same amount of total tax
cuts. It's not a matter of if, it's a matter of how, and we
judge that this way how is a better way for taxpayers."
Before approving the measure, the Senate
rejected a proposal from Republican leader Bruce Tarr that
called for doubling the state's earned income tax credit, but
with no offsetting freeze in the income tax rate.
Tarr said the Democratic amendment would
thwart the will of voters.
"If we allow this to go forward — and I
certainly hope we won't — then we will have increased taxes
beyond the 5 percent into perpetuity in order to pay for
something we could have paid for with available funds," said the
Gloucester Republican.
Associated Press
Wednesday, May 20, 2015
Senate freezes tax rate, hikes earned income credit
On the Senate floor, Republican lawmakers
offered their own objections, arguing that the freeze would
thwart the will of the voters, who approved a reduction in state
income taxes in 2000 that was later slowed down — but not
eliminated — by the Legislature.
Minority leader Bruce Tarr said the Senate
“had the chance to keep faith, had the chance to honor the law,
had the chance to honor the voters,” but seemed more interested
in redistributing wealth....
The ultimate fate of the legislation is
uncertain, given Baker’s opposition. House Speaker Robert A.
DeLeo’s office declined to comment Tuesday. But he has disputed
the Senate’s right to attach tax measures of any kind to the
budget.
The state Constitution says all “money bills”
must originate in the House of Representatives. The Senate
maintains that, because the House version of the budget included
an alteration to a tax credit, that opened the door for the
Senate to weigh changes to tax policy.
The Boston Globe
Wednesday, May 20, 2015
Senate votes to increase state’s earned income tax credit
Baker, Senate split on covering cost
The Democrats' plan is a progressive one,
which means the benefits would go primarily to those earning the
least money. The lowest 20 percent of taxpayers – those earning
less than $23,000 - would pay an average of $27 less on their
taxes than they would if the income tax reduction went into
effect but no other changes were made, according to an analysis
conducted for Rosenberg by the liberal-leaning Massachusetts
Budget and Policy Center. The lowest 60 percent of taxpayers –
those earning up to $76,000 a year – would also, on average,
receive an additional tax cut....
Downing said the change would help address
income inequality by giving more money to lower income workers
rather than giving an across-the-board cut that would help all
taxpayers, but particularly wealthier taxpayers who pay the most
in taxes. "It's about rewarding work, not just rewarding
wealth," Downing said.
But Senate Republicans argue that the policy
is in direct opposition to the will of voters.
Senate Minority Leader Bruce Tarr,
R-Gloucester, said since the ballot question was passed in 2000,
legislators have promised repeatedly that they would roll back
the income tax rate to 5 percent. "This is a choice about saying
do we stay within the framework of the law? Do we follow through
on pledges made in this chamber since the ballot question was
passed?" Tarr said.
State Sen. Vinny deMacedo, R-Plymouth, said
the Democrats are trying to move in the direction of a graduated
income tax, where richer people pay higher rates. "I think
Massachusetts has been served well by the fair tax system,"
deMacedo said, in which everyone pays the same rate.
The Springfield Republican
Wednesday, May 20, 2015
Massachusetts Senate passes income tax rate freeze to pay for
low-income tax credit
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Chip Ford's CLT
Commentary
The battle is on!
In Friday's CLT Update ("Senate
to begin debating its budget on Tuesday") I wrote:
"Bear in mind that a tax credit is
different from a tax deduction. A tax deduction reduces the
amount a taxpayer must pay when making out their tax returns
each year. A tax credit is an annual direct payment from
government to the recipient — whether that be a low-income
worker or the film industry. Funding a doubling of the EITC
should not come at the expense of the state's taxpayers
("freezing" the income tax rollback) just to continue
support of the Hollywood film industry."
The Senate yesterday voted not to just "freeze"
our and the voters' income tax rollback but to eliminate it
altogether.
In an obvious effort to make taxation more
"progressive" through the backdoor, the state Senate has voted to
kill the voters' income tax rollback altogether and transfer the
additional revenue it confiscates to "the most vulnerable among us,"
yet again.
Never mind whether the Senate can originate tax
policy in its budget — a constitutional
prerogative of the House of Representatives being usurped by Senate
President Rosenberg. Without a graduated income tax
constitutional amendment it is arguably a bigger problem for them by
benefitting one class of taxpayers over another
— especially given the proponents' own
statements that this would benefit the poor at the expense of the
wealthier.
How ironic that one of the co-sponsors of this
taxpayer attack is none other than poster boy Sen. Michael Rodrigues
(D-Westport). You might remember the senator from the CLT
exposé of 2009 when he was a state rep, right
after he voted to hike the sales and alcohol taxes: Sept. 1,
2009 -
Mass. state rep dodges new sales tax on liquor. From our
tip (and a member's photo catching him red-handed) the Boston Herald
reported ("Pol
nabbed on New Hampshire booze run"):
"A Westport
lawmaker who voted to hike the state sales and alcohol taxes
was spotted brazenly piling booze in his car - adorned with
his State House license plate - in the parking lot of a
tax-free New Hampshire liquor store, the Herald has learned.
"Michael J. Rodrigues’ blue Ford Crown Victoria, emblazoned
with his “House 29” Massachusetts license plate, was parked
outside a Granite State liquor store on Interstate-95 South
over the weekend, according to a witness who provided
pictures to the Herald."
But such blatant hypocrisy isn't surprising. It's
too often SOP on Bacon Hill. One of those senators who voted
to stick a finger in taxpayers' eyes was "Multiple-Choice" Brian
Joyce (D-Milton). You might recall that CLT's 2˝
PAC endorsed him in a tough race for the Senate after he sponsored
our income tax rollback bill — then our PAC publicly
withdrew that endorsement when he betrayed the taxpayers by
voting against the rollback. The Patriot Ledger reported it on May
23, 1998 ("Tax
group withdraws Joyce endorsement").
Now the game is — again —
to increase personal tax exemptions. We've been there,
done that already during this battle to Keep The Promise made in
1989.
In an obvious effort to derail our first income
tax rollback attempt in 1998 the Legislature passed a doubling of
the personal exemption beginning in tax year 1998 (a 73% increase,
increasing to 100% in tax year 1999). This adjustment was
subsequently repealed by the Legislature in 2002 as part of "The
Biggest Tax Increase in State History" —
at the same time it "temporarily froze" our income tax rollback at
5.3 percent and replaced it with "triggers." It's those very
"triggers" that the Senate has just voted to repeal as well.
Right, we should trust
this "promise" — again.
How stupid do they
think their constituents really are?
How Did
Your Senator Vote?
ROLL CALL VOTE TO KILL THE INCOME TAX ROLLBACK
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Chip Ford |
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State House News Service
Tuesday, May 19, 2015
Senate approves income tax freeze to fund targeted tax relief
By Matt Murphy
The Senate on Tuesday approved a package of tax cuts aimed at
helping the working poor and middle class, dismissing objections
from Republicans and some Democrats that their vote would renege on
a 15-year-old promise to voters to gradually roll back the income
tax to 5 percent.
To pay for increased personal tax exemptions for individuals and
married couples and a 50 percent expansion of the earned income tax
credit for low-income families, senators voted 29-11 to permanently
freeze the income tax rate at its current 5.15 percent rate.
While proponents argued in favor of the tax cuts to help grow the
middle-class and address wage stagnation, Republicans chastised the
leaders behind the effort for proposing to pay for the tax cuts by
halting the gradual decline of the income tax.
The amendment to the Senate's fiscal 2016 budget proposal, sponsored
by Sens. Benjamin Downing and Michael Rodrigues, would increase the
earned income tax credit by 50 percent over three years to 22.5
percent of the federal credit, costing the state about $145 million
a year in tax revenue.
Over 415,000 tax filers in Massachusetts qualify for the earned
income tax credit each year, according to Senate leaders, who said
putting money back into the pockets of low-income families would
also benefit the economy as the money is spent on local goods and
services.
"Simply put, we haven't been helping working people. We haven't been
helping the middle class. That's what this amendment would do. It
would start to reconfigure our tax code to better help the working
middle class, to better help the working poor, to help them get
ahead at a time when their wages haven't caught up with the cost of
health care, the cost of education or the cost of energy. It's a
smart investment in the middle class," Downing said.
Senate Minority Leader Bruce Tarr, whose amendment to double the
EITC to 30 percent without freezing the income tax failed, said
Democrats were "breaking faith with the voters" who in 2000 approved
a reduction of the income tax to 5 percent that has never been fully
realized.
Tarr said Republicans support tax relief for low-income families,
but argued that the EITC expansion could be paid for without
freezing the income tax. "We can't find some room to be able to
afford the EITC?" Tarr asked, suggesting other spending choices in
the $38 billion budget could be revisited, while also asserting
there's a $163 million surplus in the fiscal 2015 budget.
The Gloucester Republican said Democrats had a "hidden agenda" of
protecting the income tax as a revenue source while also
"redistributing" wealth without having to amend the Constitution to
implement a graduated income tax.
Sen. Viriato deMacedo, of Plymouth, also said that senators
supporting the income tax freeze would not only be violating the
trust of the voters and setting up a "challenging" negotiation with
the House and governor, but would be going back on what he called a
"balanced plan" from 2002 to gradually reduce the income tax burden
without sacrificing services.
Downing, a Pittsfield Democrat, said that since voters approved the
income tax rollback at the beginning of the last decade 25 percent
of the benefits flowed to top 1 percent of earners making an average
annual salary of $2.57 million, and 67 percent of the tax cuts went
to the top 20 percent of all income earners.
"That is the tax policy that we have in place right now in
Massachusetts. If we do nothing, that status quo will remain,"
Downing said. "This is not about if we are going to give tax cuts
here in Massachusetts. It's about how those tax cuts are
delivered...It's about rewarding work and not just rewarding
wealth."
Rodrigues, who said the budget amendment would guarantee a tax cut
for every filer in Massachusetts next year, defended the freezing of
the income tax rate.
"The voters did choose to reduce their personal income tax
liability, but they were given no choice on the method. We are
providing the same amount of tax relief to the voters of the
Commonwealth by a different method. It's not a matter of if we
provide that tax relief, but how we provide that tax relief,"
Rodrigues said.
To make it into law, the House would need to agree to the Senate's
tax policy changes and they would need to be signed by Gov. Charlie
Baker. The governor, who opposes higher taxes, and the House did not
include any major tax increases or reductions in their budget
proposals, and House Speaker Robert DeLeo doesn't believe the Senate
should even be allowed to consider tax changes, which must originate
in the House.
Gov. Baker earlier this year filed legislation to double the EITC to
30 percent of the federal tax credit, proposing to pay for the
expansion by freezing the $80 million film tax credit program. He
reiterated that position in a statement Tuesday from a spokeswoman
who declined to say whether Baker might consider the income tax
freeze.
"The Governor favors reducing the tax burden on all Massachusetts
families and believes the best way to pay for his plan to boost
support for low income workers is by phasing out subsidies for
Hollywood movie producers," press secretary Lizzy Guyton said.
Democratic Sens. Michael Moore, James Timilty, Eileen Donoghue,
Jennifer Flanagan and Ann Gobi joined with Republicans in opposing
the tax amendment. Sen. Daniel Wolf, of Harwich, and Sen. Joan
Lovely, of Salem, voted for both the Rodrigues-Downing amendment,
and Tarr's amendment to double the EITC that did not have a
financing mechanism.
Under the Democrats' plan, the average benefit for recipients of the
EITC credit would jump from $315 to $470 annually. The maximum value
of the EITC would rise from $937 to $1,405. The amendment would also
increase the personal tax exemption for all taxpayers regardless of
income by $400 to $4,800 for single individuals and by $800 to
$9,600 for married couples.
Sen. Jamie Eldridge, another progressive Democrat from Acton, said
Massachusetts had one of the most "regressive" tax structures in the
country.
"There is not a more anti-poverty tool in this country than the
earned income tax credit," Eldridge said.
Senators also backed an Eldridge amendment that would instruct the
House-controlled Joint Committee on Revenue to draft legislation to
restructure the film tax credit program with an eye toward limiting
the total cost of the program and ensuring that more of the benefits
flow toward Massachusetts businesses and workers.
Senate President Stanley Rosenberg said leaders hope any future
savings generated from the restructuring of the film tax credit
program could eventually be used toward a further expansion of the
EITC program.
Rep. Jay Kaufman, a co-chair of the Revenue Committee, said the
committee is already examining the possibility of restructuring the
film tax credit.
"We've been looking at what to do with the film tax credit ever
since the first hearing of the year based on the governor's proposal
to eliminate it," Kaufman told the News Service. "There are
conflicting reports on the efficacy of that and we have sent those
reports to a series of economists to try to get a reading of which
are credible and which are not and we are waiting for some feedback
on those before I'm prepared to make a recommendation of what we'll
do."
Massachusetts voters in 2000 passed a ballot question ordering the
state income tax rate to be reduced from 5.95 percent to 5 percent.
Lawmakers halted the reduction in 2002, when the rate was 5.3
percent, as part of a package of tax increases. Economic triggers
have been hit in recent years, causing the income tax rate to fall
to its current 5.15 percent.
Barbara Anderson, executive director of the group Citizens
for Limited Taxation, called the income tax freeze to pay for
the tax cuts "foolishness," suggesting that Baker had baited
Democratic lawmakers when he proposed to trade the EITC expansion
for the repeal of the film tax credit.
"They're just doing this to tweak the governor with the game that he
started when he came up with this way too cute idea about doing a
trade off," said Anderson, a driving force behind the 2000 ballot
question to lower the income tax to 5 percent.
"They went the next step to throw it back at him. Let's see what we
can trade with the governor before he breaks his pledge on the EITC.
That's the new game," she said. "I can only hope after they've
teased him they will remember it was the voters who said they wanted
the income tax to go back to 5 percent."
Anderson also noted that the House showed "no interest in messing
with the income tax rollback" during its budget debate, and she said
doesn't think Baker will ultimately go along with a tax increase.
The Salem News
Wednesday, May 20, 2015
State Sen. Bruce Tarr wants tax rate lowered to 5 percent
By Christian M. Wade
Senate Minority Leader Bruce Tarr wants to keep ratcheting down the
state's personal income tax, proposing a budget measure that
requires a rollback to 5 percent in the tax rate by 2017.
The Gloucester Republican's plan gradually reduces the tax rate over
two years, from 5.15 percent this year to 5 percent, a level
approved by voters 15 years ago. His is one of nearly 1,000 proposed
amendments to the Senate's $38 billion spending plan for the budget
year that begins July 1. The Senate's budget debate is set to begin
Tuesday.
Tarr, whose proposal is backed by other Republicans, said Democrats
in the Legislature have repeatedly failed to honor the will of
voters by declining to lower the personal income tax to 5 percent.
"The voters have waited long enough," he said.
In 2000, voters overwhelmingly approved a referendum to reduce the
tax rate from 5.95 percent to 5 percent over three years. The
referendum aimed to lower the tax rate to 1998 levels.
Two years later, despite the vote, legislators froze the rollback at
5.3 percent and added a mechanism allowing the rate to fall only if
growth in annual revenues met certain benchmarks.
Rollback supporters blasted lawmakers for defying the voters.
Since then, the income tax rate has trickled down to its current
rate of 5.15 percent.
Tarr's plan faces long odds in the Democratic-led Senate, which has
rejected previous efforts to reduce the tax rate.
Lowering to 5 percent would mean a $500 million hit to the state,
according to the Department of Revenue. The most recent drop, from
5.2 to 5.15 percent, reduces tax collections in the next fiscal year
by $145 million.
Fiscal watchdogs are worried that the Legislature will find more
reasons to delay the tax reduction.
"Our concern is that they'll try to freeze the rate or even raise
taxes again," said Barbara Anderson, president of Citizens for
Limited Taxation, a Marblehead-based group that advocated the 2000
ballot initiative. "We should have been down to 5 percent years ago,
but they've put it off again and again. It's time to honor the
voters' will."
Ahead of the budget debate, Senate President Stan Rosenberg gave
lawmakers a green light to review tax policies, which are typically
debated outside of the budget process. Some have proposed freezing
or even increasing the income tax rate to fill revenue shortfalls
and pay for the expansion of state programs.
One proposal, by Sen. Jamie Eldridge, D-Acton, freezes the state's
income tax rate at 5.15 percent to cover the estimated $125 million
cost of doubling the state's earned income tax credit.
Gov. Charlie Baker, a Republican who took office in January, has
pledged to hold the line on taxes despite pressure to raise them to
pay down a projected $1.8 billion revenue shortfall in the coming
budget.
Baker attributes the deficit, in part, to the decrease of the
state's personal income tax rate.
Meanwhile, interest groups are lobbying Baker and lawmakers to
increase spending on everything from early education and substance
abuse programs to the environment, transportation and court system.
Some fiscal policy groups say declining income tax revenue has
drained money from vital programs.
Noah Berger, president of the Massachusetts Budget and Policy
Center, a liberal think tank, said the state has forfeited about
$3.3 billion a year in income tax revenue since rollbacks started in
2001.
Associated Press
Wednesday, May 20, 2015
Senate freezes tax rate, hikes earned income credit
The Massachusetts Senate waded into the debate over tax policy on
Tuesday by voting to freeze the state income tax rate at 5.15
percent while gradually increasing the earned income tax credit for
low-income working families.
The measure, backed by Democratic leaders, was approved 29-11 during
the first day of Senate debate on the $38 billion budget for the
fiscal year starting July 1. It must still win the backing of the
House, which did not address tax changes when it passed its version
of the spending plan last month.
The Senate amendment expands the state's earned income tax credit by
50 percent over the next three years, from the current 15 percent to
22.5 percent of the federal earned income tax credit. When fully
implemented in 2017, backers say it will save the average low-wage
earner, including thousands of single parents, about $470 a year.
To cover the anticipated $145 million cost of the expanded tax
credit, the Senate froze the state's income tax rate at the current
5.15 percent, rather than allow it to drop incrementally to 5
percent over the next few years. Debate over the tax rate has
churned on Beacon Hill since 2000, when voters approved a ballot
question to cut the then-5.95 tax rate to 5 percent.
The Legislature later stepped in and set the rate at 5.3 percent,
but with triggers that would allow the rate to fall incrementally
until it settled at 5 percent.
Senate Democrats argued that under the state's flat tax system, the
income tax cuts overwhelmingly favored wealthier individuals over
working families. They also said every taxpayer would enjoy some tax
relief on their 2015 taxes since their proposal also calls for
increasing personal exemptions.
"Fourteen years ago the Red Sox were still talking about the Curse
of the Bambino," said Sen. Benjamin Downing, a Pittsfield Democrat
referring to the years passed since the ballot question. "We honored
the will of the voters by continuing to make sure we have the same
amount of total tax cuts. It's not a matter of if, it's a matter of
how, and we judge that this way how is a better way for taxpayers."
Before approving the measure, the Senate rejected a proposal from
Republican leader Bruce Tarr that called for doubling the state's
earned income tax credit, but with no offsetting freeze in the
income tax rate.
Tarr said the Democratic amendment would thwart the will of voters.
"If we allow this to go forward — and I certainly hope we won't —
then we will have increased taxes beyond the 5 percent into
perpetuity in order to pay for something we could have paid for with
available funds," said the Gloucester Republican.
It was not immediately clear if Gov. Charlie Baker would accept the
Senate amendment. The Republican has also called for doubling the
tax credit but has proposed to pay for it by eliminating the state's
25 percent tax credit for filmmaking.
"The governor favors reducing the tax burden on all Massachusetts
families and believes the best way to pay for his plan to boost
support for low income workers is by phasing out subsidies for
Hollywood movie producers," said Elizabeth Guyton, a Baker
spokeswoman.
The Senate voted Tuesday to study the film tax credit to see if
there's a way to target more of the program's benefits to
Massachusetts residents and businesses.
The Boston Globe
Wednesday, May 20, 2015
Senate votes to increase state’s earned income tax credit
Baker, Senate split on covering cost
By David Scharfenberg
State senators voted Tuesday afternoon to expand a tax credit that
benefits hundreds of thousands of low-income workers and quickly
found themselves in a standoff with Governor Charlie Baker over how
to pay for it.
The Senate legislation, which would increase the state’s earned
income tax credit by half, would pay for the move by freezing in
place the state’s income tax, which is otherwise expected to decline
from 5.15 percent to 5.1 percent in January.
Proponents said the move would effectively shift the benefit of
state tax cuts from the wealthy to working families, striking a
small blow against income inequality.
“It’s about rewarding work and not just rewarding wealth,” said
state Senator Ben Downing, a Pittsfield Democrat and coauthor of the
bill, in a floor speech.
Baker, a Republican, put the earned income tax credit on the agenda
in March when he proposed doubling it and paying for the measure, in
part, by eliminating the state’s controversial film tax credit.
On Tuesday afternoon, the administration stuck by that approach.
Lizzy Guyton, a spokeswoman for the governor, said Baker wants to
pay for the expansion “by phasing out subsidies for Hollywood movie
producers” rather than freezing the income tax in place.
On the Senate floor, Republican lawmakers offered their own
objections, arguing that the freeze would thwart the will of the
voters, who approved a reduction in state income taxes in 2000 that
was later slowed down — but not eliminated — by the Legislature.
Minority leader Bruce Tarr said the Senate “had the chance to keep
faith, had the chance to honor the law, had the chance to honor the
voters,” but seemed more interested in redistributing wealth.
The Senate measure, an amendment to the $38 billion budget the
chamber is weighing, does include a tax benefit for the broader
public — increasing the standard personal exemption taxpayers can
claim.
For single taxpayers, for instance, the exemption would jump from
$4,400 to $4,800. For a married couple filing jointly, the exemption
would increase from $8,800 to $9,600.
An analysis by the left-leaning Massachusetts Budget and Policy
Center shows the mix of tax changes approved by the state Senate —
freezing the income tax, increasing the earned income tax credit,
and bumping up the personal exemptions — would have a relatively
modest impact on most taxpayers when compared with the alternative:
allowing the state income tax rate to decline, as expected, from
5.15 to 5.1 percent next year under a formula designed to eventually
bring the rate down to 5 percent.
The analysis shows that the average taxpayer earning $23,000 to
$47,000 would see a tax cut of $41 for the 2016 tax year, while the
average filer earning $127,000 to $276,000 would pay $31 more.
Noah Berger, president of MassBudget, said the Senate proposal is
worthwhile, despite relatively modest effects. “For low-income
folks, a $40 or $50 tax cut can matter,” he said. “It can be helping
to pay a month’s rent or [it can] put food on the table for a few
days.”
Berger added the average benefit is depressed because some
low-income people do not qualify for the tax credit.
Looked at in isolation, the average earned income tax recipient’s
benefit would increase from $315 to $470 under the legislation,
according to figures provided by Senate President Stanley C.
Rosenberg’s office.
The ultimate fate of the legislation is uncertain, given Baker’s
opposition. House Speaker Robert A. DeLeo’s office declined to
comment Tuesday. But he has disputed the Senate’s right to attach
tax measures of any kind to the budget.
The state Constitution says all “money bills” must originate in the
House of Representatives. The Senate maintains that, because the
House version of the budget included an alteration to a tax credit,
that opened the door for the Senate to weigh changes to tax policy.
The Springfield Republican
Wednesday, May 20, 2015
Massachusetts Senate passes income tax rate freeze to pay for
low-income tax credit
By Shira Schoenberg
The Democratic-led Massachusetts Senate on Tuesday voted for a plan
that would freeze the current income tax rate, rather than lowering
it, and use the savings to pay for tax cuts that would primarily
benefit low and middle income families.
"We are providing the same amount of tax relief to the voters of the
commonwealth by a different method," said State Sen. Michael
Rodrigues, D-Westport, chairman of the Joint Committee on Revenue.
The Senate voted 29 to 11 to adopt the plan, with five Democrats
joining all six Senate Republicans in opposing it.
Massachusetts voters in 2000 voted to reduce the income tax rate
from 5.9 percent to 5 percent. The Legislature decided to reduce the
rate gradually based on certain economic triggers. It is now at 5.15
percent and is scheduled to drop to 5.1 percent in 2016.
Senate Democrats – led by Senate President Stan Rosenberg,
D-Amherst, Rodrigues, and Sen. Ben Downing, D-Pittsfield – want to
freeze the income tax at the current rate, which would save the
state approximately $145 million next year.
Under the Senate Democrats' plan, the state would use that money to
increase the earned income tax credit, which primarily benefits
low-income, working families with children. It would also increase
the size of the personal income tax exemption for all taxpayers.
The Democrats' plan is a progressive one, which means the benefits
would go primarily to those earning the least money. The lowest 20
percent of taxpayers – those earning less than $23,000 - would pay
an average of $27 less on their taxes than they would if the income
tax reduction went into effect but no other changes were made,
according to an analysis conducted for Rosenberg by the
liberal-leaning Massachusetts Budget and Policy Center. The lowest
60 percent of taxpayers – those earning up to $76,000 a year – would
also, on average, receive an additional tax cut.
However, the top one percent of earners – those making more than
$778,000 – would pay an average of $961 more on their taxes next
year than they would have if the income tax reduction went into
effect but no other changes were made. Essentially, the top 20
percent of earners (those making more than $127,000 annually) would
be almost exclusively the ones paying higher taxes than they would
have without the policy change.
Senate leaders stress that no one's taxes will go up from what they
are paying today. The difference is that a scheduled tax cut will be
restructured so that it primarily helps poorer taxpayers rather than
wealthier taxpayers.
Downing said the change would help address income inequality by
giving more money to lower income workers rather than giving an
across-the-board cut that would help all taxpayers, but particularly
wealthier taxpayers who pay the most in taxes. "It's about rewarding
work, not just rewarding wealth," Downing said.
But Senate Republicans argue that the policy is in direct opposition
to the will of voters.
Senate Minority Leader Bruce Tarr, R-Gloucester, said since the
ballot question was passed in 2000, legislators have promised
repeatedly that they would roll back the income tax rate to 5
percent. "This is a choice about saying do we stay within the
framework of the law? Do we follow through on pledges made in this
chamber since the ballot question was passed?" Tarr said.
State Sen. Vinny deMacedo, R-Plymouth, said the Democrats are trying
to move in the direction of a graduated income tax, where richer
people pay higher rates. "I think Massachusetts has been served well
by the fair tax system," deMacedo said, in which everyone pays the
same rate.
Gov. Charlie Baker, a Republican, had proposed doubling the earned
income tax credit, and partially paying for it by eliminating a tax
credit for film production. Senate leaders do not want to eliminate
the film tax credit, though they would make some changes to focus
the credit on in-state workers.
Under the Senate plan, the earned income tax credit would increase
from 15 percent of the federal credit to 22.5 percent. The increase
would be implemented over three years. That means the average credit
would go from $315 to $470 per person. More than 400,000
Massachusetts residents claim this tax credit, which goes to people
who are working and have incomes of up to $52,400 for a couple with
three children.
Asked whether Baker would support the Senate plan, Baker spokeswoman
Lizzy Guyton said, "The Governor favors reducing the tax burden on
all Massachusetts families and believes the best way to pay for his
plan to boost support for low income workers is by phasing out
subsidies for Hollywood movie producers." Baker opposes freezing the
income tax rate.
Also under the Senate plan, the personal exemption – the amount of a
person's income that is exempt from taxes - would go from $4,400 to
$4,800 for an individual and from $8,800 to $9,600 for a married
couple filing jointly. This would apply to all taxpayers.
Tarr proposed an amendment that would have increased the earned
income tax credit gradually to 30 percent of the federal tax break.
Tarr did not propose a means of paying for it, saying only that
given the size of the budget and an expected increase in revenue,
"We ought to be able to find room for this modest investment in low
wage earners in this commonwealth."
The Senate rejected Tarr's amendment, 32 to 8, after Rodrigues urged
the Senate to "be responsible" and identify a revenue source before
implementing a $145 million tax credit. Two Democrats joined six
Republicans supporting Tarr's amendment.
Even if the plan passes the full Senate in the final budget vote, it
must still be approved by a team of House-Senate negotiators, then
passed by both bodies and signed by Baker.
Seth Gitell, a spokesman for House Speaker Robert DeLeo, D-Winthrop,
said, "Speaker DeLeo will refrain from commenting during the ongoing
Senate budget debate."
The total Senate budget is around $38 billion. Debate will continue
throughout the week.
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