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CLT UPDATE
Monday, August 22, 2016
Teachers, public employee unions
still deceive
|
They’ve helped raise the minimum wage.
They passed a ballot initiative giving
employees up to 40 hours of sick time per year.
And now they’re engaged in their biggest
battle yet: A 2018 constitutional amendment referendum —
given a preliminary green light by the Legislature this year
— to raise taxes on millionaires and funnel that cash to
transportation and education.
At a time when a no-new-taxes Republican
governor is ascendant and the state Democratic Party is in a
defensive crouch, Raise Up Massachusetts, a coalition of
community, faith, and organized labor groups, is at the
vanguard of the liberal fight against economic inequality.
Opponents frame Raise Up as a front group
for public-sector unions — from teachers to MBTA drivers —
trying to sneakily squeeze more money out of taxpayers for
profligate Beacon Hill spending under the guise of forcing
the rich to pay their fair share....
Harris Gruman, a top union official and a
co-chairman of the group, said Massachusetts is in the midst
of moral crisis: a crisis of work, communities, and the
faith we have in ourselves as a society.
“Raise Up is really about rebuilding all of
that, bringing that all together, becoming Norway, in a
sense — using our resources,” said Gruman.
Gruman, a 57-year-old Somerville resident
and state political director for the Service Employees
International Union, helps run Raise Up along with a
faith-based organizer and a social justice activist. They
represent scores of groups, from UU Mass Action, which
organizes Unitarian Universalists on social justice issues,
to the Massachusetts Nurses Association, a union....
By gathering enough signatures for a ballot
push, Raise Up helped pressure the Legislature to pass an
incremental minimum wage hike in 2014; the floor will be
lifted to $11 per hour in January.
And it backed a successful 2014 ballot
initiative to mandate that workers be able to earn and use
up to 40 hours of sick time annually — time that is paid if
their employer has 11 or more employees.
The group spent more than $1.3 million
during that campaign, primarily funded by unions, such as
those affiliated with SEIU and the Massachusetts Teachers
Association, state records show....
The state Department of Revenue has
estimated if there is not an exodus of wealthy people from
Massachusetts, the tax measure could bring in as much as
$2.2 billion annually, a massive new influx of cash....
However, Massachusetts voters have
previously rejected five proposals to change the
Constitution to allow for a graduated state income tax:
1962, 1968, 1972, 1976, and 1994.
And there are several simmering disputes
about the millionaires’ tax effort. Opponents say the
Legislature, rather than being mandated to actually spend
the money from the new tax on transportation and education,
could spend it on anything.
And they say that Raise Up is effectively a
front group for Democratic Party-aligned public sector
unions that stand to benefit from a massive infusion of new
tax dollars.
Chip Faulkner, the communications
director for Citizens for Limited Taxation, which
vociferously opposes the millionaires’ tax, said he sees
Raise Up as a new iteration of his low-tax group’s longtime
foes: The Massachusetts Teachers Association.
“They go way back, the MTA. They were our
main opposition in 1980,” he said, referring to the fight
over Proposition 2½, which limits property taxes. Faulkner
added that he sees the group’s top officials, including MTA
president Barbara Madeloni, as actually leading the
millionaires’ tax charge.
“It’s the same old group with a different
face. They just changed their masks,” he said. “But we
expected that.”
The Massachusetts Teachers Association,
which spent millions of dollars trying to defeat Republican
Governor Charlie Baker in his 2014 race, has donated $75,000
and more than $389,000 worth of staff time to the
millionaires’ tax effort, state campaign records show.
But Madeloni strongly rejected the
supposition that Raise Up is a front group for teachers and
other public sector unions, and said opponents are trying to
deny and undermine the people-driven power of the
wide-ranging coalition....
And Fastino, the Raise Up co-chairwoman,
said she believes advocates have finally framed a tax
question in a way that will be victorious.
“I think the process of thinking through how
to do it, make it more clear, tying it to something people
care about — transportation and education,” she said. “I
think that we have a winner this time.”
The Boston Globe
Sunday, August 21, 2016
Raise Up seeks more from millionaires
Twenty-five years ago, Gov. Lowell P.
Weicker Jr. and the Connecticut legislature imposed a
personal income tax on the people of Connecticut for the
first time in the state's history. Until that point, there
were 10 states with no personal income tax. Now there are
nine.
The story of how Connecticut taxpayers were
saddled with a personal income tax on wages (in addition to
the already existing sales tax, corporate income tax and
property taxes) is a familiar one. First, Lowell Weicker was
elected governor promising to oppose an income tax. Safely
elected, he changed his mind. Lie No. 1.
Second, the governor and legislature put a
constitutional amendment on the November 1992 ballot that
passed 80 percent to 20 percent. Taxpayers were promised
that this amendment would limit total state spending.
However, the legislature refused to enact the terms of the
voter-approved measure. The constitutional spending cap
never went formally into effect. Since 1991, Connecticut
taxpayers have paid $126 billion (with a B) in income taxes,
measured in today's dollars, according to a forthcoming
Yankee Institute study. State spending grew 71 percent
faster than inflation between 1991 and 2014. The promised
spending restraint was lie No. 2.
Politicians do not impose new taxes to
reduce existing taxes. They tax to spend. Connecticut could
have learned from watching New Jersey impose its first sales
tax in 1966 on the promise to reduce high property taxes —
and then in 1976 added its first income tax to reduce those
high property taxes. Today New Jersey has high income taxes,
sales taxes and property taxes. Connecticut walked down the
same road with the same result.
The Hartford (Conn.) Courant
Sunday, August 14, 2016
The Damage CT's Income Tax Has Done
By Grover Norquist
Faced with poor revenue collections in the
second half of the last fiscal year, state budget writers
and finance officials lowered the tax revenue estimate for
fiscal year 2017 by $629 million before enacting the fiscal
2017 budget, a state finance official told investors
Wednesday.
Tax collections over the second half of
fiscal 2016 continually fell shy of benchmarks, creating
uncertainty as the administration and Legislature developed
a budget for fiscal 2017.
After originally agreeing to a consensus tax
revenue estimate of $26.86 billion for fiscal 2017, the
Legislature reduced the estimate by about 2.34 percent to
roughly $26.231 billion, according to Jennifer Sullivan, the
Executive Office of Administration and Finance's assistant
secretary for capital finance. The reduction corresponded to
the low-end of revenue shortfall projections forecast by the
Baker administration in late June.
"Based on weaker than expected revenue
performance in the second half of fiscal 2016, and after
consulting with the (Administration and Finance) secretary,
(the Department of Revenue) and independent economists, the
Legislature reduced its tax revenue estimate at the time of
their enactment of the budget," Sullivan said during a
conference call for Massachusetts bond holders Wednesday
morning.
Total tax collections in fiscal 2016 of
$25.267 billion were up by $550 million, or 2.2 percent,
from fiscal 2015, but still fell $484 million below the
budget benchmark....
On July 8, Baker issued $264 million in line
item vetoes and signed a $38.92 billion fiscal 2017 budget
that he said solved for the declining revenue projections,
but the Legislature restored $231.6 million in spending
through veto override votes leaving what the Massachusetts
Taxpayers Foundation pegged as an early $240 million gap in
the budget.
State House News Service
Wednesday, August 17, 2016
Final state budget shaved almost $630M
from early revenue projections
Local officials are raising alarms across
the country about a potential economic slowdown that could
blow holes in state budgets still struggling to get above
water less than a decade after the worst recession in
generations.
Preliminary budget data from the end of the
2016 fiscal year show tax revenue grew by just over 2
percent last year, well below historic norms — and below the
growth rate of state spending and obligations.
States hoping they’d see their first
surpluses since the recession are instead grappling with
projected deficits....
California is a bright spot. The state’s tax
revenues are up 66 percent from the depths of the recession,
according to first quarter figures, bolstered by capital
gains taxes and a 2012 ballot initiative that extended
income taxes on wealthy families.
The state sported a $3 billion surplus in
the last fiscal year, and legislators put some of that money
away in a rainy day fund. While the national gross domestic
product has risen haltingly, California’s was up 4
percentage points last year.
But because of the state’s reliance on
income and capital gains taxes, officials there, too, are
wary of any hint of a return to darker times.
“There’s a sense of cautiousness” among
state budget officials, said California Treasurer John
Chiang. “This recovery has been slow, but it has been long,
and we know that we’ve exceeded the average length of a
recovery.”
“We remember very clearly the impact of the
last recession. So we want to make sure we do not replicate
the pain of the last downturn in the economy,” Chiang said.
The Hill
Thursday, August 18, 2016
States fear new era of deficits
|
|
Chip Ford's CLT
Commentary
The usual pick-pocket suspects are flocking to fleece taxpayers again, as usual
claiming it's necessary for the common good — not
their own benefit — while admittedly practicing
their well-honed deceptions.
Fastino, the Raise Up co-chairwoman,
said she believes advocates have finally framed a tax question in a way
that will be victorious.
“I think the process of thinking through how to do it, make it more
clear, tying it to something people care about — transportation and
education,” she said. “I think that we have a winner this time.”
Deb Fastino, co-chairwoman of Raise Up Massachusetts, knows that any
revenue that could be raised by their proposed constitutional amendment
cannot be dedicated or earmarked to be spent on anything whatsoever.
That is specifically forbidden by the very constitution they hope to
amend. That's precisely why they included "subject to appropriation by the
Legislature" in their proposal in order for it to be constitutionally permitted
as a petition. Without that phrase and intent, it would not have been
legally permitted, their petition sheets would not have been approved or
printed.
But that doesn't stop them from trying to sell their big lie to an unwary
electorate. Liberals can't win with the truth. The Boston Globe
report further noted:
Opponents frame Raise
Up as a front group for public-sector unions — from teachers
to MBTA drivers — trying to sneakily squeeze more money out
of taxpayers for profligate Beacon Hill spending under the
guise of forcing the rich to pay their fair share....
The group spent more
than $1.3 million during that [2014 annual sick time]
campaign, primarily funded by unions, such as those
affiliated with SEIU and the Massachusetts Teachers
Association, state records show....
And there are several
simmering disputes about the millionaires’ tax effort.
Opponents say the Legislature, rather than being mandated to
actually spend the money from the new tax on transportation
and education, could spend it on anything.
And they say that Raise
Up is effectively a front group for Democratic Party-aligned
public sector unions that stand to benefit from a massive
infusion of new tax dollars.
Chip Faulkner,
the communications director for Citizens for Limited
Taxation, which vociferously opposes the millionaires’
tax, said he sees Raise Up as a new iteration of his low-tax
group’s longtime foes: The Massachusetts Teachers
Association.
“They go way back,
the MTA. They were our main opposition in
1980,” he said, referring to the fight over Proposition 2½,
which limits property taxes. Faulkner added that he sees
the group’s top officials, including MTA president Barbara
Madeloni, as actually leading the millionaires’ tax charge.
“It’s the same old
group with a different face. They just changed their masks,”
he said. “But we expected that.”
The Massachusetts
Teachers Association, which spent millions of dollars trying
to defeat Republican Governor Charlie Baker in his 2014
race, has donated $75,000 and more than $389,000 worth of
staff time to the millionaires’ tax effort, state campaign
records show.
I read through a multitude of news reports and columns, studies,
reports and analyses each week, part of my job for keeping me and you
informed. What's important to us taxpayers I save for future
reference, what's immediately relevant to us I pass along in these
Updates. Often information dots connect days, weeks, or months
later and form a better picture of trends and direction. This is
the case today.
The Hartford Courant column by Grover Norquist concerning Connecticut's
relatively new income tax is a good history lesson on how political promises are
made only to be broken, and how taxes increase incrementally, rarely if ever
solving the problems they are sold to address. Tax increases only extract
more from taxpayers to be spent on political whims, new spending that adds to
budget baselines that require increased funding in ensuing budgets, layer upon
layer.
The Hill, a national online publication, put out a report focused on the
decline of revenue in states around the country. Massachusetts has
recognized this situation, felt its impact, yet the Legislature whistled past
the graveyard with crossed fingers.
The State House News Service reported last week: "Faced with poor
revenue collections in the second half of the last fiscal year, state budget
writers and finance officials lowered the tax revenue estimate for fiscal year
2017 by $629 million before enacting the fiscal 2017 budget." The Baker
administration's spokeswoman, Jennifer Sullivan, added: "This estimate
assumes that the statutory triggers that would automatically reduce the personal
income tax rate on most classes of taxable income to 5.05 percent on Jan. 1,
2017 will not occur." Denying the voters' income tax rollback would "free
up $80 million in taxes for spending," according to legislators.
While recognizing the weakening revenue situation —
even as they expect to deny the voters' 2000 income tax rollback mandate once
again — the Legislature went ahead and overrode
$231.6 of the $264 million of spending that Governor Baker had vetoed.
$38.92 billion of spending in fiscal year 2017, up from
$38.1 billion last
fiscal year, on Beacon Hill is consider austere —
because the Legislature had wanted to spend $39.1 billion. The
Legislature fell short of its billion dollar spending increase goal by $180
million, but that's still $820 million more spending than last year.
Tough times indeed — especially for taxpayers
who once again aren't expected to see the promised reduction of the "temporary"
income tax hike of 1989.
Meanwhile, the relentless, insatiable Gimme Lobby led by the usual suspects
— the deep-pockets teachers and public employee
unions — are raising millions to spend on another
deceptive campaign for yet another tax hike. According to one of their top
union spokesmen, they want Massachusetts to become more like “Norway, in a
sense.”
|
 |
 |
|
Chip Ford
Executive Director |
|
|
|
|
The Boston Globe
Sunday, August 21, 2016
Raise Up seeks more from millionaires
By Joshua Miller
They’ve helped raise the minimum wage.
They passed a ballot initiative giving employees
up to 40 hours of sick time per year.
And now they’re engaged in their biggest battle
yet: A 2018 constitutional amendment referendum
— given a preliminary green light by the
Legislature this year — to raise taxes on
millionaires and funnel that cash to
transportation and education.
At a time when a no-new-taxes Republican
governor is ascendant and the state Democratic
Party is in a defensive crouch, Raise Up
Massachusetts, a coalition of community, faith,
and organized labor groups, is at the vanguard
of the liberal fight against economic
inequality.
Opponents frame Raise Up as a front group for
public-sector unions — from teachers to MBTA
drivers — trying to sneakily squeeze more money
out of taxpayers for profligate Beacon Hill
spending under the guise of forcing the rich to
pay their fair share.
But the leaders of Raise Up, founded in 2013,
reject that argument and say Massachusetts, one
of the wealthiest places on earth, cannot truly
thrive when the gap between the top 1 percent
and everyone else is so vast.
Harris Gruman, a top union official and a
co-chairman of the group, said Massachusetts is
in the midst of moral crisis: a crisis of work,
communities, and the faith we have in ourselves
as a society.
“Raise Up is really about rebuilding all of
that, bringing that all together, becoming
Norway, in a sense — using our resources,” said
Gruman.
Gruman, a 57-year-old Somerville resident and
state political director for the Service
Employees International Union, helps run Raise
Up along with a faith-based organizer and a
social justice activist. They represent scores
of groups, from UU Mass Action, which organizes
Unitarian Universalists on social justice
issues, to the Massachusetts Nurses Association,
a union.
Lew Finfer, 65, a longtime Dorchester resident
and another co-chairman, has been a community
organizer since 1970. For the last
quarter-century, Finfer, who is the director of
Massachusetts Communities Action Network, has
been engaged in faith-based organizing, bringing
together church, synagogue, and other religious
groups in social justice efforts.
Deb Fastino, 51, who lives in Fall River, is a
co-chairwoman of Raise Up. She’s also the
executive director of Coalition for Social
Justice, which engages in advocacy and political
action, and a board member of Family Values at
Work, a national network pressing for paid leave
laws.
Raise Up’s goal, they said in interviews with
the Globe, is threefold: Raising wages and
benefits for the poorest workers; more heavily
taxing the very rich; and using that new money
to improve education and transportation.
By gathering enough signatures for a ballot
push, Raise Up helped pressure the Legislature
to pass an incremental minimum wage hike in
2014; the floor will be lifted to $11 per hour
in January.
And it backed a successful 2014 ballot
initiative to mandate that workers be able to
earn and use up to 40 hours of sick time
annually — time that is paid if their employer
has 11 or more employees.
The group spent more than $1.3 million during
that campaign, primarily funded by unions, such
as those affiliated with SEIU and the
Massachusetts Teachers Association, state
records show.
Raise Up’s new initiative would impose an
additional tax of 4 percent on annual taxable
income in excess of $1 million starting in 2019.
(Currently, Massachusetts’ income tax rate is
5.1 percent for all income levels.) And the new
tax would be tied to inflation, so the levy
would continue to apply only to very wealthy
people.
The state Department of Revenue has estimated if
there is not an exodus of wealthy people from
Massachusetts, the tax measure could bring in as
much as $2.2 billion annually, a massive new
influx of cash.
Advocates see their push through the lens of
income inequality, which is particularly
pronounced in the state. Boston, a recent
Brookings Institution analysis found, has the
highest rate of income inequality among the
country’s biggest cities.
In the group’s private polling and focus groups,
Gruman said, Massachusetts residents were
crystal clear that they support increasing taxes
on the very rich as long as the new money is
dedicated to the areas that matter to them. They
told interviewers that having a reliable way to
get to work and being able to get a college
education without lifelong debt are key to their
economic security.
Raise Up’s efforts are supported by strong
majorities of residents in opinion surveys. And
backers point to the 157,000 signatures
collected in the effort to put the millionaires’
tax on the ballot: One third collected by
unions, one-third by religious groups, one third
by community organizations, and none by paid
canvassers.
However, Massachusetts voters have previously
rejected five proposals to change the
Constitution to allow for a graduated state
income tax: 1962, 1968, 1972, 1976, and 1994.
And there are several simmering disputes about
the millionaires’ tax effort. Opponents say the
Legislature, rather than being mandated to
actually spend the money from the new tax on
transportation and education, could spend it on
anything.
And they say that Raise Up is effectively a
front group for Democratic Party-aligned public
sector unions that stand to benefit from a
massive infusion of new tax dollars.
Chip Faulkner, the communications
director for Citizens for Limited Taxation,
which vociferously opposes the millionaires’
tax, said he sees Raise Up as a new iteration of
his low-tax group’s longtime foes: The
Massachusetts Teachers Association.
“They go way back, the MTA. They were our main
opposition in 1980,” he said, referring to the
fight over Proposition 2½, which limits property
taxes. Faulkner added that he sees the group’s
top officials, including MTA president Barbara
Madeloni, as actually leading the millionaires’
tax charge.
“It’s the same old group with a different face.
They just changed their masks,” he said. “But we
expected that.”
The Massachusetts Teachers Association, which
spent millions of dollars trying to defeat
Republican Governor Charlie Baker in his 2014
race, has donated $75,000 and more than $389,000
worth of staff time to the millionaires’ tax
effort, state campaign records show.
But Madeloni strongly rejected the supposition
that Raise Up is a front group for teachers and
other public sector unions, and said opponents
are trying to deny and undermine the
people-driven power of the wide-ranging
coalition.
“We work arm-and-arm with community
organizations, faith organizations. One of the
beautiful things about it is that it is all of
us working together,” Madeloni said. “It is what
democracy looks like.”
And Fastino, the Raise Up co-chairwoman, said
she believes advocates have finally framed a tax
question in a way that will be victorious.
“I think the process of thinking through how to
do it, make it more clear, tying it to something
people care about — transportation and
education,” she said. “I think that we have a
winner this time.”
The Hartford (Conn.) Courant
Sunday, August 14, 2016
The Damage CT's Income Tax Has Done
By Grover Norquist
Twenty-five years ago, Gov. Lowell P. Weicker
Jr. and the Connecticut legislature imposed a
personal income tax on the people of Connecticut
for the first time in the state's history. Until
that point, there were 10 states with no
personal income tax. Now there are nine.
The story of how Connecticut taxpayers were
saddled with a personal income tax on wages (in
addition to the already existing sales tax,
corporate income tax and property taxes) is a
familiar one. First, Lowell Weicker was elected
governor promising to oppose an income tax.
Safely elected, he changed his mind. Lie No. 1.
Second, the governor and legislature put a
constitutional amendment on the November 1992
ballot that passed 80 percent to 20 percent.
Taxpayers were promised that this amendment
would limit total state spending. However, the
legislature refused to enact the terms of the
voter-approved measure. The constitutional
spending cap never went formally into effect.
Since 1991, Connecticut taxpayers have paid $126
billion (with a B) in income taxes, measured in
today's dollars, according to a forthcoming
Yankee Institute study. State spending grew 71
percent faster than inflation between 1991 and
2014. The promised spending restraint was lie
No. 2.
Politicians do not impose new taxes to reduce
existing taxes. They tax to spend. Connecticut
could have learned from watching New Jersey
impose its first sales tax in 1966 on the
promise to reduce high property taxes — and then
in 1976 added its first income tax to reduce
those high property taxes. Today New Jersey has
high income taxes, sales taxes and property
taxes. Connecticut walked down the same road
with the same result.
The Connecticut income tax was, at first, a flat
rate of 4.5 percent. But that promise was broken
at least five times after 1991 as the number of
tax brackets expanded to seven and the top rate
jumped to 6.99 percent. Politicians love to
divide voters into different groups (tax
brackets) and mug them one at a time. Divide and
conquer. Massachusetts has a constitutionally
mandated flat tax. It is 5.1 percent.
Pennsylvania's flat tax is 3.07 percent.
Illinois' flat tax is 3.75 percent. A flat tax
is hard to raise. A progressive or graduated
income tax is easy to increase.
We know what happened in Connecticut. From 1993,
the year after the income tax was first
collected, until 2010, more than 193,000 people
left Connecticut than arrived from other states.
They took with them $8.7 billion in income.
What could have happened if Connecticut had
simply controlled spending to the rate of
inflation and refused to add the personal income
tax?
Imagine the jobs and opportunity that, over the
past 25 years, would have flowed into a
Connecticut — with zero personal income tax —
sitting next to Massachusetts, New York and New
Jersey.
Studies comparing the nine highest income tax
states and nine zero income tax states over a
decade found the zero income tax states had job
creation more than 7 percent higher than the
high income tax states. Personal income growth
was 12.3 percent higher in the zero income tax
states. Total gross state product grew at nearly
62 percent in zero income tax states vs. 46.4
percent for the high income tax states. More
people left high-tax states for other states
than moved into them from within the U.S.
Those zero income tax states? Texas passed a
nearly $4 billion tax cut for employers and
property owners. Florida has approved at least
$2 billion in tax relief in recent years.
Tennessee, with no personal income tax on wages,
just abolished its death tax and voted to phase
out its investment income tax. Other states are
showing the path to success. North Carolina is
dropping its income tax from 7.75 to 5.5 percent
and plans other cuts.
The income tax in Connecticut did not bring
spending restraint, an end to fiscal crises,
stability, economic growth, fairness, better
schools, uncongested roads or an end to
exploding pension liabilities. The Connecticut
income tax has now lasted longer than
Prohibition or the Iraq war. Stupid does not
have to last forever. It is not too late to
repair the damage done 25 years ago.
Grover Norquist is president of Americans for
Tax Reform, a nonprofit taxpayer advocacy
organization founded in 1985 at the request of
President Ronald Reagan.
State House News Service
Wednesday, August 17, 2016
Final state budget shaved almost $630M from
early revenue projections
By Colin A. Young
Faced with poor revenue collections in the
second half of the last fiscal year, state
budget writers and finance officials lowered the
tax revenue estimate for fiscal year 2017 by
$629 million before enacting the fiscal 2017
budget, a state finance official told investors
Wednesday.
Tax collections over the second half of fiscal
2016 continually fell shy of benchmarks,
creating uncertainty as the administration and
Legislature developed a budget for fiscal 2017.
After originally agreeing to a consensus tax
revenue estimate of $26.86 billion for fiscal
2017, the Legislature reduced the estimate by
about 2.34 percent to roughly $26.231 billion,
according to Jennifer Sullivan, the Executive
Office of Administration and Finance's assistant
secretary for capital finance. The reduction
corresponded to the low-end of revenue shortfall
projections forecast by the Baker administration
in late June.
"Based on weaker than expected revenue
performance in the second half of fiscal 2016,
and after consulting with the (Administration
and Finance) secretary, (the Department of
Revenue) and independent economists, the
Legislature reduced its tax revenue estimate at
the time of their enactment of the budget,"
Sullivan said during a conference call for
Massachusetts bond holders Wednesday morning.
Total tax collections in fiscal 2016 of $25.267
billion were up by $550 million, or 2.2 percent,
from fiscal 2015, but still fell $484 million
below the budget benchmark.
The administration in late June estimated that
tax revenues for fiscal 2017 could fall $650
million to $950 million short of projections
agreed to in January.
Sullivan said the new tax revenue estimate
— $26.231 billion
— no longer assumes a reduction in the
income tax rate from 5.1 percent to 5.05 percent
in January, a change that legislators said would
free up $80 million in taxes for spending.
"This estimate assumes that the statutory
triggers that would automatically reduce the
personal income tax rate on most classes of
taxable income to 5.05 percent on Jan. 1, 2017
will not occur," she said.
The new fiscal year, which began July 1, got off
to a good start for the state budget picture.
DOR announced earlier this month that the state
collected more than $1.7 billion in July -- 2.1
percent more than in the same month last year
and about $7 million above the monthly benchmark
that had been adjusted to correspond to the new
revenue projection.
While income, corporate and business taxes all
beat projections for the month of July, sales
and use taxes and withholding collections fell
short of their mark.
By Oct. 15, Administration and Finance Secretary
Kristen Lepore will have to submit revised tax
revenue estimates for fiscal 2017 in accordance
with state law, unless she believes there have
been no significant changes since the last
estimate.
On July 8, Baker issued $264 million in line
item vetoes and signed a $38.92 billion fiscal
2017 budget that he said solved for the
declining revenue projections, but the
Legislature restored $231.6 million in spending
through veto override votes leaving what the
Massachusetts Taxpayers Foundation pegged as an
early $240 million gap in the budget.
The Hill
Thursday, August 18, 2016
States fear new era of deficits
By Reid Wilson
Local officials are raising alarms across the
country about a potential economic slowdown that
could blow holes in state budgets still
struggling to get above water less than a decade
after the worst recession in generations.
Preliminary budget data from the end of the 2016
fiscal year show tax revenue grew by just over 2
percent last year, well below historic norms —
and below the growth rate of state spending and
obligations.
States hoping they’d see their first surpluses
since the recession are instead grappling with
projected deficits.
“When you look at budget growth, I believe that
most states are forecasting a slower rate of
growth next year than they did this past year.
So there seems to be some consensus that things
are beginning to tighten,” said Richard Eckstrom,
South Carolina’s comptroller general.
Budget analysts say states generally expect a 5
percent annual growth rate in their tax
revenues. But the National Association of State
Budget Officers, a nonpartisan group, said early
indications showed total general fund tax
collections rose only 2.3 percent in the last
fiscal year, down from 5.2 percent in fiscal
year 2015.
“That’s a red flag right there,” said Lucy
Dadayan, a budget analyst at the Rockefeller
Institute of Government at the State University
of New York. “If we look at the nominal numbers,
we see growth overall nationwide. But each state
is in a different position.”
Each state relies on a different tax scheme to
make up its revenue.
Alaska, North Dakota and Wyoming rely heavily on
extraction taxes from natural resources like oil
and gas.
These states weathered the recession in
relatively healthy positions but have seen their
fortunes shift with a fall in commodity prices.
North Dakota legislators passed a measure
earlier this month to deal with a $310 million
shortfall, even after the state drained its
rainy day fund to cut a larger budget gap
earlier this year.
New Mexico, too, expects a $150 million to $200
million shortfall, which experts blame on
falling oil prices.
Many states blame lower business tax collections
for a drop in their tax revenues.
In the first quarter of the year, business tax
collections were down 5 percent, or nearly $600
million, from the same quarter last year,
according to data compiled by the U.S. Census
Bureau. At the same time, individual income
taxes and sales taxes each rose by just 2.4
percent.
Some traditional sources of state tax revenue
have been in long-term decline.
Lower smoking rates mean less money generated by
tobacco taxes. Higher fuel efficiencies in cars
and trucks mean gas taxes bring in less money.
Extraction taxes on natural resources have
declined sharply over the short run as the
commodity bubble bursts.
Income taxes tend to rebound fastest after
recessions, and Dadayan said states that rely
most heavily on them, such as California, New
York, Connecticut and New Jersey, have seen more
robust budget growth in recent years.
“It is true that state revenues overall,
adjusted for inflation even, have recovered. So
they’re back above pre-recession levels. But
we’re getting close to nine years after the
recession first hit, so that kind of growth over
that period of time is not enough to keep up
with increased enrollment in schools and more
students in public colleges and long-term care
and other Medicaid services,” said Michael
Leachman, director of state fiscal research at
the left-leaning Center on Budget and Policy
Priorities.
Louisiana economists expect a budget shortfall
that could reach $200 million. Jay Dardenne, the
state commissioner of administration, told
reporters this week that a deficit is
“inevitable.” In Oregon, rising costs and
obligations outpacing revenue growth will force
legislators to deal with a budget shortfall that
could top $1.3 billion. On Tuesday, Pennsylvania
drew $400 million on a line of credit to ensure
the state’s bank account wasn’t overdrawn.
Even in South Carolina, where state tax revenue
grew at a 4.3 percent rate in the last fiscal
year, there is reason for concern. Eckstrom said
tax revenues began slowing in recent months, and
while just a few months may not indicate a
trend, those figures represent worrying
indicators.
“As the fiscal year began to come to a close,
that sort of growth rate wasn’t repeating
itself, and for a few months we saw that growth
rate decline,” he said. “If we put together a
month of August like we did in the month of
July, the alarm bells will start ringing.”
Clint Zweifel, Missouri’s treasurer, said the
fact that revenue streams had rebounded to
pre-recession levels amounted to good news. His
state took in nearly $2.9 billion in the first
quarter of 2016, a 21 percent increase over the
depth of the recession. But budget volatility in
recent years has taken a toll as legislators
struggle to budget based on estimates of
economic strength that can miss the mark.
“There’s a huge cost to this volatility that
happened in revenue from the financial crisis
that can only be partially quantified,” Zweifel
said in an interview. Even modest growth instead
of a recession, he said, would have meant
billions more in spending on education and
infrastructure. “The lost investment opportunity
in things like human capital and education and
infrastructure are huge.”
California is a bright spot. The state’s tax
revenues are up 66 percent from the depths of
the recession, according to first quarter
figures, bolstered by capital gains taxes and a
2012 ballot initiative that extended income
taxes on wealthy families.
The state sported a $3 billion surplus in the
last fiscal year, and legislators put some of
that money away in a rainy day fund. While the
national gross domestic product has risen
haltingly, California’s was up 4 percentage
points last year.
But because of the state’s reliance on income
and capital gains taxes, officials there, too,
are wary of any hint of a return to darker
times.
“There’s a sense of cautiousness” among state
budget officials, said California Treasurer John
Chiang. “This recovery has been slow, but it has
been long, and we know that we’ve exceeded the
average length of a recovery.”
“We remember very clearly the impact of the last
recession. So we want to make sure we do not
replicate the pain of the last downturn in the
economy,” Chiang said. |
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