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CLT UPDATE
Sunday, June 4, 2017

"Fiscal crises" fuel tax hikes


The Baker administration has been tight-lipped about the scope of the state's immediate budget problems, but the potential depth of the revenue struggle that's unfolded over the first 10 months of the fiscal year is laid bare in new financial disclosure statements.

After marking down expected state tax collections last October by $175 million, the governor's budget staff now expects tax collections for fiscal 2017, which ends June 30, to fall between $375 million and $575 million below their revised projection, according to the statements signed by Administration and Finance Secretary Kristen Lepore and state Treasurer Deborah Goldberg....

The disclosure documents also affirm the suggestion by legislative leaders and Baker that the fiscal 2018 budget, the subject of most of the focus on Beacon Hill so far this year, will need to be substantially reworked. Bills passed by the House in late April and Senate last week will need to be overhauled by a six-member conference committee to reflect a reduction in estimated available revenues. The conference members could be named this week.

"Any adjustments to the projected fiscal 2018 tax revenue estimate on which the fiscal 2018 budget is based are expected to be resolved by the Legislature and the Governor during this process. The Executive Office for Administration and Finance and the Department of Revenue will be evaluating fiscal 2018 tax revenue estimates in light of the below-benchmark revenue performance in fiscal 2017, and anticipate that tax revenue projections for fiscal 2018 will be reduced by an amount yet to be determined," according to the May 19 disclosure, which arrived days before the Senate passed a fiscal 2018 budget bill based on revenue numbers that few on Beacon Hill believe will hold up....

Budget difficulties have persisted throughout Baker's term. While the governor has made progress reducing the use of one-time revenues to support spending, tax collections have consistently fallen short of the estimates state officials wrote into their spending plans after hearing from local economists....

To boost state revenues, the Legislature voted 135-57 in May 2016 to advance a constitutional amendment adding a 4 percent surtax on household income above $1 million. Lawmakers this session are expected to advance the amendment to the 2018 ballot. Opponents of the measure say it could discourage high earners from living in Massachusetts and lead to a graduated income tax structure in which over time more people will be grouped in different tax brackets and taxed at different rates. Supporters say the surtax could generate $1.6 billion to $2.2 billion annually to invest in education and transportation.

State House News Service
Sunday, May 28, 2017
Tax revenue shortfall could hit $575 Million, state says in disclosure

 


A proposal that would impose more taxes on the rich to pay for education and transportation is expected to be an easy sell to voters.

That’s why the state’s most powerful business groups want to stop the initiative before it gets that far. They’re working on a legal challenge to scuttle the so-called millionaires tax.

The Massachusetts High Technology Council just sent out a letter to its roughly 150 members, seeking contributions of $10,000 to $25,000. The surcharge, council president Christopher Anderson wrote, could cause irreparable harm to the state’s innovation economy.

Other influential business groups — such as the Massachusetts Taxpayers Foundation, Associated Industries of Massachusetts, and the Massachusetts Competitive Partnership — also oppose the labor-backed surcharge. Among their strategies: filing a lawsuit later this year that challenges its constitutionality....

But the union-funded “Fair Share Amendment” still needs to clear an important hurdle: a vote by the state lawmakers to put the tax question before voters next year.

The surcharge would be created through a constitutional amendment, which requires two roll call votes from the Legislature. Lawmakers have overwhelmingly approved it once, in 2016. They could take their second vote as soon as June 14.

The business groups’ legal strategy is just starting to take shape. One likely plan of attack: challenging language that would set aside funds for education and transportation. They argue that constitutional amendments can’t appropriate funds for specific uses. They also may also claim that the referendum question is too broad....

A successful court challenge would be far less expensive than a campaign to defeat a ballot question, which could cost millions....

In comparison, the Raise Up Massachusetts ballot committee spent nearly $600,000 in the past two years to get the millionaires tax this far. Most of that money came from union sources, including Services Employees International Union affiliates, and the Massachusetts Teachers Association.

The Boston Globe
Saturday, May 27, 2017
Business advocates gear up for legal fight against ‘millionaires tax’ proposal


Somehow, a progressive state like Massachusetts ended up with a regressive tax system, and it is not serving us well.

The state budget looks a lot like it did one year ago: revenue coming in below projections, spending cuts looming, and a budget deficit growing. But this dismal math presents an opportunity to revamp the way we generate revenue for the Commonwealth.

The top two sources of state revenue for fiscal 2016 came from two “flat” taxes — income and sales. When most people think of flat taxes, they think of Republican presidential contenders like Steve Forbes, Ted Cruz, Rand Paul, and Rick Perry. Yet, here in our blue state, we have a flat 6.25 percent sales and a flat 5.1 percent income tax. The uniform nature of the income tax was enshrined in our state Constitution in 1915.

It’s time to fix that.

A[nother] constitutional amendment to eliminate the sales tax and replace the flat state income tax with a progressive scale based on income would be a bold solution. It would both alleviate the tax burden for low- and moderate-income families and generate enough revenue to right our budget ship before the next recession hits....

The recurrent budget problems can be traced back two decades to a tax cut that materialized, while proposed spending cuts did not. In 2000, a state referendum cut the income tax from 5.85 percent to the current 5.1 percent. That cut state revenue, but spending was never cut to balance the books....

A 4 percent “millionaires’ tax” is also being considered as a 2018 referendum to bring in more revenue. Moving to a progressive state income tax complements this referendum because the top bracket would likely start much lower than $1,000,000.

I don’t expect Governor Charlie Baker to support this proposal. But for 2018 gubernatorial candidates and Beacon Hill Democrats, a less regressive tax system could be a winning issue. Massachusetts has a choice: Either stick with a tax structure that soaks the poor and underperforms in most years, or summon the courage to make a big change.

The Boston Globe
Sunday, May 28, 2018
Ax the sales tax (also the income tax)
By Tom Emswiler


If it’s a $40,000 snowplow for clearing sidewalks that the town of Hingham wants, then a $40,000 snowplow for clearing sidewalks the town of Hingham — median income $103,000, median home value $766,000 — shall have.

But why on earth should the taxpayers of the entire commonwealth pay for it?

Sadly that is how spending on Beacon Hill so often works. Local spending needs become the responsibility of state taxpayers, simply because a lawmaker asks his colleagues to make it happen and because leadership — for reasons the public will never know — gives it the green light.

That’s how amendment No. 82, which provides $40,000 to the tony town of Hingham for that piece of specialty public works equipment, became part of the Senate budget last week....

Most of these amendments are relatively small potatoes, at least in the context of a $40 billion state budget.

And none of this is unique to the Senate. The House filled its own tourism line item with pork, too. Naturally there is a gazebo. (Isn’t there always a gazebo?) The House OK’d $25,000 for the town of Dracut to build a gazebo in memory of a late, local pol.

But at what point does someone stand astride the state budget and yell, “Stop!”

Last year Gov. Charlie Baker used his veto pen to X out 497 earmarks to help bring the budget back into balance; now many of them are rising like zombies to appear in next year’s budget.

In authorizing the most hyperlocal earmarks, lawmakers have all but forfeited their right to complain about the state’s “revenue problem.” Baker should make sure his veto pen still has plenty of ink.

A Boston Herald editorial
Tuesday, May 30, 2017
Earmarks are eternal


Gov. Charlie Baker and Mayor Martin J. Walsh have announced a tuition-free college program.

The Republican governor and the Democratic mayor on Monday launched the new college affordability program for Boston high school graduates, enabling low-income students to complete four-year degrees without paying tuition or mandatory fees.

The program, called The Boston Bridge, will be open to all 2017 high school graduates who live in the city.

The commonwealth and the city said they'll cover students' tuition and fees....

Baker said college affordability "too often serves as a barrier" for students seeking degrees. He said the new program is intended to provide "more opportunities for a quality education."

Associated Press
Tuesday, May 30, 2017
Baker, Walsh announce tuition-free college pilot program


Jessica Frazier's second child was a "family cap" baby, meaning that under Massachusetts rules, the single mother from Boston could not receive an increase in welfare benefits to help care for her now 7 month-old son.

The rule, established as part of a 1995 welfare reform law, was meant to discourage parents on welfare from conceiving additional children. It states that children who are born after a family begins receiving benefits are not eligible for the additional $100 per child stipend and clothing allowance from the state program called Transitional Aid to Families with Dependent Children.

Activists seeking to overturn the policy say it only serves to punish children while falling far short of its objective to keep more kids from being born into poverty....

The Legislature's Committee on Children, Families and Persons with Disabilities are considering a bill that would abolish the cap, a move that supporters say could help as many as 9,000 children.

Naomi Meyer, an attorney with Greater Boston Legal Services, told the panel at a hearing Tuesday that the state treats those children as if they don't exist. The result is parents forced to make difficult choices that affect the entire family....

"There is no family that chooses to take care of one child and not the other child," said Rep. Marjorie Decker, a Cambridge Democrat who is one of the sponsors of the bill....

Fiscal constraints could play into any decisions the Legislature makes on the issue. Decker estimated that eliminating the cap would result in up to $13 million in added welfare costs for the state each year.

The Associated Press
Saturday, May 20, 2017
Advocates Seek Repeal of 'Family Cap' on Welfare Benefits


Two words seldom found together in the same sentence are Attleboro and override.

Since 1982, when it became possible for residents of a municipality to override the then-newly created tax-limiting law Proposition 2˝, the city has asked voters only once to do it.

That was in 1991 when four measures were put on the ballot in a general override election after the city, along with many other communities statewide, had suffered from a bad economy and state aid cuts.

Officials asked residents to approve tax increases of $500,000 for schools, $63,000 for the fire department, $56,000 for the police department and $94,000 for the public works department, for a total of $713,000.

In general overrides, tax increases are permanent. In today’s dollars that increase would equal about $1.275 million.

Voters said “no” with emphasis.

The “no” vote percentages were 73, 78, 78 and 90 respectively for the four departments.

The subject hasn’t been broached seriously since — until now....

But what is known is that, statewide, voters have approved debt exclusion tax hikes at far greater rate than general or permanent overrides.

School projects have especially gotten the blessings of taxpayers.

Information on the state’s Department of Revenue website show that 89 percent or almost 9 out of 10 debt exclusions tax increases are approved.

The DOR website lists 4,226 debt exclusion votes since 1982.

Out of that number, 3,771 tax hikes were approved and 455 were rejected.

Total vote count was 4.2 million in favor and 2.8 million opposed, or 60 percent in favor and 40 percent against.

By comparison, there were 4,279 general override votes.

Out of that number 1,685 were approved, or 39 percent, and 2,594 or 61 percent were rejected.

School projects funded by debt exclusions were approved at a slightly higher percentage than all debt exclusion funded projects.

Out of the 4,226 debt exclusion override votes, 1,409 were for school projects.

Out of that number, 1,306 projects, or 93 percent, won at the ballot box and 103 lost.

Of the 103 that lost, nine overrides sought money for school operating budgets rather than capital projects. There were 20 such votes with only 11, or 55 percent, being approved while 9, or 45 percent, were rejected.

The debt exclusion numbers for schools include elections in which a project may lose the first time it’s on the ballot, but won in a later election.

The Attleboro Sun-Chronicle
Sunday, May 28, 2017
Attleboro voters soon to weigh an override


Cities and towns that have adopted the Community Preservation Act want the state to cough up more money to offset the cost of their local projects. And state lawmakers, of course, want to keep their cities and towns happy.

So now comes a renewed push on Beacon Hill to boost funding for the Community Preservation Trust Fund, which provides state grants to local communities for preservation of open space and historic properties and for affordable housing.

And with it comes a pitch for higher fees for the entire commonwealth....

So the Senate recently voted to jack up the registry recording fees by 125 percent — to $45. Yes, that means individuals in communities that haven’t adopted the CPA would be paying more than twice the current fee to fund ballfields, bike paths and playgrounds in communities, many of them quite wealthy, that have.

A separate bill pending before the Legislature would adjust registry fees to, well, whatever amount is sufficient to guarantee a 50 percent match from the state....

CPA supporters believe the number of participating communities and local projects should determine how much money goes into the state trust fund.

But it’s the balance in the trust fund that ought to determine how much is available for those elective municipal projects each year.

A Boston Herald editorial
Sunday, June 4, 2017
Community chest


Chip Ford's CLT Commentary

The latest and current "fiscal crisis" deepens, with revenue now estimated to come in up to $575 million below even their revised "projection" up from the $462 shortfall of just two weeks ago.  The Legislature is putting all its eggs in the graduated income tax basket as it whistles past the graveyard as usual.  The State House News Service reports:

To boost state revenues, the Legislature voted 135-57 in May 2016 to advance a constitutional amendment adding a 4 percent surtax on household income above $1 million.  Lawmakers this session are expected to advance the amendment to the 2018 ballot.  Opponents of the measure say it could discourage high earners from living in Massachusetts and lead to a graduated income tax structure in which over time more people will be grouped in different tax brackets and taxed at different rates.  Supporters say the surtax could generate $1.6 billion to $2.2 billion annually to invest in education and transportation.

In his column for The Boston Globe advocating for a graduated income tax, a more "progressive" tax policy, Tom Emswiler wrote:

"The recurrent budget problems can be traced back two decades to a tax cut that materialized, while proposed spending cuts did not. In 2000, a state referendum cut the income tax from 5.85 percent to the current 5.1 percent. That cut state revenue, but spending was never cut to balance the books."

This claptrap revisionist history is clearly intended to obfuscate and misdirect the uninformed.  Emswiler a public health advocate and former congressional aide — either is simply ignorant or he hopes nobody remembers what really happened.  The problem was and remains relentless, unbridled overspending by the state.

The income tax rate that CLT cut in 2000 from 5.85 percent to its current 5.1 percent was imposed "temporarily," for just "18 months" we were promised over a decade before taxpayers and voters took its rollback into our own hands.  The "temporary" tax hike was necessary because the state had spent itself into the fiscal crisis of 1989.

That the Legislature didn't deign to adjust its spending to the reality of the voters' income tax rollback mandate demonstrates the origins of fiscal crises, and nothing was learned, nothing has changed.

Some of the other news reports contained here prove my assertion.  More spending is never enough.  There will always be "unmet needs" that require more taxpayer funding if legislators look hard enough.  These days, with so many "unmet needs" having been met at the cost of multiple billions of our dollars, the Legislature stretches, contorts, and uncovers a need to even provide taxpayer-funded baby diapers to indigent mothers, as previously reported.

The Legislature is depending on the proposed "Tax Fairness Amendment," aka "The Millionaires' Tax," to rake in more revenue and refill the state coffers so their reckless spending can continue unabated.  They can and will claim clean hands and no fingerprints if it reaches the ballot and the voters not them agree to tax those "evil millionaires" without harming themselves.

The proposed constitutional amendment needs one more vote in the Legislature to be put on the 2018 ballot, and that's expected to occur in two weeks on June 14.  This backdoor graduated income tax is only the beginning.  If it somehow is adopted by low-information voters it will change our state's flat tax forever.  Either we have a constitutionally-required flat income tax where everyone pays the same rate or we don't.  If we ever don't if the Takers can finally break that protective barrier they've battered away at for decades the insatiable Takers will be back for another bite at another income bracket, then another, then another.

For decades, Divide and Conquer has always been their strategy, pitting one income bracket against the others.  Starting with those "evil millionaires" — perceived as the weakest target with the smallest numbers — is just the beginning, to get their noses into the taxpayers' tent.  If they do, eventually we'll all be their next target.

We've turned back the barbarians at the barricades five times over the decades: in 1962, 1968, 1972, 1976 and 1994.  It looks like we'll need to gear up and march out again.  At least it appears we may finally have some reinforcements joining us.

The business community, especially our old allies the Massachusetts High Tech Council, have begun to take this threat seriously.  It will be interesting to see what happens if the Massachusetts Taxpayers Foundation takes the ballot question before the courts on its constitutionality.  That could and should be the end of it it should never have gotten this far.  But in Massachusetts we must recognize that the final arbiter is the state Supreme Judicial Court, and I didn't long ago call it the Supreme Judicial Kangaroo Court lightly.

On Tuesday (1 p.m., State House Hearing Room B-1) the Joint Committee on Revenue will be hearing a number of tax bills.  One of them, H1618, "An Act relative to income tax rates," intends to halt the income tax rollback where it is, at 5.1 percent.  It is sponsored by Reps. Denise Provost (D-Somerville), Jonathan Hecht (D-Watertown), Mary Keefe (D-Worcester), and Mike Connolly (D-Cambridge).

How many times can you freeze a freeze before getting freezer-burn?  CLT of course will be opposing their shameless betrayal of their promise, taxpayers, voters, and their constituents.

Chip Ford
Executive Director


 

State House News Service
Sunday, May 28, 2017

Tax revenue shortfall could hit $575 Million, state says in disclosure
By Michael P. Norton


The Baker administration has been tight-lipped about the scope of the state's immediate budget problems, but the potential depth of the revenue struggle that's unfolded over the first 10 months of the fiscal year is laid bare in new financial disclosure statements.

After marking down expected state tax collections last October by $175 million, the governor's budget staff now expects tax collections for fiscal 2017, which ends June 30, to fall between $375 million and $575 million below their revised projection, according to the statements signed by Administration and Finance Secretary Kristen Lepore and state Treasurer Deborah Goldberg.

The statements do not specify how Gov. Charlie Baker's team is dealing with the revenue problem, saying only that it "expects to implement measures, including reducing allotments, maintaining payroll caps and other hiring limitations and otherwise imposing spending controls" to balance the budget.

Baker has ruled out taking money out of the state savings account to plug the budget hole and the impact of new spending cuts is limited since there's only about a month remaining in a fiscal year that has already featured efforts to trim the state workforce and nearly $100 million in emergency spending cuts.

Tax collections through April were up just 1.1 percent. Receipts 10 months into the fiscal year are running $462 million below estimates, about midway between the latest estimates of diminished revenue levels. State officials are also seeing less revenue from large tax settlements. Revenue officials in early June will release data detailing tax collections in May.

The disclosure documents also affirm the suggestion by legislative leaders and Baker that the fiscal 2018 budget, the subject of most of the focus on Beacon Hill so far this year, will need to be substantially reworked. Bills passed by the House in late April and Senate last week will need to be overhauled by a six-member conference committee to reflect a reduction in estimated available revenues. The conference members could be named this week.

"Any adjustments to the projected fiscal 2018 tax revenue estimate on which the fiscal 2018 budget is based are expected to be resolved by the Legislature and the Governor during this process. The Executive Office for Administration and Finance and the Department of Revenue will be evaluating fiscal 2018 tax revenue estimates in light of the below-benchmark revenue performance in fiscal 2017, and anticipate that tax revenue projections for fiscal 2018 will be reduced by an amount yet to be determined," according to the May 19 disclosure, which arrived days before the Senate passed a fiscal 2018 budget bill based on revenue numbers that few on Beacon Hill believe will hold up.

The state's revenue woes have caught the attention of credit analysts. In March, Moody's and Fitch assigned stable outlooks to Massachusetts bonds. And S&P Global Ratings assigned a AA+ rating to the bonds but also attached a negative outlook. The outlook, analysts wrote, "reflects our view that despite a period of economic expansion and generally positive revenue trends, Massachusetts continues to face midyear downward revenue revisions and spending pressures that have resulted in small budgetary gaps and reduced fund balances, even if the budget stabilization reserves have remained fairly stable."

Baker and his team have not offered specifics of how they are managing the budget, with Baker saying he's "nipping and tucking" and "working the edges." A Baker budget spokeswoman this week declined to provide any information about budget management decisions made in response to anemic revenue growth this year. Baker said his meeting on Monday with Democratic legislative leaders focused on the fiscal 2017 and 2018 budgets, but offered no further insights.

The disclosure documents also detail other aspects of the state's fiscal picture.

Significantly, $333 million in supplemental payments to hospitals, out of $736 million, "are now expected to be delayed until fiscal 2018 due to anticipated lags in approval by the federal Centers for Medicare and Medicaid Services (CMS) of the associated federal revenue."

Earlier this fiscal year, Baker administration officials announced a $294 million budget shortfall and attempted to close it by sweeping "unneeded" trust fund balance, forecasting increases in non-tax revenue, and decreasing fund transfers to the MBTA and state school building authority.

A significant source of aid to cities and towns -- the Massachusetts Lottery -- is projected to again end the fiscal year with a record high annual profit despite a dip in sales this year, the documents show.

Through 10 months of fiscal 2017, Lottery sales are down $112.5 million or 2.6 percent compared to the same fiscal 2016 period, but the disclosure projects that the Lottery will end the year with $989.7 million in profit -- just a hair above last year's record-setting $989.4 million reported in fiscal 2016.

The Legislature relies on the Lottery to generate annual profits, which are returned to municipalities as unrestricted local aid, and though the last two years have set records for Lottery profits, Goldberg has cautioned lawmakers that the string of records will not continue unless the Lottery adapts to compete with the state's developing casino gaming industry and online daily fantasy sports contests.

The state's nascent gaming industry, which for now consists of a single slots parlor, is projected to post no real growth in its second full fiscal year. After taking in $160.9 million in gross gaming revenue in fiscal 2016, Plainridge Park Casino is projected in fiscal 2017 to tally $160 million in revenue, meaning the state will collect just less than the $64.4 million it counted last year in gaming-related revenue.

Once the two resort casinos under development are open to gamblers, diners and shoppers, Massachusetts can expect to pull in about $300 million in annual gaming revenue, the chairman of the Massachusetts Gaming Commission has said.

On the spending side, Baker has been trying to manage deficiencies in revenue available to cover rising MassHealth enrollment and related costs, unfunded costs at county sheriffs' offices, the impacts of collective bargaining agreements, and correction and mental health costs.

Budget difficulties have persisted throughout Baker's term. While the governor has made progress reducing the use of one-time revenues to support spending, tax collections have consistently fallen short of the estimates state officials wrote into their spending plans after hearing from local economists.

While revenue performance problems date back to the Obama administration, House Ways and Means Committee Chairman Rep. Brian Dempsey said this week that he believes sagging receipts also stem from a more recent trend -- people waiting to make business decisions based on the assumption that Congress will pass a major tax reform bill, which is a legislative priority for President Donald Trump.

Income taxes 10 months into fiscal 2017 are $335 million below benchmark, mostly in connection with returns, bills and quarterly payments, a problem that Dempsey said is evident in more than 27 states. April collections in those states are 6.5 percent below April 2016, he said, because certain taxpayers are deferring income, accelerating pension contributions, and taking first quarter losses because it's advantageous for them to do so for tax purposes.

"That indicates that the hope that there is going to be a significant tax package coming out of Washington has resulted in a bit of a holding pattern with respect to high income earners, corporations, businesses and the like," he said.

While Trump and Congress are considering a major overhaul of federal tax laws, reform legislation has yet to gain traction.

"When you look at what is happening, and it's very concerning, it is happening nationally and it is happening, we believe, because there is a wait-and-see approach with respect to what may happen with regards to a tax package out of Washington," Dempsey said.

Sales taxes are running $39 million below projections this fiscal year, primarily in connection with motor vehicle sales. Dempsey said there has been an escalation in delinquent auto loans and that has made it much more difficult to obtain an auto loan today than it was last year. He said there was "much more caution" by financial institutions, which he said may be countering some of the positive impacts associated with low unemployment.

And the state's relatively low jobless numbers, Dempsey said, are also colored by the fact that many people are working part-time and therefore are not spinning off the same amount of taxes that full-time workers do.

The state's revenue problems could worsen substantially if Republicans in Washington are successful in passing legislation repealing the Affordable Care Act and replacing it with a new federal health care law. A reform bill approved by the U.S. House, Baker wrote in a recent letter, would cause thousands of people to lose their health insurance and state government would lose $1 billion in federal revenue supports beginning in 2020.

To boost state revenues, the Legislature voted 135-57 in May 2016 to advance a constitutional amendment adding a 4 percent surtax on household income above $1 million. Lawmakers this session are expected to advance the amendment to the 2018 ballot. Opponents of the measure say it could discourage high earners from living in Massachusetts and lead to a graduated income tax structure in which over time more people will be grouped in different tax brackets and taxed at different rates. Supporters say the surtax could generate $1.6 billion to $2.2 billion annually to invest in education and transportation.

In its disclosure documents, state officials said it's not possible to predict with certainty what will happen with federal health care reform, but caution that "significant changes" could occur this year and beyond including changes affecting a Medicaid deal that Baker negotiated with the Obama administration.

The disclosure documents also show the total state workforce, including the judiciary, higher education and other agencies, grew to 86,258 in June 2016, a 2.1 percent increase from 84,513 in June 2012. However, the workforce considered under the governor's authority has decreased by 1.1 percent over that period, from 34,151 in June 2012 to 33,765 in June 2016, with a reduction of 1,408 jobs between June 2015 and June 2016.

Colin A. Young contributed reporting.


The Boston Globe
Saturday, May 27, 2017

Business advocates gear up for legal fight against ‘millionaires tax’ proposal
By Jon Chesto


A proposal that would impose more taxes on the rich to pay for education and transportation is expected to be an easy sell to voters.

That’s why the state’s most powerful business groups want to stop the initiative before it gets that far. They’re working on a legal challenge to scuttle the so-called millionaires tax.

The Massachusetts High Technology Council just sent out a letter to its roughly 150 members, seeking contributions of $10,000 to $25,000. The surcharge, council president Christopher Anderson wrote, could cause irreparable harm to the state’s innovation economy.

Other influential business groups — such as the Massachusetts Taxpayers Foundation, Associated Industries of Massachusetts, and the Massachusetts Competitive Partnership — also oppose the labor-backed surcharge. Among their strategies: filing a lawsuit later this year that challenges its constitutionality.

If the measure appears on the ballot in November 2018 and voters approve it, the taxation rate for personal income above $1 million would increase by 4 percentage points. Assuming the current income tax rate of 5.1 percent remains in place, an individual would pay the standard rate on all income up to $1 million, and then pay a 9.1 percent rate for earnings above that threshold.

But the union-funded “Fair Share Amendment” still needs to clear an important hurdle: a vote by the state lawmakers to put the tax question before voters next year.

The surcharge would be created through a constitutional amendment, which requires two roll call votes from the Legislature. Lawmakers have overwhelmingly approved it once, in 2016. They could take their second vote as soon as June 14.

The business groups’ legal strategy is just starting to take shape. One likely plan of attack: challenging language that would set aside funds for education and transportation. They argue that constitutional amendments can’t appropriate funds for specific uses. They also may also claim that the referendum question is too broad.

The millionaires tax is projected to raise nearly $2 billion a year. But critics say there’s no guarantee the new revenue will result in an equivalent increase in education and transportation funding. Lawmakers could use the new money to pay for preexisting line items in the state budget, which would then free up that money for other causes, such as health care.

Then there’s the risk of building a budget around a potentially volatile revenue stream — income taxes collected from the wealthy often vary from year to year.

James Rooney, chief executive of the Greater Boston Chamber of Commerce whose group only recently took an official stance against the surcharge, said he expects the chamber will research the volatility issue and whether the surcharge would unfairly hurt businesses owned by a single individual.

Supporters of the additional tax cite studies that show a relatively small number of wealthy people move out of state because of tax policies. Rooney, however, still worries about the economic impact.

“We need to be mindful of the mobility of people and businesses in this economy,” he said, pointing to General Electric’s decision to relocate from Connecticut to Boston last year.

Business opposition to a tax on the rich, however, is not unanimous. The left-leaning Alliance for Business Leadership, for example, is trying to build support for the surcharge.

“You would be hard pressed to find any business group in Greater Boston that hasn’t said investment in education and transportation is a priority,” said Jesse Mermell, the alliance’s president. “It’s perfectly reasonable for the most fortunate among us to pay slightly more to make sure that economic growth happens.”

Surcharge supporters say they’re on solid legal ground. They point to the state’s gas tax, whose proceeds are set aside for transportation purposes.

A successful court challenge would be far less expensive than a campaign to defeat a ballot question, which could cost millions.

While the Massachusetts High Technology Council won’t say how much it hopes to raise, the Globe reported last fall that the group’s goal was in the $400,000 range.

In comparison, the Raise Up Massachusetts ballot committee spent nearly $600,000 in the past two years to get the millionaires tax this far. Most of that money came from union sources, including Services Employees International Union affiliates, and the Massachusetts Teachers Association.

The opponents have not yet created a ballot committee, so their expenses are not public. Mark Gallagher, executive vice president at the high-tech group, said his side has to disclose its spending only when it begins to try to directly influence voters. Legal work doesn’t count, he said.

“It’s easy to see how this would be appealing to voters,” said Eileen McAnneny, president of the Massachusetts Taxpayers Foundation. “The vast majority of them are not subject to the new tax. . . . You just don’t want to hurt the underpinnings of our economy with a tax that will hit investors, innovators and entrepreneurs.”


The Boston Globe
Sunday, May 28, 2018

Ax the sales tax (also the income tax)
By Tom Emswiler


Somehow, a progressive state like Massachusetts ended up with a regressive tax system, and it is not serving us well.

The state budget looks a lot like it did one year ago: revenue coming in below projections, spending cuts looming, and a budget deficit growing. But this dismal math presents an opportunity to revamp the way we generate revenue for the Commonwealth.

The top two sources of state revenue for fiscal 2016 came from two “flat” taxes — income and sales. When most people think of flat taxes, they think of Republican presidential contenders like Steve Forbes, Ted Cruz, Rand Paul, and Rick Perry. Yet, here in our blue state, we have a flat 6.25 percent sales and a flat 5.1 percent income tax. The uniform nature of the income tax was enshrined in our state Constitution in 1915.

It’s time to fix that.

A constitutional amendment to eliminate the sales tax and replace the flat state income tax with a progressive scale based on income would be a bold solution. It would both alleviate the tax burden for low- and moderate-income families and generate enough revenue to right our budget ship before the next recession hits.

A couple of years ago, the Institute on Taxation and Economic Policy found that, while Massachusetts households making less than $70,000 paid 1.7 percent of their income in sales taxes, those making over $252,000 paid just 0.54 percent. So wealthy households paid one-third of the tax rate of lower income households. That’s pretty regressive.

Income inequality began to widen in the late 1970s, and it has gotten worse over the years, making our flat taxes more unjust over time. Although a progressive income tax amendment failed in 1994, a 2010 poll showed 57 percent of Massachusetts respondents supported a progressive income tax; pairing that proposal with eliminating the sales tax could improve its popularity even more.

The recurrent budget problems can be traced back two decades to a tax cut that materialized, while proposed spending cuts did not. In 2000, a state referendum cut the income tax from 5.85 percent to the current 5.1 percent. That cut state revenue, but spending was never cut to balance the books. In 17 years we’ve gone from “Taxachusetts” to “Regressichusetts.” Not to mention our reliance on lottery and casino gambling taxes, which generate revenue from lower-income people.

Scrapping these regressive levies isn’t a new idea. The 2014 Tax Fairness Commission also suggested a progressive income tax. Pair that with the elimination of the sales tax, and the state wouldn’t be thinking small-ball; it would be making a tectonic shift in the way the state does business. This is a big idea whose effects would be felt for generations.

It’s imperative to move quickly, while economic times are still good. It has been eight years since the last recession, and we’re due for a downturn. That would cause the budget deficit to balloon with little notice, and state spending would have to be cut quickly when residents could least afford it.

Despite them having to pay more, a progressive income tax is still a good deal for the wealthy. They benefit from various public programs and tax breaks aimed at the gleaming innovation hubs and the high-paying jobs they spin off. People who own or run large businesses and organizations benefit from the competitive state colleges and universities that graduate their next generation of talent.

Eliminating the state sales tax on most goods could also be a boon to some retailers — the same ones struggling in part because of the advantageous tax status afforded online vendors. And given how geographically cozy the New England states are, how much revenue are we losing when residents along our northern border go into New Hampshire to buy items, ranging from TVs to laundry detergent, that are taxable in Massachusetts?

At least for now, we should preserve the current sales tax on at least one item: cars. The motor-vehicle sales tax is also 6.25 percent, but usually listed separate from the rest of our sales and use taxes. The revenue stream — over $800 million per year — comes in handy. Massachusetts buyers can’t avoid it by shopping in Nashua; out-of-state purchases are traceable because residents must register their cars. Car purchases are often financed, so consumers can spread out the costs.

Will this make the state tax code more complex? Residents who have to pay more are already likely to use computers or paid help to do their taxes, thus the added burden of brackets will be relatively low. Tax complexity arguments usually stem from the myriad of deductions and credits, which this proposal does not address. A 4 percent “millionaires’ tax” is also being considered as a 2018 referendum to bring in more revenue. Moving to a progressive state income tax complements this referendum because the top bracket would likely start much lower than $1,000,000.

I don’t expect Governor Charlie Baker to support this proposal. But for 2018 gubernatorial candidates and Beacon Hill Democrats, a less regressive tax system could be a winning issue. Massachusetts has a choice: Either stick with a tax structure that soaks the poor and underperforms in most years, or summon the courage to make a big change.

Tom Emswiler is a public health advocate and former congressional aide who lives in Quincy.


The Boston Herald
Tuesday, May 30, 2017

A Boston Herald editorial
Earmarks are eternal


If it’s a $40,000 snowplow for clearing sidewalks that the town of Hingham wants, then a $40,000 snowplow for clearing sidewalks the town of Hingham — median income $103,000, median home value $766,000 — shall have.

But why on earth should the taxpayers of the entire commonwealth pay for it?

Sadly that is how spending on Beacon Hill so often works. Local spending needs become the responsibility of state taxpayers, simply because a lawmaker asks his colleagues to make it happen and because leadership — for reasons the public will never know — gives it the green light.

That’s how amendment No. 82, which provides $40,000 to the tony town of Hingham for that piece of specialty public works equipment, became part of the Senate budget last week. Perhaps the only unusual thing is that the amendment was sponsored by a Republican (Patrick O’Connor of Weymouth).

Democrats got their fair share of pork, too. Sen. Anne Gobi scored $15,000 for a private group working to restore a windmill in Brimfield.

Sen. Marc Pacheco (D-Taunton) managed to put state taxpayers on the hook for $15,000 so the town of Carver can design an addition to its town library for the local Council on Aging.

And then there are the dozens of earmarks in the tourism line item, which is the first-and-last refuge of any decent pork-seeking lawmaker.

Most of these amendments are relatively small potatoes, at least in the context of a $40 billion state budget.

And none of this is unique to the Senate. The House filled its own tourism line item with pork, too. Naturally there is a gazebo. (Isn’t there always a gazebo?) The House OK’d $25,000 for the town of Dracut to build a gazebo in memory of a late, local pol.

But at what point does someone stand astride the state budget and yell, “Stop!”

Last year Gov. Charlie Baker used his veto pen to X out 497 earmarks to help bring the budget back into balance; now many of them are rising like zombies to appear in next year’s budget.

In authorizing the most hyperlocal earmarks, lawmakers have all but forfeited their right to complain about the state’s “revenue problem.” Baker should make sure his veto pen still has plenty of ink.


Associated Press
Tuesday, May 30, 2017

Baker, Walsh announce tuition-free college pilot program


BOSTON — Gov. Charlie Baker and Mayor Martin J. Walsh have announced a tuition-free college program.

The Republican governor and the Democratic mayor on Monday launched the new college affordability program for Boston high school graduates, enabling low-income students to complete four-year degrees without paying tuition or mandatory fees.

The program, called The Boston Bridge, will be open to all 2017 high school graduates who live in the city.

The commonwealth and the city said they'll cover students' tuition and fees. They'll take federal Pell grants into account.

Baker said college affordability "too often serves as a barrier" for students seeking degrees. He said the new program is intended to provide "more opportunities for a quality education."

Walsh said the partnership means "a free bachelor's degree is within reach" for low-income students.

To qualify for the tuition-free program, eligible students must meet federal Pell grant income standards and enroll full time at Bunker Hill Community College, Roxbury Community College or Mass Bay Community College. The students will be required to complete their associates' degrees within two and a half years before transferring to state public colleges or state universities.

The new tuition-free college program builds on Boston's Tuition Free Community College initiative and the state's Commonwealth Commitment, which were launched last year.

Walsh said in a statement that since launching the city's program last year "we have helped fifty Boston Public Schools graduates attend community college."

State Higher Education Commissioner Carlos Santiago said The Boston Bridge program was built "to take students all the way from high school to college commencement."

"Our message to students is clear — if you commit the time and do the work, we'll be beside you every step of the way to help you complete your college journey while avoiding burdensome debt," he said in a statement.


The Associated Press
Saturday, May 20, 2017

Advocates Seek Repeal of 'Family Cap' on Welfare Benefits
By Bob Salsberg


BOSTON (AP) — Jessica Frazier's second child was a "family cap" baby, meaning that under Massachusetts rules, the single mother from Boston could not receive an increase in welfare benefits to help care for her now 7 month-old son.

The rule, established as part of a 1995 welfare reform law, was meant to discourage parents on welfare from conceiving additional children. It states that children who are born after a family begins receiving benefits are not eligible for the additional $100 per child stipend and clothing allowance from the state program called Transitional Aid to Families with Dependent Children.

Activists seeking to overturn the policy say it only serves to punish children while falling far short of its objective to keep more kids from being born into poverty.

Frazier, who also has a 2-year-old daughter, said she must get by on less than $500 in monthly benefits. Even with child support from the children's father, she struggles to afford diapers and other basic necessities, or fill her car with gasoline to get to job interviews.

"Normal things that people don't think (are) what I have to think of on a daily basis," said Frazier.

The Legislature's Committee on Children, Families and Persons with Disabilities are considering a bill that would abolish the cap, a move that supporters say could help as many as 9,000 children.

Naomi Meyer, an attorney with Greater Boston Legal Services, told the panel at a hearing Tuesday that the state treats those children as if they don't exist. The result is parents forced to make difficult choices that affect the entire family.

"There is no family that chooses to take care of one child and not the other child," said Rep. Marjorie Decker, a Cambridge Democrat who is one of the sponsors of the bill.

Massachusetts is among 17 states with a family cap still in place, according to an advocacy coalition called the Campaign to Lift the Cap on Kids.

Fiscal constraints could play into any decisions the Legislature makes on the issue. Decker estimated that eliminating the cap would result in up to $13 million in added welfare costs for the state each year.

The ranking Republicans on the committee, Rep. Shaunna O'Connell, of Taunton, and Sen. Donald Humason, of Westfield, did not return calls seeking comment on the legislation.

With state tax collections coming in below forecast in recent months, there appears little room in the state budget for new discretionary spending. But advocates framing the issue as one of conscience are imploring the state to find the necessary resources.

Under the rule, even children born to parents not on welfare can be denied benefits if the mother had recently received benefits.

Rachel Mulroy said she was on and off welfare and in an abusive relationship during a period from 2006 to 2012. Her second daughter was born while she was not receiving benefits, but was still subject to the cap.

"The rule was created under the assumption that women were getting pregnant to have more children to get welfare," said the New Bedford woman, who has since earned a college degree and works as a community activist. "I didn't have her because I wanted to get some extra money."


The Attleboro Sun-Chronicle
Sunday, May 28, 2017

Attleboro voters soon to weigh an override
By George W. Rhodes


ATTLEBORO — Two words seldom found together in the same sentence are Attleboro and override.

Since 1982, when it became possible for residents of a municipality to override the then-newly created tax-limiting law Proposition 2˝, the city has asked voters only once to do it.

That was in 1991 when four measures were put on the ballot in a general override election after the city, along with many other communities statewide, had suffered from a bad economy and state aid cuts.

Officials asked residents to approve tax increases of $500,000 for schools, $63,000 for the fire department, $56,000 for the police department and $94,000 for the public works department, for a total of $713,000.

In general overrides, tax increases are permanent. In today’s dollars that increase would equal about $1.275 million.

Voters said “no” with emphasis.

The “no” vote percentages were 73, 78, 78 and 90 respectively for the four departments.

The subject hasn’t been broached seriously since — until now.

City officials are planning to ask voters next spring to increase their taxes to pay for a new or renovated high school with a “debt exclusion” override, which is different from a general override because the tax increase is temporary.

While it’s technically “temporary” it will still last a long time and will outlive some taxpayers.

The increase could last 20 years or longer.

A new high school could cost about $263 million. A renovation with additions could cost around $283 million, according to preliminary estimates.

City taxpayers would be responsible for about half of those amounts, or $131.5 million if the choice is to build a new school and $141.5 million if the decision is to renovate.

The state’s School Building Authority would pick up the rest of the tab.

A third option to repair the high school is considered an unlikely choice because it would cost $197 million and do little to improve the longevity of the building or to accomplish the city’s aim to create a school suitable for 21st century education.

Officials are hoping to get at least 50 years and maybe as many as 75 out of a new school that’s equipped to teach skills kids need as they head into the brave new high-tech world, which is changing almost day by day.

A final estimate on the costs won’t be made until the end of the year.

Officials said the price could go up or down, but the goal is to get it down once city officials choose exactly what they hope to build and present that choice to the School Building Authority, for approval.

Fine tuning the design could result in efficiencies that would reduce the cost.

But those reductions could be offset by the bidding process, which is unpredictable and dependent on the state of the economy and could put estimates on or off target.

Another set of unknowns at this point is how much of a hit the individual taxpayer would take on his yearly bill.

Mayor Kevin Dumas said those figures are being worked out.

The entire increase will be added over a number of years because the city will borrow money as it’s needed during the course of the project.

At this point there are many unknowns about the project.

But what is known is that, statewide, voters have approved debt exclusion tax hikes at far greater rate than general or permanent overrides.

School projects have especially gotten the blessings of taxpayers.

Information on the state’s Department of Revenue website show that 89 percent or almost 9 out of 10 debt exclusions tax increases are approved.

The DOR website lists 4,226 debt exclusion votes since 1982.

Out of that number, 3,771 tax hikes were approved and 455 were rejected.

Total vote count was 4.2 million in favor and 2.8 million opposed, or 60 percent in favor and 40 percent against.

By comparison, there were 4,279 general override votes.

Out of that number 1,685 were approved, or 39 percent, and 2,594 or 61 percent were rejected.

School projects funded by debt exclusions were approved at a slightly higher percentage than all debt exclusion funded projects.

Out of the 4,226 debt exclusion override votes, 1,409 were for school projects.

Out of that number, 1,306 projects, or 93 percent, won at the ballot box and 103 lost.

Of the 103 that lost, nine overrides sought money for school operating budgets rather than capital projects. There were 20 such votes with only 11, or 55 percent, being approved while 9, or 45 percent, were rejected.

The debt exclusion numbers for schools include elections in which a project may lose the first time it’s on the ballot, but won in a later election.

They also include some duplicates which were not weeded out of the listings, however, the overall percentages are accurate, if not exact.

It should also be noted that some elections are missing, such as the Attleboro override vote that took place in 1991.

When high school projects alone are considered, the percent varies only a little.

Of the 1,409 school projects, 203 involved requests to pay for new or renovated high schools.

Out of that number, 91 percent or 184, got “yes” votes and 19 got “no” votes.

Of all the high school projects, 65 were for new schools. Out of that number 62 of the projects, or 95 percent, were approved.

There were 116 renovation/addition projects. Of that number, 103, or 89 percent, were approved.

The remaining 22 debt exclusion elections were to fund high school feasibility studies, architects or the purchase of land which were approved at percentages of 91, 89 and 75 percent respectively.

While the trend over 35 years shows that residents across the state strongly approve of building schools, only time will tell whether that holds true in Attleboro, especially in the face of modern-day costs.

Constructing a new high school at a cost of $263 million would be the city’s biggest project ever and one of the state’s most expensive high schools ever.

While the price tag is big, officials argue that the city will get two schools for the money.

AHS is a comprehensive high school which means it has career and technical education as well as academic programs.

Plans for the new school call for an expansion of the CTE program by adding four areas of study.

CTE programs require more space than academic programs and that adds to the cost, they said.

Meanwhile, the city’s alternative high school, the Network Program, would be brought into the building as well, which could be considered a third high school, although a much smaller one.

A new school would encompass about 485,670 square feet, which is 57,670 square feet bigger than the current building. It would have a compact design to create economic and operational efficiencies and to allow it to fit next to the old high school on Rathbun Willard Drive.

Under SBA rules. it’s being planned for a student population of 1,725, or an increase of about 75 over current numbers.

Cost estimates are made with 2021 dollars to take inflation into account.

Officials insist that the school under consideration is not a “Taj Mahal,” but is being built to accommodate modern teaching methods with few, if any, frills.

A concerted effort is being made to make areas visited by the public to be easily accessible, while at the same time improving the overall security of the building by limiting entrances.

Savings are expected on energy and maintenance costs which would allow more cash for classroom expenses, they said.

While the numbers are big for the new school, they’re not unprecedented.

In November, Somerville voters approved a debt exclusion tax increase to pay for a $256 million renovation/addition for their high school.

Waltham is paying $283.5 million for its high school project and Lowell could be looking at a bill of $344 million for its proposed new high school.

The tax hike in Somerville was approved overwhelmingly with 72 percent of the vote, 26,752 votes in favor and 10,374 against.

Once city voters know what the tax impacts are and final cost estimates for the school are made at the end of the year, the city council will be asked to schedule a special election for late winter or early spring of next year.

In the meantime, officials will finalize plans and work to inform the community about the project. That effort will be enhanced with reams of information on the city’s website.

School and city officials are planning to meet with parent-teacher organizations and the public.

Vice-chairman of the school building committee Jack Jacobi said his committee and all city officials must establish the cost and fully vet the project before they can urge the public to vote for it.

“We have a whole lot of work to do over the next six months to justify this to ourselves, never mind the public,” he said. “We have to be able to say to the public, we’ve done our homework and we’ve done our due diligence and this is a project we can recommend to the city of Attleboro.”


The Boston Herald
Sunday, June 4, 2017

A Boston Herald editorial
Community chest

Cities and towns that have adopted the Community Preservation Act want the state to cough up more money to offset the cost of their local projects. And state lawmakers, of course, want to keep their cities and towns happy.

So now comes a renewed push on Beacon Hill to boost funding for the Community Preservation Trust Fund, which provides state grants to local communities for preservation of open space and historic properties and for affordable housing.

And with it comes a pitch for higher fees for the entire commonwealth.

Local funds for the CPA come from a surcharge on municipal property tax bills. The state matching grants come from a surcharge on recording fees at state registries of deeds.

But supporters insist the $20 recording fee is too low — and that with more and more communities adopting the CPA, it doesn’t allow for sufficient state grant funding.

So the Senate recently voted to jack up the registry recording fees by 125 percent — to $45. Yes, that means individuals in communities that haven’t adopted the CPA would be paying more than twice the current fee to fund ballfields, bike paths and playgrounds in communities, many of them quite wealthy, that have.

A separate bill pending before the Legislature would adjust registry fees to, well, whatever amount is sufficient to guarantee a 50 percent match from the state.

Of course rarely mentioned is the fact that the law anticipated that the trust fund balance may not always allow for the full state match. It guarantees only that in the first round of grants cities and towns will get at least 5 percent of the local amount raised.

There are other ways to boost funding in the trust fund, without adding to the public’s burden. In the House, for example, Rep. Brad Jones (R-North Reading) called for transferring funds out of the racehorse development fund, where gaming revenue sits unspent. And Beacon Hill routinely diverts a portion of surplus state funds to the trust fund, when they’re available.

CPA supporters believe the number of participating communities and local projects should determine how much money goes into the state trust fund.

But it’s the balance in the trust fund that ought to determine how much is available for those elective municipal projects each year.

 

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


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