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and the
Citizens Economic Research Foundation
Post Office Box 1147 ●
Marblehead, Massachusetts 01945 ●
(508)
915-3665
“Every Tax is a Pay Cut ... A Tax Cut is a Pay Raise”
44 years as “The Voice of Massachusetts Taxpayers”
— and
their Institutional Memory — |
|
CLT UPDATE
Wednesday, January 17, 2018
CLT's Proposition 2˝ to the
rescue, again
|
“Grab
your wallets, folks! The Legislature apparently is going
down the same rabbit hole as political leaders in other
high-tax, high-spending, Democrat-dominated states have
desperately plunged. [The Legislature is] … intent on
protecting their wealthiest state taxpayers by scheming to
circumvent federal tax policy — while simultaneously
plotting to soak the same taxpayers with a state
‘Millionaire's Tax.’” —Chip
Ford, Executive Director of Citizens for Limited
Taxation. The “Millionaire's Tax" is a 2018 ballot
question that would allow the state to impose an additional
4 percent income tax, in addition to the current 5.10
percent tax, on taxpayers’ earnings of more than $1 million.
QUOTABLE QUOTES – Special Taxes Edition
Beacon Hill Roll Call
By Bob Katzen
January 8-12, 2018
Back in 2014 Democrats on Beacon Hill were
pleased as punch that they had succeeded in introducing
early voting to Massachusetts. But now that early voting is
actually a thing, some of those same reps and senators don’t
seem so eager to cover the costs they’ve imposed on cities
and towns.
It’s been just about a year since state
Auditor Suzanne Bump concluded that parts of the early
voting law amount to an unfunded state mandate. Now, at the
Legislature’s direction, the auditor’s office has officially
surveyed municipal officials on costs incurred to comply
with the mandate in 2016, the first year it was in effect,
and certified a figure of just over $1 million....
It’s not as if reps and senators didn’t
think about this issue back in 2014, when they were so eager
to get their election reform bill through. At the time they
debated a funding mechanism for early voting — ultimately
settling on, naturally, a “task force” to study the cost
issue.
But navel-gazing task forces don’t cover
overtime for poll workers. Beacon Hill has an obligation to
cities and towns, and it needs to meet that obligation.
A Boston Herald editorial
Monday, January 15, 2018
Fund this mandate
The Local Mandate Law
The Local Mandate Law was enacted as part of the property
tax limit initiative known as Proposition 2˝.
The Local Mandate Law says that any state law or regulation
passed or implemented after January 1, 1981 that imposes any
direct service or cost obligation on a city or town is only
effective when the community votes to accept the law or
regulation, or the Commonwealth provides funding for the
community to comply with the law/regulation.
Under this law, cities and towns can ask the
Office of the State Auditor to determine if a state law or
regulation constitutes an unfunded mandate, and to provide
an analysis of the financial impact of such a mandate.
The Local Mandate Law also allows any
community facing the unfunded state mandate to request an
exemption from compliance in superior court.
Commonwealth of Massachusetts
Office of the State Auditor
The Local Mandate Law
Top Democrats on Beacon Hill are eyeing a
legislative solution that would keep as many as three
initiative petitions – a $15 minimum wage, paid family leave
and a sales tax cut – off the 2018 ballot, but activists and
stakeholders involved in those efforts say it could be a
tricky needle to thread. Both House Speaker
Robert DeLeo and Acting Senate President Harriette Chandler
have indicated their interest in addressing the minimum wage
and paid leave this year - proponents of those measures have
been prodding lawmakers to act for years. And DeLeo went
even further this week, throwing the third issue – a sales
tax cut – into the mix of potential bargaining to avoid
letting the major issues go before voters ten months from
now. "I’d like to see us, as best as we can,
address these issues, keep them off the ballot. But that
remains to be seen," DeLeo told the Boston Globe in an
interview Wednesday. An official familiar
with the speaker's thinking confirmed the Democratic leader
would like to avoid those three questions reaching the
ballot, but could not elaborate on what that framework might
look like.... DeLeo in 2009 led the push to
raise the sales tax from 5 percent to 6.25 percent and is
among the Democrats who have advanced to the 2018 ballot a
proposed constitutional amendment imposing a 4 percent
income surtax on households with incomes above $1 million,
an idea that could generate $2 billion a year.
The source close to the speaker also said, with regard to
cutting the sales tax, that it might be possible to avoid a
ballot campaign without DeLeo agreeing to a tax cut. "I
think the expectation is that that could be resolved without
that happening," the person said....
Complicating matters is the fact all three questions are
intertwined with the same interest groups having a stake in
the outcome of each proposal. The
Retailers Association of Massachusetts (RAM) has proposed
rolling the state's sales tax rate back to 5 percent, and
making an annual summer sales tax holiday weekend permanent.
RAM President Jon Hurst said he is unaware of any option on
the table at this point that would convince retailers to
settle for no change to the sales tax, but he did not rule
out getting there. "The year's just
starting. I think there's a long way to go, a lot of moving
parts. We have just one ballot initiative when the big
health care union out of New York City has three questions,"
Hurst said. Hurst was referring to 1199 SEIU
United Health Care Workers East, a major player in the Raise
Up Coalition, which is behind the paid family and medical
leave initiative, the push to raise the minimum wage to $15
an hour and the 4 percent surtax on incomes over $1
million.... "We do see a nexus between our
question and the three others that are out there. I think
there's a real tough road to hoe here with our friends in
the Legislature to try to get the big public health care
union to negotiate and do things the right way," Hurst said.
Raise Up also believes it would be a "big lift" to strike
deals with lawmakers that could keep all three questions off
the ballot and avoid costly campaigns with uncertain
outcomes. One thing that can't be
controlled by Beacon Hill at this point is the fate of the
so-called "millionaire's tax" proposal. The Legislature
twice voted overwhelmingly in support of putting the
constitutional amendment on the ballot, but the Supreme
Judicial Court is now preparing to hear arguments from
business leaders about why it should be not be allowed to go
before voters. The court will hear
arguments in that case on Feb. 5. Hurst said that if the
court does disqualify the matter for the ballot based on its
content, that could be an opening for compromise on the
other three issues. "If the millionaire's tax
goes forward, it makes it much more difficult for us to
negotiate and pull that off," Hurst said. "But if it
doesn't, maybe the decks are a little more clear to
negotiate more satisfactory outcomes for all. Maybe it's a
little less complicated of a discussion in reaching some
middle ground." Gov. Charlie Baker is another
wildcard. While lawmakers would desire his support for any
compromises intended to address ballot questions, he has
largely refrained from publicly staking out positions on the
measures.... The deadline for ballot
petitioners to submit their final round of voter signatures
to place the questions on the ballot is July 4....
Hurst said a more realistic deadline might be mid-May when
he expects his board to make the final decision about
whether to collect the signatures required to go to the
ballot. State House News Service
Friday, January 12, 2018
If successful, Hill bargaining could derail three ballot
questions
State tax revenues will grow at a 3.5
percent clip next fiscal year, state budget managers agreed
on Friday, signaling that the governor and Legislature will
have almost $27.6 billion available to spend, along with
billions of dollars in federal and non-tax revenues, as they
begin to shape the fiscal 2019 state budget.
Gov. Charlie Baker's budget chief and the chairs of the
House and Senate Ways and Means Committees on Friday
detailed a finalized accord on how much tax revenue the
state expects to collect in fiscal year 2019, which begins
on July 1. Budget watchers also upgraded their expectations
for tax revenue in the current fiscal year, upping the
projected total revenue by $157 million, to $26.661 billion.
The estimate of $27.594 billion in tax revenues for
fiscal 2019 amounts to $933 million more in revenue than the
updated projection for the current fiscal year. The
projected growth rate will serve as the basis for Baker's
budget, which is due on Jan. 24, and budget-building
exercises this spring and summer in the House and Senate.
The Republican governor and Democrats in the Legislature
faced a Jan. 15 deadline to agree on a tax revenue
estimate.... The 3.5 percent growth
figure, the budget managers said, assumes the state income
tax rate will drop from 5.1 percent to 5.05 percent on Jan.
1, 2019, which DOR has previously said would result in a
roughly $83 million reduction in state revenue over the last
six months of fiscal 2019. Recent economic growth was
not significant enough to statutorily trigger an income tax
cut on Jan. 1, 2017 or Jan. 1, 2018.... After
two budget years in which tax collections came up short of
the consensus projections, tax collections over the first
six months of the fiscal are greater than $12.9 billion,
which is 6 percent above the benchmark and 8.1 percent, or
$966 million, higher than the first half of fiscal 2017. But
major revenue gaps have exploded in the second half of the
last two fiscal years, or between January and June.
In a report earlier this week, the business-backed
Massachusetts Taxpayers Foundation noted that tax
collections are running nearly $730 million above benchmarks
through December and recommended the state use
above-benchmark revenues to build its rainy day, or
stabilization reserve, an area that credit rating agencies
have flagged as a concern. "The state
budget is twice the size it was fifteen years ago, while the
Stabilization Fund balance is $400 million lower," MTF said
in its report. "Without a behavior change, the next fiscal
downturn will be disastrous." State
House News Service
Friday, January 12, 2018
Tax revenue accord sets stage for new state spending plans
One would think with revenues performing
decently and the economy in great shape, spending planners
could ride those trends through a fairly agreeable and
straightforward budget process, even in an election year
charged with ferocious partisanship. Ah, but
a much more compelling trend strengthened this week:
governors and lawmakers in high-wage, high-tax states across
America unveiling and advancing plans to sidestep,
circumvent, and contravene the effects of federal tax reform
on state taxpayers and tax collections. Gov.
Andrew Cuomo of New York declared the Republican tax law an
act of "economic civil war" on high-income, high-property
value states like his, and Massachusetts, and promised to
promote measures to protect upper-middle income earners from
the hit they're about to take as the state and local tax
(SALT) deduction is capped at $10,000. The California
Assembly is working on a plan to let people make, and then
deduct, donations to a new fund to offset the SALT deduction
reduction. And the movement is just getting started as
budget clocks tick nationwide. The
politically-driven countervailing proposals overlay a
fiendishly-nuanced accounting situation to begin with. Every
millionaire who can no longer deduct much of her state
income tax on the federal form nonetheless gets a wonderful
windfall from the new tax brackets. In states like Maryland,
lots of state tax deductions are linked to federal
equivalents - and that actually means more revenues for
state treasuries, not less. State revenue
department officials haven't made clear yet if that's the
case in Massachusetts, and if it is, officials may want to
take the money and run for re-election on a platform of
preserving services with a revenue-neutral sort of response
to all the changes and complexity. Everyone who pays taxes
is simultaneously considering whether to modify their
behavior, and Baker's budget is due in 12 days.
State House News Service
Friday, January 12, 2018
Weekly Roundup - Deductive Reasoning
Much has changed in Donald Trump’s first
year as President, including some progressive principles.
Lo, California Democrats in 2016 campaigned to extend a tax
hike on the rich. Now they’re promoting a gimmick to help
reduce their wealthy residents’ tax burden.
State Senate President Kevin de Leon, who is challenging
U.S. Senator Dianne Feinstein in the June primary,
complained last week that the new GOP tax law “offers
corporations and hedge fund managers massive tax breaks and
expects California taxpayers to pick up the costs.” It’s the
“worst tax policy in the history of this country. Perhaps
the world.” ... But speaking of bad tax
policies, Mr. de Leon has proposed legislation to help high
earners avoid the new $10,000 state-and-local tax deduction
limit. Taxpayers would receive a dollar-for-dollar tax
credit for contributions to a new California Excellence
Fund, which they could then deduct as charity. Taxpayers can
deduct up to 60% of their income for charitable
contributions under the new federal reform.
The Wall Street Journal
Saturday, January 13, 2018
California’s Political Charity
Democrats propose a gimmick to help the rich avoid federal
taxes
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Chip Ford's CLT
Commentary
Some Massachusetts taxpayers are aware that
Citizens for Limited Taxation and its members gifted them
with Proposition 2˝ in 1980,
limited their city or town's ability to hike their property
taxes by not more than 2.5% year over year.
Some — but obviously
nowhere near enough — realize and appreciate how much
we did for them, despite opposition from every quarter —
opposition from every union, every public official, every
"budget expert." Only CLT and our sole ally, the Mass.
High Tech Council — and a huge swath of voters — pushed our
ballot question comfortably over the finish line and into
law.
But Proposition
2˝ did much more than just that.
It was revolutionary, multi-faceted. It reorganized
municipal government; how it was funded and how its
residents were treated.
● Even
fewer recognize and appreciate how our Proposition
2˝ also reduced their annual auto
excise tax by SIXTY-TWO PERCENT (62%) — a savings for
motorists of hundreds of dollars every year, year after year
— for almost four decades and counting. (SEE
HERE)
● Fewer than that have even a clue that
CLT's Proposition 2˝ since 1980
provides a rental deduction for tenants — 50% of their rent
paid up to a total annual deduction of $3,000. (SEE
HERE)
● Rarely does anyone appreciate that
CLT's Proposition 2˝ repealed
"school committee fiscal autonomy" and returned it to its
proper role as part of the overall municipal budget.
In a
2008 article for The Boston Globe, Barbara Anderson
wrote: "Local managers, able to finally get some
control over school budgets, looked there first for savings.
So when you hear that 'education was devastated by Prop 2˝,'
it was merely treated, for the first time, like other town
departments. Even today, per pupil expenditures are among
the highest in the nation."
● Our Proposition
2˝ also repealed binding arbitration
for public employees, and; it also limited to not more
than 2.5% all county, district, public authority, the
commonwealth, or other governmental entities authorized by
law to assess costs, charges or fees upon cities and towns.
Binding arbitration a bad deal for taxpayers
April 30, 2010
From The Beacon, May 2010, Vol. XXXVI, #5
Binding arbitration was repealed by the voters in
1980 as a core element of Proposition 2˝, because
voters recognized that with a tax cap in place it
would be irresponsible and foolish to give an
outside party the ability to create a fiscal crisis
by giving special or unaffordable benefits to any
segment of the workforce. In the 1980s, the
Legislature reinstated a form of binding arbitration
through the Joint Labor Management Committee for
police and fire employees. Under that system, if an
impasse is sent to binding arbitration by the
committee, the subsequent ruling is binding on the
municipal executive, who is prevented from speaking
against the ruling. The municipal council must vote
to accept the decision, and it is extremely rare to
have a ruling rejected.
In the years leading up to binding arbitration’s
repeal in 1980, the evidence was crystal clear that
most arbitrators were issuing findings that favored
labor and imposed a very heavy burden on
communities. Cities and towns have no interest in
long and protracted negotiations and would offer
comparable wage increases throughout the workforce.
Yet unions holding out for binding arbitration would
almost always receive more than other employees,
creating imbalances and inequities, and driving up
costs.
https://www.mma.org/binding-arbitration-bad-deal-taxpayers
Section 20A: Increase in assessments
Section 20A. No county, district, public authority,
the commonwealth, or other governmental entity
authorized by law to assess costs, charges or fees
upon cities and towns, except regional school
districts, regional water districts and regional
sewerage districts, may increase the total of such
costs, charges or fees by more than the sum of: (1)
two and one-half per cent of the total of such
costs, charges or fees over the preceding fiscal
year; and (2) any increases in costs, charges or
fees for services customarily provided locally or
for services subscribed to at local option.
https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter59/Section20A
● Almost NONE are aware that CLT's
Proposition 2˝ ended unfunded
state mandates imposed from On High by the Almighty Lords
and Ladies of Beacon Hill upon the vassal municipalities
beneath their then-unlimited power. And Proposition
2˝ also created the
state
Division of Local Services (under the Department of
Revenue) and the state
Division of Local Mandates (under the Office of the
State Auditor) to monitor and enforce our
unfunded mandates ban:
Commonwealth of Massachusetts
Office of the State Auditor
The Local Mandate Law
The Local
Mandate Law was enacted as part of the property tax
limit initiative known as Proposition 2˝.
The Local Mandate Law says that any state law or
regulation passed or implemented after January 1,
1981 that imposes any direct service or cost
obligation on a city or town is only effective when
the community votes to accept the law or regulation,
or the Commonwealth provides funding for the
community to comply with the law/regulation.
Under this law, cities and towns can ask the Office
of the State Auditor to determine if a state law or
regulation constitutes an unfunded mandate, and to
provide an analysis of the financial impact of such
a mandate.
The Local Mandate Law also allows any community
facing the unfunded state mandate to request an
exemption from compliance in superior court.
A year ago state Auditor Suzanne Bump ruled
that parts of "the early voting law" amount to an unfunded
state mandate. This is CLT's unfunded mandate ban in
action. The first year of implementation of the early
voting law, as certified by the state Auditor's office, has
cost municipalities just over $1 million.
"As the State House News Service reports, the
House passed a supplemental appropriation of
$485,000 to cover a portion of the costs
incurred in 2016 but the Senate rejected that
effort.
"Bump last week urged Gov. Charlie Baker and
House and Senate leaders to approve a
supplemental appropriation to reimburse cities
and towns for those 2016 costs. She also cited
the need for a new system to fund the costs in
future elections. News flash: There’s one barely
10 months away.
"It’s not as if reps and senators didn’t think
about this issue back in 2014, when they were so
eager to get their election reform bill through.
At the time they debated a funding mechanism for
early voting — ultimately settling on,
naturally, a 'task force' to study the cost
issue."
What's to "study"? It's a mandate from
On High imposed upon the vassal municipalities.
The law, created by CLT and the voters, is clear.
Reimburse the municipalities for their 2016 imposed costs
according to unfunded mandate law, then either fund the
mandate going forward — or
repeal the early voting law mandate.
Quite a revolution
that CLT created with its proposed law. We collected
the signatures, got onto the 1980
ballot, campaigned against all odds for it, and the voters adopted
our daring law in a 59%-41% victory.
That's why I called it revolutionary. It was very
comprehensive tax reform. It overturned and rewrote
the way government in Massachusetts functioned, limited the
damage it could impose on taxpayers — and it still stands.
If you think things
are bad now, consider how much worse they would be
without CLT's Proposition 2˝
— or if it ever gets taken away from us!
That almost happened
in 2010 — but CLT was here to defend it again, successfully:
CLT
Saves Proposition 2˝ Again
House leadership attacks Proposition 2˝; Urges major tax
hike (Apr 21, 2010)
CLT's 'prevent defense' winning another one for Prop 2˝
(Apr 23, 2010)
Taxpayers demand a Section 8 discharge for stealth tax
(Apr 25, 2010)
Taxpayers win a big one; CLT saves Proposition 2˝ again!
(Apr 27, 2010)
More news and commentary on CLT's latest taxpayer win
(Apr 29, 2010)
Read and/or download
a full copy of our Proposition 2˝
"Question 2" ballot question summary
in the Secretary of State's 1980 Information for Voters
Guide:
1980 VOTER'S GUIDE
Good news/Bad news on the revenue front.
"Expectations" for tax revenue in this
current fiscal year (FY 2018) have been increased by $157
million, to $26.661 billion.
"The estimate of $27.594 billion in tax
revenues for fiscal 2019 amounts to $933 million more in
revenue than the updated projection for the current fiscal
year."
That's an additional $1 BILLION more than
this fiscal year's projected revenue take was. What
will legislators do with that amazing anticipated windfall?
Well, it appears they can't dodge CLT's
income tax rollback again this year.
It'll be hard to avoid the drop from 5.1% to
5.05% — five one-hundredths of
one percent — the income
tax hike they
promised would be "only temporary" in 1989
when they imposed it, three decades ago next year.
The voters ordered that it be rolled back to 5% in 2000
— almost two decades ago
— but got the Beacon Hill
Middle Finger Salute from the Legislature in 2003 when
legislators "froze" it "temporarily" with contrived
"economic triggers." It looks like the $83 million
trigger will be pulled later this year for next tax year,
however reluctantly.
That $83 million is taxpayers' money that
the Legislature never should have had after the "18-months,
temporary" period it promised in 1989 had passed. It
certainly should have been returned and restored to
the taxpayers who earned it back in 2000, after voters
demanded its return.
How many
tens if not hundreds of billions of our money has the
Legislature continued to take from us under a decades-old
false promise
— The Big Lie?
The Legislature has been
increasing the state budget by an additional billion dollars
every year. (The state budget in 1989 when the
"temporary" income tax hike was imposed was a mere $12.3
billion; it had increased to $21.4 billion in 2000 when we
voted to roll the income tax rate back to 5%. This
fiscal year it rose to over $40 billion). That
long-overdue $83 million is a relative pittance in a $40
billion budget ($40,000 million). It and more is there
to be returned, and has been for decades. Regardless,
there's little doubt they'll find a way to squander however
much comes in and more, again.
Many including me are getting a kick out of
watching the uber-liberal state politicians scurrying about
trying to concoct a way to protect their wealthier state
taxpayers from the loss of much of their SALT (State And
Local Taxes) deductions from their federal taxes. They
see the writing on the wall when those high-end taxpayers
recognize just how much their tax burden actually is
— and who is really the
blame. When high-tax, high-spending, Democrat-dominant
states can't pass off their tax burden onto the federal
government, when that burden is no longer spread among more
fiscally prudent taxpayers across the nation, there's going
to be hell to pay in Deep Blue State capitols.
You can already smell the smoldering fear
and panic.
If the mobile wealthy are smart and vote
with their feet the "anticipated revenue" loss will be
devastating to states habituated to unlimited spending.
If this doesn't make the tax-borrow-and-spenders take a deep
breath and a reality-check, look for ways to cut spending,
trim budgets, cease burdening taxpayers with new "programs,"
their political futures are doomed. Hopefully they'll
wake up before taking all of us down with them.
Do you think our Bacon Hill solons are
paying attention, or whistling past the graveyard?
Their “millionaire’s tax” graduated income tax ballot
question can only speed up the inevitable.
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Chip Ford
Executive Director |
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The Boston Herald
Monday, January 15, 2018
A Boston Herald editorial
Fund this mandate
Back in 2014 Democrats on Beacon Hill were
pleased as punch that they had succeeded in
introducing early voting to Massachusetts. But
now that early voting is actually a thing, some
of those same reps and senators don’t seem so
eager to cover the costs they’ve imposed on
cities and towns.
It’s been just about a year since state Auditor
Suzanne Bump concluded that parts of the early
voting law amount to an unfunded state mandate.
Now, at the Legislature’s direction, the
auditor’s office has officially surveyed
municipal officials on costs incurred to comply
with the mandate in 2016, the first year it was
in effect, and certified a figure of just over
$1 million.
The total cost of implementing early voting was
higher — but that’s in part because some
communities, including Boston, exceeded the
minimum requirements. They’re on their own for
covering those additional costs.
But if Beacon Hill is going to mandate that
cities and towns offer a certain number of extra
voting days, with minimum staffing levels — then
it sure as heck ought to be willing to offset
the cost of that mandate.
As the State House News Service reports, the
House passed a supplemental appropriation of
$485,000 to cover a portion of the costs
incurred in 2016 but the Senate rejected that
effort.
Bump last week urged Gov. Charlie Baker and
House and Senate leaders to approve a
supplemental appropriation to reimburse cities
and towns for those 2016 costs. She also cited
the need for a new system to fund the costs in
future elections. News flash: There’s one barely
10 months away.
It’s not as if reps and senators didn’t think
about this issue back in 2014, when they were so
eager to get their election reform bill through.
At the time they debated a funding mechanism for
early voting — ultimately settling on,
naturally, a “task force” to study the cost
issue.
But navel-gazing task forces don’t cover
overtime for poll workers. Beacon Hill has an
obligation to cities and towns, and it needs to
meet that obligation.
State House News Service
Friday, January 12, 2018
If successful, Hill bargaining could derail
three ballot questions
By Matt Murphy
Top Democrats on Beacon Hill are eyeing a
legislative solution that would keep as many as
three initiative petitions – a $15 minimum wage,
paid family leave and a sales tax cut – off the
2018 ballot, but activists and stakeholders
involved in those efforts say it could be a
tricky needle to thread.
Both House Speaker Robert DeLeo and Acting
Senate President Harriette Chandler have
indicated their interest in addressing the
minimum wage and paid leave this year -
proponents of those measures have been prodding
lawmakers to act for years. And DeLeo went even
further this week, throwing the third issue – a
sales tax cut – into the mix of potential
bargaining to avoid letting the major issues go
before voters ten months from now.
"I’d like to see us, as best as we can, address
these issues, keep them off the ballot. But that
remains to be seen," DeLeo told the Boston Globe
in an interview Wednesday.
An official familiar with the speaker's thinking
confirmed the Democratic leader would like to
avoid those three questions reaching the ballot,
but could not elaborate on what that framework
might look like. The House referred all of the
proposed ballot questions to committees for
review Thursday, and the upcoming hearings on
the proposals will shed additional light on the
issues and whether stakeholders are open to
compromises.
"He has to see what compromise they come up
with," the source said.
DeLeo in 2009 led the push to raise the sales
tax from 5 percent to 6.25 percent and is among
the Democrats who have advanced to the 2018
ballot a proposed constitutional amendment
imposing a 4 percent income surtax on households
with incomes above $1 million, an idea that
could generate $2 billion a year.
The source close to the speaker also said, with
regard to cutting the sales tax, that it might
be possible to avoid a ballot campaign without
DeLeo agreeing to a tax cut. "I think the
expectation is that that could be resolved
without that happening," the person said.
Lawmakers sometimes prefer to have control over
major policy initiatives if they sense support
in the electorate, rather than let laws be
written by activists, but initiative petitions
are often proposed in part because lawmakers
have been unable or unwilling to reach agreement
on policy topics.
Frustrated proponents of all three ballot
questions in the mix gathered tens of thousands
of signatures from voters last year in support
of their measures.
Complicating matters is the fact all three
questions are intertwined with the same interest
groups having a stake in the outcome of each
proposal.
The Retailers Association of Massachusetts (RAM)
has proposed rolling the state's sales tax rate
back to 5 percent, and making an annual summer
sales tax holiday weekend permanent. RAM
President Jon Hurst said he is unaware of any
option on the table at this point that would
convince retailers to settle for no change to
the sales tax, but he did not rule out getting
there.
"The year's just starting. I think there's a
long way to go, a lot of moving parts. We have
just one ballot initiative when the big health
care union out of New York City has three
questions," Hurst said.
Hurst was referring to 1199 SEIU United Health
Care Workers East, a major player in the Raise
Up Coalition, which is behind the paid family
and medical leave initiative, the push to raise
the minimum wage to $15 an hour and the 4
percent surtax on incomes over $1 million.
So far, negotiations have been most active over
whether a deal can be reached on paid family and
medical leave. Officials with the Raise Up
Coalition and business groups on both sides of
the issue have met at least a handful of times
with Rep. Paul Brodeur and Sen. Jason Lewis, the
co-chairs of the Committee on Labor and
Workforce Development, according to people
involved in those talks.
The same type of direct talks have not happened
with respect to the sales tax, Hurst said, and
an official with Raise Up said that despite
Brodeur's recent comments that he and Lewis have
convened negotiations between the coalition and
the business community over the minimum wage,
those talks have not occurred.
"We are working diligently to strike the right
balance between fair compensation for workers
and ensuring that Massachusetts businesses can
remain competitive. I'm confident that these
parties have engaged in a good faith effort, and
I am eager to find a legislative compromise
which works for everyone," Brodeur said in a
late December statement to the News Service.
Hearings will take place before legislative
committees on all three topics this year, and
the Senate has created a task force focused on
strengthening local retail that could come up
with some ideas that would ameliorate retailers
and convince them to drop the tax cut proposal.
"We do see a nexus between our question and the
three others that are out there. I think there's
a real tough road to hoe here with our friends
in the Legislature to try to get the big public
health care union to negotiate and do things the
right way," Hurst said.
Raise Up also believes it would be a "big lift"
to strike deals with lawmakers that could keep
all three questions off the ballot and avoid
costly campaigns with uncertain outcomes.
One thing that can't be controlled by Beacon
Hill at this point is the fate of the so-called
"millionaire's tax" proposal. The Legislature
twice voted overwhelmingly in support of putting
the constitutional amendment on the ballot, but
the Supreme Judicial Court is now preparing to
hear arguments from business leaders about why
it should be not be allowed to go before voters.
The court will hear arguments in that case on
Feb. 5. Hurst said that if the court does
disqualify the matter for the ballot based on
its content, that could be an opening for
compromise on the other three issues.
"If the millionaire's tax goes forward, it makes
it much more difficult for us to negotiate and
pull that off," Hurst said. "But if it doesn't,
maybe the decks are a little more clear to
negotiate more satisfactory outcomes for all.
Maybe it's a little less complicated of a
discussion in reaching some middle ground."
Gov. Charlie Baker is another wildcard. While
lawmakers would desire his support for any
compromises intended to address ballot
questions, he has largely refrained from
publicly staking out positions on the measures.
The retailers have not been involved in the
talks so far over a legislative solution on paid
family and medical leave, and it's unclear when,
or if, formal negotiations will begin over the
minimum wage and sales tax.
One member of the Raise Up Coalition questioned
whether the Retailers Association had the
financial resources to run an effective campaign
to cut the sales tax, or if the group was simply
trying to bluff the Legislature.
"He's saber rattling and at some point people
want to know if you have a sword," the person
said of Hurst, who has not been bashful in the
past about acknowledging the financial
limitations of his membership to run a political
campaign.
Jesse Mermell, the president of the Alliance for
Business Leadership, said her organization has
been involved in talks with Brodeur, Lewis and
other business groups about paid family and
medical leave, but said participants had agreed
to keep the substance of those negotiations
private for now.
The deadline for ballot petitioners to submit
their final round of voter signatures to place
the questions on the ballot is July 4.
"We're certainly keeping that deadline in mind
and trying to come to some resolution, but that
deadline is not lost on anybody," Mermell said.
Hurst said a more realistic deadline might be
mid-May when he expects his board to make the
final decision about whether to collect the
signatures required to go to the ballot.
State House News Service
Friday, January 12, 2018
Tax revenue accord sets stage for new state
spending plans
By Colin A. Young
State tax revenues will grow at a 3.5 percent
clip next fiscal year, state budget managers
agreed on Friday, signaling that the governor
and Legislature will have almost $27.6 billion
available to spend, along with billions of
dollars in federal and non-tax revenues, as they
begin to shape the fiscal 2019 state budget.
Gov. Charlie Baker's budget chief and the chairs
of the House and Senate Ways and Means
Committees on Friday detailed a finalized accord
on how much tax revenue the state expects to
collect in fiscal year 2019, which begins on
July 1. Budget watchers also upgraded their
expectations for tax revenue in the current
fiscal year, upping the projected total revenue
by $157 million, to $26.661 billion.
The estimate of $27.594 billion in tax revenues
for fiscal 2019 amounts to $933 million more in
revenue than the updated projection for the
current fiscal year. The projected growth rate
will serve as the basis for Baker's budget,
which is due on Jan. 24, and budget-building
exercises this spring and summer in the House
and Senate. The Republican governor and
Democrats in the Legislature faced a Jan. 15
deadline to agree on a tax revenue estimate.
As part of the revenue agreement, the
triumvirate of budget officials also announced
Friday a $2.609 billion transfer to the pension
fund -- a $214 million increase over the fiscal
2018 contribution -- a $1.032 billion transfer
to the MBTA, a transfer of $858.9 million to the
Massachusetts School Building Authority and a
$24.1 million transfer to the Workforce Training
Fund.
After a total of $4.612 billion in transfers,
the maximum amount of tax revenue available for
the fiscal 2019 budget will be $22.982 billion,
the officials agreed. The state budget, which
totals about $39.4 billion this fiscal year, is
supplemented by federal revenues along with
non-tax revenues like fees.
The 3.5 percent growth figure, the budget
managers said, assumes the state income tax rate
will drop from 5.1 percent to 5.05 percent on
Jan. 1, 2019, which DOR has previously said
would result in a roughly $83 million reduction
in state revenue over the last six months of
fiscal 2019. Recent economic growth was not
significant enough to statutorily trigger an
income tax cut on Jan. 1, 2017 or Jan. 1, 2018.
The agreement also assumes $1.3 billion in
capital gain taxes and assumes a transfer of $88
million of capital gains taxes to the state's
stabilization fund.
"The FY19 forecast reflects modest growth in the
Commonwealth's economy, consistent with
testimony we have heard from economic experts,
and incorporates a conservative view of
year-to-date tax revenues," Administration and
Finance Secretary Michael Heffernan said in a
statement. "Establishing a consensus revenue
forecast is an important shared first step in
the budget process, and I look forward to
working with House and Senate Ways and Means in
the coming months as we develop a fiscally
responsible FY19 budget."
At a revenue projection hearing in December, the
Department of Revenue (DOR), budget-tracking
think tanks and Massachusetts economists
provided estimates of revenue growth that came
in as low as 2.8 percent and as high as 6.1
percent. The consensus revenue figure announced
Friday is closest to the 3.3 percent to 4.1
percent growth range estimate offered by the DOR,
where officials were not available this week to
discuss impacts of a new federal tax law.
State leaders in recent years have overestimated
tax collections. In announcing the agreed-upon
revenue figure on Friday, budget officials used
words like "conservative," "cautious,"
"uncertainty," "volatility" and "modest" to
describe their forecast of the state revenue
picture.
"We must always be cautious when predicting
revenue growth, especially given recent
volatility and increased uncertainty for the
coming year," Senate Ways and Means Chair Karen
Spilka said in a statement. "This projection of
modest growth reflects these uncertainties,
along with a recent upswing in economic trends.
Moving forward in the FY19 budget process, we
will continue to monitor revenue as we work to
build a balanced budget, mindful of our mission
to provide critical services and programs for
the Commonwealth’s most vulnerable."
House Ways and Means Chairman Jeffrey Sánchez
said the 3.5 percent growth rate "reflects the
cautious optimism and realities of current
economic trends."
"This is a number that balances the uncertainty
at the federal level and elsewhere with the
growth we are experiencing in Massachusetts," he
said in a statement. "With this agreement in
place, we can begin the FY19 budget process and
build upon previous investments in programs that
improve the lives of people throughout the
Commonwealth."
With less than two weeks until Baker is
scheduled to unveil his fourth budget as
governor and set in motion a budget process that
will last into the summer, there remains
significant uncertainty about how state finances
will be affected by recent federal tax code
changes and proposals to alter state tax policy.
After two budget years in which tax collections
came up short of the consensus projections, tax
collections over the first six months of the
fiscal are greater than $12.9 billion, which is
6 percent above the benchmark and 8.1 percent,
or $966 million, higher than the first half of
fiscal 2017. But major revenue gaps have
exploded in the second half of the last two
fiscal years, or between January and June.
In a report earlier this week, the
business-backed Massachusetts Taxpayers
Foundation noted that tax collections are
running nearly $730 million above benchmarks
through December and recommended the state use
above-benchmark revenues to build its rainy day,
or stabilization reserve, an area that credit
rating agencies have flagged as a concern.
"The state budget is twice the size it was
fifteen years ago, while the Stabilization Fund
balance is $400 million lower," MTF said in its
report. "Without a behavior change, the next
fiscal downturn will be disastrous."
Sánchez, embarking on his first budget as House
budget chief, said in December that the
Legislature has "the potential to set the stage
for the next 30 years" with the Bay State's
fiscal 2019 budget.
Heffernan, Sánchez and Spilka also agreed Friday
to a 3.6 percent rate of potential gross state
product growth for calendar year 2019, the same
figure that has been used the past three years
to set up a health care cost growth benchmark
under the 2012 cost containment law.
State House News Service
Friday, January 12, 2018
Weekly Roundup - Deductive Reasoning
By Craig Sandler
Marijuana's major medical use is the alleviation
of pain and anxiety - and after this week, Gov.
Baker and his budget-writing team might consider
availing themselves of the nearest dispensary.
But they'll need to bring cash...
One would think with revenues performing
decently and the economy in great shape,
spending planners could ride those trends
through a fairly agreeable and straightforward
budget process, even in an election year charged
with ferocious partisanship.
Ah, but a much more compelling trend
strengthened this week: governors and lawmakers
in high-wage, high-tax states across America
unveiling and advancing plans to sidestep,
circumvent, and contravene the effects of
federal tax reform on state taxpayers and tax
collections.
Gov. Andrew Cuomo of New York declared the
Republican tax law an act of "economic civil
war" on high-income, high-property value states
like his, and Massachusetts, and promised to
promote measures to protect upper-middle income
earners from the hit they're about to take as
the state and local tax (SALT) deduction is
capped at $10,000. The California Assembly is
working on a plan to let people make, and then
deduct, donations to a new fund to offset the
SALT deduction reduction. And the movement is
just getting started as budget clocks tick
nationwide.
The politically-driven countervailing proposals
overlay a fiendishly-nuanced accounting
situation to begin with. Every millionaire who
can no longer deduct much of her state income
tax on the federal form nonetheless gets a
wonderful windfall from the new tax brackets. In
states like Maryland, lots of state tax
deductions are linked to federal equivalents -
and that actually means more revenues for state
treasuries, not less.
State revenue department officials haven't made
clear yet if that's the case in Massachusetts,
and if it is, officials may want to take the
money and run for re-election on a platform of
preserving services with a revenue-neutral sort
of response to all the changes and complexity.
Everyone who pays taxes is simultaneously
considering whether to modify their behavior,
and Baker's budget is due in 12 days.
Republican Gov. Larry Hogan of Maryland has
already advanced legislation unlinking state
deductions from the federal rules, in order to
eliminate the state-level windfall there and
lower state tax bills. So far, Gov. Baker's done
nothing of the sort - it may not be possible or
necessary anyhow. The effects of tax reform
aren't really about politics or nuance, not at
the budgetary policy level. The governor, and
later the Legislature, have to quantify the
unknowable and hope they guess right as they set
a top line for fiscal 2019. Then it'll be right
back to the politics.
So you can see why some pain relief might be in
order - and all kidding aside, people who really
are using pot to ease their distress report it's
a powerful antidote to debilitating symptoms.
Surely many are looking forward to the day, just
around the corner, when people suffering milder
affiliations of daily stress and care can more
easily join them in seeking relief via the
ancient weed, perhaps making tightly-wound
Massachusetts a somewhat mellower place.
Actually, wait, no - hang on there, people.
Because in the past fortnight's other
maddeningly complicating development, U.S.
Attorney General Jeff Sessions eliminated a
Justice Department guidance resolving the
conflict between federal law, under which
marijuana is illegal, and state laws, under
which increasingly it is not. Then Monday,
newly-appointed Massachusetts U.S. Attorney
Andrew Lelling said he "cannot provide
assurances that certain categories of
participants in the state-level marijuana trade
will be immune from federal prosecution."
Start-ups HATE it when they might go jail, and
Lelling's declaration he's going to prosecute if
ordered to do was an extreme buzzkill for an
industry just getting organized, both in the
marketplace and the halls of regulation. The
immediate effect of Sessions' and Lellings'
pronouncements: a majority of medical-pot
dispensaries, operating legally under state law,
lost their ability to accept debit cards as
transaction processors disengaged from what
might be treated now as criminal enterprise.
So that threw THAT particular burgeoning sector
of the economy into total turmoil, even though
the Cannabis Control Commission did issue a
10-page guidance document for municipalities
Thursday to let them know what it expects from
communities hosting new dispensaries. Beyond the
basic question of whether anyone new will want
to enter the sector for the time being, the $500
million in new legal pot sales next fiscal year
was projected to generate $50 million in state
revenue, conservatively. But will budget-writers
really keep that money on the table if the
people moving large quantities of marijuana are
liable to busted at any time? There's a word for
this sort of situation, and that word is: "Oy."
Baker maintained his unflappable approach to the
turmoil this week. While individuals taxpayers
and corporations are sizing up the immediate
impacts of the law on their own operations,
Baker observed that it'll be years before tax
reform's effect on the economy is properly
known. He continued more or less running against
Trump - and he might as well, because for the
time being he's got no one else to run against
though people are trying to run against him.
To be sure, Jay Gonzalez and Setti Warren were
going at Baker full time and full force, and Bob
Massie continued inveighing from the far left,
the three Democrats trying to make the case that
Baker's squishiness on the issues is failing
Massachusetts voters. The problem is, their
efforts are not making them noticeable to the
vast majority of those voters, as far as the
MassINC Polling Group can tell. MIPG released a
WBUR poll Monday showing the Democratic trio has
an average name recognition of 27 percent.
Meanwhile, Baker enjoys a favorable rating of 74
percent, never mind universal name recognition.
So, understandably, Baker did not have a lot to
say about his critics' helpful suggestions on
the travails of the T - but he made sure to get
in his weekly condemnations of the way the
president is running the country.
Baker said he will not have Massachusetts impose
a work requirement on able-bodied Medicaid
recipients, after the federal Centers for
Medicaid and Medicare Services issued guidance
intended to help states do just that. A number
of states, including Maine and New Hampshire,
are already pursuing such a requirement, which
advocates for the recipients view as cruel and
punitive.
And he reiterated his objection to a
Trump-administration expansion of plan to allow
offshore oil drilling. Matthew Beaton, secretary
of energy and environmental affairs, told the
News Service Thursday, "I think we have made it
very clear under no circumstances would we
support offshore drilling off the coast of the
Commonwealth." Whether that objection will
suffice to block new drilling, time will tell.
With all the anti-Trump folderol, and there's
always plenty in Massachusetts, it was
surpassing strange to see congressman Ed Markey
standing almost shoulder to shoulder with the
President in the Oval Office Wednesday. Markey
was on hand as Trump signed the senator's
International Narcotics Trafficking Emergency
Response by Detecting Incoming Contraband with
Technology - INTERDICT - bill. It equips border
patrol agents with fentanyl-detecting devices;
Trump said Markey's bill was "an important step
to halt the flood of deadly drugs that are
pouring into our country like never before."
Markey, who lambastes Trump approximately as
often as most people check their smartphone,
thanked the president for his signature.
Another, erstwhile, president made a routine but
simultaneously exceptional appearance Thursday,
as Sen. Stanley Rosenberg (D-Amherst) returned
to public view after resigning his presidency
Jan. 4 in the face of an ethics investigation.
Rosenberg was warmly greeted as he attended
farewell ceremonies for former senator and
newly-installed Lynn Mayor Tom McGee Jr. He said
he is separated from his husband Bryon Hefner,
whose alleged misconduct caused Rosenberg and
the Senate so much woe, and that along with the
rest of the state, he awaits the findings of a
probe as to whether he violated Senate rules by
countenancing Hefner's behavior. Rosenberg's
acknowledged lack of clarity about his own
future was a fitting coda of uncertainty for the
week.
STORY OF THE WEEK: Revenue performance is
finally robust again and exceeding expectations!
Should be an easy budget to write, right? Wrong.
Because nothing is easy when the demands and
expectations are so vast and different.
The Wall Street Journal
Saturday, January 13, 2018
OPINION | REVIEW & OUTLOOK
California’s Political Charity
Democrats propose a gimmick to help the rich
avoid federal taxes
Much has changed in Donald Trump’s first year as
President, including some progressive
principles. Lo, California Democrats in 2016
campaigned to extend a tax hike on the rich. Now
they’re promoting a gimmick to help reduce their
wealthy residents’ tax burden.
State Senate President Kevin de Leon, who is
challenging U.S. Senator Dianne Feinstein in the
June primary, complained last week that the new
GOP tax law “offers corporations and hedge fund
managers massive tax breaks and expects
California taxpayers to pick up the costs.” It’s
the “worst tax policy in the history of this
country. Perhaps the world.”
In fact, some California taxpayers are among the
law’s biggest beneficiaries—to wit, Silicon
Valley titans such as Apple, Facebook and
Google. California tech companies are sitting on
more than $500 billion in cash overseas, which
they will now be able to repatriate at a
discounted tax rate.
But speaking of bad tax policies, Mr. de Leon
has proposed legislation to help high earners
avoid the new $10,000 state-and-local tax
deduction limit. Taxpayers would receive a
dollar-for-dollar tax credit for contributions
to a new California Excellence Fund, which they
could then deduct as charity. Taxpayers can
deduct up to 60% of their income for charitable
contributions under the new federal reform.
The Senate leader cites as his model
private-school scholarship tax-credit programs
in other states that function like vouchers.
However, these charitable contributions help
nonprofits or parents who want to send children
to private schools. Mr. de Leon’s “excellence
fund” would exist within the General Fund, and
donations would be appropriated by the
legislature. The only beneficiaries of this
“charity” would be the donating taxpayer—and
politicians.
In other words, Democrats in Sacramento want to
help the rich dodge federal taxes. According to
IRS data, California’s 71,000 taxpayers with
million-dollar incomes deducted on average
$462,500 in 2015 compared to $6,940 for
individuals making between $50,000 and $100,000.
Few California middle-class taxpayers will be
harmed by the $10,000 deduction cap since the
standard deduction has doubled to $12,000.
Neither the IRS nor federal courts are likely to
allow this charity dodge. The IRS disallows
deductions for charitable contributions to the
extent that a taxpayer benefits—for example,
paying $10,000 at a charity auction for an
artwork valued at $8,000 would only yield a
$2,000 deduction. In 1989 the Supreme Court
ruled that contributions “made to such
recipients with some expectation of a quid pro
quo” are not deductible.
The one reform Mr. de Leon isn’t proposing is a
cut in California’s top marginal tax rate of
13.3%, including the three percentage-point
increase that Democrats pushed in a 2012
referendum. Rates on individuals making more
than $250,000 also increased. Democrats
successfully pushed to extend the tax hikes
through 2030 in November 2016. The federal GOP
tax reform means that the effective top state
and federal combined marginal rate for
Californians increases by 2.7-percentage points
in 2018—to 50.3% from 47.6%.
Revenues are soaring due to strong income and
capital-gains growth. Gov. Jerry Brown on
Wednesday proposed a $132 billion budget that
forecasts a $6 billion surplus. While the
Governor wants to add some revenue to the
state’s $8 billion rainy day fund, this will
quickly vanish in the next recession—unless
Democrats raid it first after he leaves office.
State tax revenues fell cumulatively by more
than $70 billion following each of the past two
recessions.
California’s steeply progressive tax code has
encouraged a boom-bust revenue and spending
cycle. Reducing taxes on high earners would
impose spending discipline and ameliorate the
effects of the limitation of the state-and-local
tax deduction. Alas, Democrats in Sacramento
seem mainly interested in boosting their
favorite charity—themselves. |
| |
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Citizens for Limited Taxation ▪
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