CITIZENS   FOR  LIMITED  TAXATION  &  GOVERNMENT

 

Taxation Committee's Dog-and-Pony Show Endured

The expected dog-any-pony show before the Legislature's Taxation Committee has been endured along with some of its members' stunning display of arrogance. This phase is now behind us. Our conclusion is short and sweet: Attending was an absolute waste of everyone's time; the committee's decision was made before the first word of testimony was uttered. Get your clipboards ready for the second round of signature collecting next month!

If we're to enforce the Legislature's promise of eleven years ago, if the income tax rate hike is ever to be truly "temporary," we're going to have to do it ourselves.

Yesterday the Department of Revenue released its monthly revenue figures, and again tax revenue is flooding the state's coffers, "up $172.7 million or 14.1 percent from last March....

"Income tax collections for March totaled $469.2 million, an increase of $132.7 million or 39.4 percent when compared to March 1999....

"Year-to-date revenue collections totaled $11 billion, up $749.4 million or 7.3 percent above last year."

But still, the Gimme Lobby insists, "we cannot afford to let taxpayers keep more of their hard-earned money. MINE, MINE, MINE: More Is Never Enough!"

A study released yesterday by the Beacon Hill Institute found:

Since 1994, state revenues have been growing by nearly $1 billion per year or at about twice the inflation rate. This means that, even with the tax cut and at current rates of growth, the state will bring in about $23.3 billion in FY 2003, enough to finance all existing state programs.

But still, the Gimme Lobby insists, "we cannot afford to let taxpayers keep more of their hard-earned money. MINE, MINE, MINE: More Is Never Enough!"

All of a sudden there is broadening support among the special interests for the so-called Massachusetts Taxpayers Foundation's substitute plan - the Trojan Horse now adopted by the House of Representatives -- what, at yesterday's hearing, Barbara called their "risky tax-rollback scheme."

We know we can't trust the Legislature to keep its promises -- that is now a given. But now we're supposed to buy this latest promise that in three years they'll begin rolling back the income tax rate so it will finally reach its historic 5 percent rate maybe by ... 2007?

Sorry Bacon Hill Cabal: To little, too late ... and far too unlikely! We don't need your approval any more. We are too close to doing it ourselves, despite your ongoing campaign of fear, lies and unmitigated greed.

You have cried wolf too often, lied to us too many times. We simply don't believe you any longer. We have recognized that you are integrity-challenged, that far too many of you don't believe a word you utter.

Fortunately, this time we don't have to take you at your word. We aren't forced to trust you.

We'll see you on the November ballot, where we'll find out if the voters are as stupid as you think and treat them.

CFord-Sig2.gif (4854 bytes)

Chip Ford



Commonwealth of Massachusetts

Department of Revenue

April 4, 2000

Contact:  Nicole St. Peter
               Jeffrey Busha (617) 626-2201

March 2000 Revenues Total $1.40 Billion

Revenue Commissioner Frederick A. Laskey today announced that revenue collections for March 2000 totaled $1.40 billion, up $172.7 million or 14.1 percent from las  March. Year-to-date revenue collections totaled $11 billion, up $749.4 million or 7.3 percent above last year. Collections for FY2000 are $160 million above the midpoint of the revenue estimate range, which is based on the Administration & Finance annual estimate of $15.288 billion.

"As we move into the end of tax filing season, revenue collections remain solid with income tax collections leading the way," said Commissioner Laskey.

Income tax collections for March totaled $469.2 million, an increase of $132.7 million or 39.4 percent when compared to March 1999. Withholding tax collections totaled $669.2 million, up $92.1 million or 16.0 percent. Sales and use tax collections totaled $268.8 million, up $3.3 million or 1.2 percent. Corporate excise collections totaled $374.8 million, up $41.7 million or 12.5 percent compared to last March.

Year-to-date income tax collections totaled $6.12 billion, up $509.0 million or 9.1 percent. Withholding collections totaled $5.61 billion, up $492.4 million or 9.6 percent  Total sales and use tax collections totaled $2.62 billion, up $200 million or 8.3 percent  Corporate collections totaled $806.0 million, up $55.8 million or 7.4 percent.

So far this tax season, DOR has received 1.6 million returns and has issued 1.3 million tax refunds totaling $513 million with an average refund amount of $373. DOR ha  processed 662,000 electronically filed tax returns, up 18 percent compared to last year and has directly deposited 166,000 refunds into taxpayers' bank accounts, up 25 percent from last year.


The Beacon Hill Institute
http://www.beaconhill.org/

Wednesday, April 5, 2000
Contact: Aubrey Haznar, 617/742-9102

New Analysis Shows Governor's Tax Cut
Would Benefit the State Economy Most

Massachusetts could strengthen its position at the forefront of the new economy and, in the process, capture substantial economic benefits by adopting a cut in the personal income tax as proposed by Governor Cellucci and slated for inclusion on the November 2000 ballot. This is according to a new analysis released today by the Beacon Hill Institute (BHI). The analysis shows that the Governor's proposal would confer substantially more benefits than a "compromise" proposal offered by the Massachusetts Taxpayers Foundation (MTF).

In cutting the tax rate to 5% by 2003, as proposed by the Governor, the state would create 74,505 new jobs, $956 million in new factories, equipment and other capital, and $3.733 billion in new payrolls by 2003, about 3.8 times the benefitsconferred by the MTF proposal. BHI obtained these estimates by using its State Tax Analysis Modeling Program (STAMP).

A number of factors support this conclusion:

  • Since 1994, state revenues have been growing by nearly $1 billion per year or at about twice the inflation rate. This means that, even with the tax cut and at current rates of growth, the state will bring in about $23.3 billion in FY 2003, enough to finance all existing state programs.

  • Over the last eight years, the state has consistently underestimated tax revenues, running up huge surpluses, portions of which disappear into spending projects tha  didn't appear during the normal budget process. Over the period FY 1996 -- FY 2000, these surpluses will have averaged about $770 million per year.

  • A frequent worry -- a Big Dig cost overrun of $1.4 billion -- turns out to have little importance in considering a tax cut. The debt service on additional borrowing in this amount would come to only about $130 million per year or about 0.6% of the current budget.

  • With over $3.3 billion in reserves ($1.8 billion in the unemployment insurance fund; $131 million in the welfare caseload reserve and $1.4 billion in the stabilization fund), recurrent large budget surpluses and a strong economy, the state is in a position to absorb a slowdown in tax collections.

  • The MTF proposal makes tax policy a hostage of past economic growth rates that bear no relation to current economic conditions, and it complicates tax planning.

Dr. David Tuerck, Beacon Hill Executive Director and Chairman and Professor of the Department of Economics at Suffolk University, said "Massachusetts taxpayers would be best served by a simple reduction in the personal income tax rate to 5%. There should be no compromise when it comes to the Massachusetts economy and its taxpayers."

The Beacon Hill Institute at Suffolk University is a nonprofit, nonpartisan research organization that applies state-of-the-art economic methods to the analysis of current public policy issues.


State House News Service
Wednesday, April 5, 2000

Lawmakers Have Cutting Remarks
for Tax Reduction Ballot Questions

By Elisabeth J. Beardsley

STATE HOUSE, BOSTON, APRIL 5, 2000 ... A trio of tax cuts headed for the November ballot received a decidedly cold reception from lawmakers today, even as Gov. Paul Cellucci argued that a massive income tax rate reduction is necessary to preserve the state's economic fortunes.

The Taxation Committee today aired three initiative petitions that would reduce the income tax rate to 5 percent, grant a full tax credit for auto excise and tolls, and create   tax deduction for charitable giving. The Legislature has until May 2 to act, after which proponents must gather another 9,517 additional signatures to place the questions before voters.

Arguing for his plan to reduce revenues by $1.2 billion over three years, Cellucci said the rate cut would insulate the state against another disastrous recession. With some o  the highest income taxes in the country, Massachusetts was the hardest-hit state during the fiscal crisis of the late '80s. The governor reminded lawmakers that their first act then was to slash local aid by 25 percent, forcing the layoffs of thousands of teachers, police and firefighters.

Raising his voice and angrily jabbing a finger at committee members, Cellucci said, "You're worried about losing a little revenue next year. I'm worried about losing thousands of jobs in five years because we have not protected the economic base of this state. We cannot be the state that has the highest income tax in the country."

According to the Department of Revenue, Cellucci's income tax cut will reduce revenues by $1.2 billion, the toll-reduction plan would remove $675 million a year and the charitable giving plan will cost $175 million.

Discussion of the income tax cut monopolized most of the hearing, as the debate turned quickly into a squabble over competing proposals to fill the Big Dig financing hole. The overrun now stands at $1.4 billion but could grow to double that, according to preliminary indications from federal auditors combing the massive projects' books. Cellucci blasted the House's plan for $750 million in new borrowing to shore up road and bridge projects. The governor proposed freeing up $650 million for projects by paying off high-interest debt.

"You talk about the loony left. This is the loony left," Cellucci said of the House plan. "It's lunacy to borrow $750 million to create a special fund when you can accomplish the exact same thing by paying off $650 million in high-interest debt. It's irrational. It makes no sense. It's a compelling argument that we need fiscal discipline."

Committee members jumped on the governor with both feet. Vice Chairman Joseph Wagner (D-Chicopee) interrupted and said, "I think it's lunacy that the Legislature is faced with having to step up and fix the problem, the $1.4 (billion), that comes out of left field and in the 11th hour."

Taxation Committee Co-chairman Rep. John Rogers (D-Norwood) said of the Big Dig: "It's a cancer on the state budget. It's a blue whale in state government. It's eating up everything in sight." Of the income tax cut plan, Rogers added: "It's blind to the economic health of the Massachusetts economy, and it's blind to the needs of Massachusetts (residents)."

Tangling over Chapter 90 road/bridge spending, Wagner demanded that Cellucci commit to an extra $50 million. Cellucci protested that since the 1980s, "We've ramped it up substantially." Wagner countered that, "We'd like to see it at $150 million." Cellucci fired back, "You'd like to see it at $250 million -- admit it, admit it." A visibly angry Wagner spat: "I'd like to see a project in Chicopee get done."

Committee member Rep. James Marzilli (D-Arlington) criticized Cellucci's Big Dig proposal to extend certain bonds to 50 years from the more standard 40 years, saying it's not "fair" to foist the cost onto "our grandchildren." Marzilli then brought up this morning's news stories about potential burgeoning of the overrun, and asked Cellucci directly: "Do you expect the shortfall to exceed $1.4 billion?"

Cellucci said, "I learned a long time ago not to believe everything you read in the newspapers. I can't guarantee anything when they're working under a 350-year-old city  but I don't expect that (costs exceeding $1.4 billion) to happen."

Before the governor's arrival at the hearing, legislative heavyweights turned out to oppose the tax cut initiatives. House Ways and Means Chairman Paul Haley (D-Weymouth), who opposes all three tax cuts, predicted that the state would be in "very serious straits" if voters approve the income tax cut. Major government investments in infrastructure, education and health care cannot be maintained if an estimated $2 billion in revenues is taken off the table, he said.

"This administration has not been about the business of being a vicious fiscal watchdog. If they are, they have no bite," Haley said. "We've been about prudent budgeting, but we need those resources to continue to meet the needs."

If the economy should go south, Haley warned that the state can't get out of a revenue jam through borrowing, as it did in the late 1980s and early 90s. "We are leveraged to the hilt," he said. "We need to challenge the proponents ... to say how can you fill the gap we have visited upon us down the street, that big hole to fill, and still keep our other improvements going?"

Cellucci later scoffed at the assertion that the state can't do it all, pointing out that over the last seven years, taxes were cut 38 times while education spending was boosted from $1.5 billion to $3.6 billion annually and the state embarked upon unprecedented health care expansions.

"To argue you can't meet the needs of educating the children of the Commonwealth and the health care needs and cut taxes at the same time, I just point out to you what's happened over the last seven years," Cellucci said.

Senate President Thomas Birmingham (D-Chelsea) reiterated his now-familiar argument that the tax cut debate is about "choices and values" and he decried the "make-believe nature of this tax cut as a painless one." Although conceding that "the Commonwealth would not crumble into the Atlantic Ocean" should the tax cut pass, Birmingham joined the teachers unions in predicting dire consequences for spending on education, health care and local aid.

As evidence, Birmingham cited Administration and Finance Secretary Andrew Natsios' testimony last year before the Senate Ways and Means Committee that major programmatic expansions would not be possible under the income tax cut scenario.

"Historically, we will be judged on whether we seize the opportunity or squander the opportunity," Birmingham said. "It's a fundamental defining choice about who we are as a Commonwealth."

Although most of today's focus was on the income tax cut petition, the committee also engaged in some back-and-forth with anti-toll activists. Commuter Tax Relief Coalition Chairman Douglas Barth demanded that lawmakers keep their promise to relieve the Turnpike of tolls once the road was paid for. Tolls collected to date have paid for the road six times over, he said.

"Public officials should keep their promises," Barth said. "Maybe it sounds like I just walked off Walton's mountain, but that is the foundation of sound, effective public policy."

Barth underwent a lengthy cross-examination by Taxation Committee Co-chairman Sen. Marian Walsh (D-West Roxbury), who was clearly put off by the ballot campaign's use of paid signature gatherers. Walsh asked why paid gatherers were used to supplement volunteers, to which Barth replied that there aren't enough volunteers with enough time to gather enough signatures to safeguard against an SJC decision banning stray marks on petition sheets.

"You said the public wants this, but in your testimony to the committee, you said people don't have the time to do citizenship," Walsh said. "So people are unavailable to be citizens, so we contract out politics to private companies to do the citizenship."

Barth immediately parried with: "People are heavily taxed in this state and they don't have time on Saturday to collect signatures because they're out working their second job."


The Boston Globe
Thursday, April 6, 2000

Cellucci, defends his tax rollback
Legislative leaders call plan 'reckless'

By Michael Rezendes, Globe Staff

Sparks flew yesterday as Governor Paul Cellucci and legislative leaders squared off before a Beacon Hill committee considering the governor's initiative petition to roll back the state income tax rate to 5 percent.

In a preview of what is likely to be one of the most contentious issues on the ballot this fall, Senate President Thomas F. Birmingham called Cellucci's plan "reckless" in light of cost overruns on the Big Dig, and he promised to play an active role in a campaign to defeat the measure.

The chairman of the House Ways and Means Committee, Representative Paul R. Haley, said the state has already approved more than $3 billion in tax cuts to take effect by 2003, insisting that Cellucci's tax rollback is unnecessary.

"We've already been cutting taxes very aggressively in the Commonwealth," Haley said. His comments echoed the views of Speaker Thomas M. Finneran.

Then Cellucci, during an unusual grilling by members of the Joint Taxation Committee, defended his plan, which would cut the income tax rate from 5.85 percent to 5 percent. The tax cut would return $600 to the average family of four while "imposing fiscal discipline" on legislative leaders, he said.

Cellucci, who haggled with committee members for more than an hour, lashed out at House leaders for coming out with a plan that would increase his proposed $21.3 billion budget by $400 million.

Cutting taxes is the best way to control state spending, the governor said. "What we're seeing now reminds me very much of the late 1980s, when spending was basically out of control in this Commonwealth."

The Taxation Committee also heard from several influential organizations likely to battle over the tax-cut plan.

The groups include Citizens for Limited Taxation, which is working with Cellucci to win approval of the measure, and the Massachusetts Teachers Association, which says the initiative would threaten state aid to education.

Barbara Anderson, CLT president, said the tax cut should be approved to keep a promise made by state lawmakers when they raised the income tax during the recession of the late 1980s.

The teachers association said cuts in state revenue imposed by an income tax cut pose a dangerous threat to public schools. "It is inevitable that a major state revenue loss will be felt in the classrooms," said Stephen E. Gorrie, president of the union.

But administration officials who favor the tax rollback noted that state revenues continue to rise and have produced budget surpluses, even though lawmakers have cut taxes on numerous occasions over the last decade.

State revenues were up again last month, rising to $1.4 billion, 14.1 percent more than was collected in March of last year, administration officials said.

"As we move into the end of tax-filing season, revenue collections remain solid, with income tax collections leading the way," said Revenue Commissioner Frederick A. Laskey. Tax collections for the first three months of the year are up 7.3 percent over 1999, he added.


The Commonwealth of Massachusetts
EXECUTIVE DEPARTMENT

Wednesday, April 5, 2000

Contact: John Birtwell
Bridget Goertz
(617) 727-2759

Cellucci to Legislature: Pass Tax Cut Now!
Vows to Bring Tax Cut Fight to Ballot in November

Governor Paul Cellucci today issued a stern warning to legislators, saying this may be their last chance to avoid a rebuke by voters if they do not roll back the income tax to 5 percent. Cellucci reminded them time is running out and noted that inaction on his bill will only give voters the opportunity to cut their own taxes in November.

"This is the Legislature's last chance to do what's right for the citizens and for the future of our Commonwealth," said Cellucci, in a testimony before the Joint Committee on Taxation. "The taxpaying families of Massachusetts deserve to be the beneficiaries of our good fortune and they should not have to continue to pay for the fiscal mismanagement of a decade ago."

Because the Legislature has refused to keep their promise to return the income tax back to its historic 5 percent rate, Cellucci and Swift have led a petition drive to bring the question directly to the voters. Last summer, Cellucci and Swift filed language necessary to get the question on the November 2000 ballot and last fall they submitted 150,000 signatures in support of the initiative -- almost three times as many as are required to place the initiative on the ballot. Under state law, the Legislature must act on the proposal before the first Wednesday in May. If it does not act on or it rejects the petition, Cellucci and Swift will collect the additional 9,517 signatures necessary to put the question on the ballot, giving the voters the chance to vote for the tax relief they deserve.

Although the Cellucci-Swift Administration has cut taxes a record 38 times, Massachusetts still has the highest personal income taxes of any industrial state and is the fifth most heavily taxed state overall. Keeping the income tax at its high rate will deter future growth and put Massachusetts at a severe competitive disadvantage in the new global economy. Cellucci noted that cutting the income tax rate back to 5 percent will move the Commonwealth from fifth to 10th in ranking of the most heavily taxed states. He also noted that it will allow Massachusetts to leapfrog California and Michigan, the Commonwealth's principal rivals for high tech jobs, and put the state neck and neck with New York, the Bay State's chief competitor in the financial services industry.

"Lower taxes are a significant factor in business location decisions and with the highest income tax of any industrial state, the Commonwealth is operating with one hand tied behind its back," said Cellucci. "We must make Massachusetts more competitive and to do that we must bring significant, permanent tax relief."

The Cellucci-Swift plan will roll back the income tax to 5 percent in three steps. The rate is scheduled to drop to 5.6 in 2001, 5.3 percent in 2002 and 5.0 percent in 2003, ultimately saving the average family of four between $500 and $600 a year and pumping more than a billion dollars annually back into the Massachusetts economy.


[EXCERPTS]
The Commonwealth of Massachusetts
Department of the State Treasurer

April 5, 2000

Letter from Treasurer O'Brien on Tax Cuts

Senator Marian Walsh, Chair
Representative John H. Rogers, Chairman
Joint Committee on Taxation

Dear Chairwoman Walsh, Chairman Rogers, and Members of the Committee:

I am writing to comment on H.4980, H.4981, and H.4982, three initiative petitions regarding commuter tax relief, a state income tax rollback, and charitable giving. I regret that I could not appear before you personally, however a prior commitment has me out of the building this afternoon. I can not support these efforts to reduce revenues to the Commonwealth at the present time, particularly the petition to roll back the income tax to 5%. ...


[EXCERPTS]
Associated Industries of Massachusetts

A.I.M. Supports Prudent Tax Relief

Statement of Richard C. Lord
President
Associated Industries of Massachusetts

April 5, 2000

Associated Industries of Massachusetts, the Commonwealth's principal employer organization, supports a balanced approach to tax reduction, one that recognizes the need for public investments and for the sustainability of government as well as for tax relief. ...

... That is why we support the proposal initially put forward by the Massachusetts Taxpayers Foundation, and now substantially embodied in the House Ways and Means Committee's Fiscal Year 2001 budget document. As both Mass Taxpayers and the House have strong records as champions of fiscal responsibility, we are confident that this is a tax plan that will work.


Massachusetts Teachers Association

Testimony from Stephen E. Gorrie, President
Massachusetts Teachers Association
Against Tax Cut Ballot Initiatives h. 4981 and H. 4980

April 5, 2000

My name is Steve Gorrie and I am president of the Massachusetts Teachers Association. For 27 years I was a fourth grade teacher in Winchester.

I am here to speak against two of the tax cut initiative petitions House 4981 and House 4980 -- that are expected to appear on the ballot in November. Combined, these tax cuts would cost the Commonwealth more than $2 billion a year when they are fully implemented. When added to the tax cuts that were recently passed but not yet phased in, the state estimates that the revenue loss will exceed $2.5 billion a year -- almost as much as the $2.8 billion the state is spending this year in local aid for education (Chapter 70 funds).

Other educators here today will talk specifically about some of the progress that has been made in their schools, colleges and universities as a result of increased funding in recent years, some of the promise of future improvements if the state sustains its commitment to our students, and some of the problems we will face if these tax cut measures are passed.

Let me say briefly that a lot of progress has been achieved, particularly in low-income school districts. As you know, thousands of teachers have been hired enabling many schools to reduce class sizes, reinstitute programs that had been cut and provide additional help to students who need it. Teachers are working harder than ever to align their curricula with the new state standards. At our higher education institutions, new courses have been offered, standards have been raised and tuition has been substantially reduced.

These are all promising trends, but a lot more has to be done. The MTA recently highlighted its agenda in our Teachers' Blueprint for Educational Excellence in which educators -- our members -- said that adequate resources, along with hard work, good will and respect, are the keys to improving achievement. Reducing class size, establishing alternative programs for disruptive students, providing mentors for all new teachers these are among our priorities, and we will be filing budget amendments in the House to promote our goals. We know that money isn't the only solution, but we also know that lack of funds makes it much, much harder to ensure that all students are able to reach their academic potential.

Supporters of these tax cuts are unlikely to admit that any reductions would be made in education funding. So why are we convinced the education cuts will be deep? History, and common sense. Every time we have experienced a major loss of revenues, spending on public schools and higher education has been cut deeply. We learned those lessons the hard way after Proposition 2 was passed and during the recessionary years of the early 1990s. As for common sense: Schools will be primary targets for budget cuts because that's where the money is. Education is the single largest program in the budget, accounting for over one-fifth of state spending. A huge percentage of the budget is untouchable mandatory spending, such as debt service, pensions and entitlement programs. It is inevitable that a major state revenue loss will be felt in our classrooms.

How will the impact be felt? No one can say for sure, but it's no mystery where most of state spending on education is allocated: teachers and other staff, textbooks and other supplies and school buildings.

If you share my concerns about what the impact of cuts in education would mean for the nearly one million students we teach, I urge you, members of the legislature, to send a strong message to the public by voting "no" on the income tax reduction and toll and auto excise rebate initiative petitions before you.


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