Senate Debate
on "Promised" Tax Rollback
of 11 Year-Old "Temporary" Income Tax Hike

State House News Service
Wednesday, May 24, 2000


CONVENES: The Senate returned from recess at 10:01 am with Majority Whip Robert Travaglini presiding. Question came on engrossing the fiscal 2001 budget, and debate on amendments resumed.


INCOME TAX CUT: Sen. Lees offered amendment 598 reducing the income tax rate from 5.85 percent to 5 percent over three years.

Sen. Lees said everybody knows this amendment. This is the ballot question. I am hoping that instead of the public being the leaders that we are the leaders and that we take a leadership role just like Paul Cellucci and Jane Swift have done. Some of us were here when this came up before. I don't want to hear that it was not discussed on the floor that it would be a temporary income tax. That was a promise that was made by the Legislature to the public. You can coat it or try to change it any way you want. This would reduce the earned and unearned income. Working men and women will benefit the most. I helped gather signatures to put this on the ballot because we didn't have the guts to take this up. People were running up to sign the petitions when they heard what it was. They want to see their income taxes lowered. They have seen the shenanigans pulled in this building over the past few years. They are saying enough is enough.

The income tax was raised on a temporary basis. Somehow the word temporary to some of you has become permanent. Temporary means a short period of time. Permanent means forever. As the only person in here who has ever worked in manufacturing and one of the few who has ever worked in the private sector at all, the business community looks at the income tax when deciding whether to expand or come to an area. The first year of this is under $200 million. If we can't in a $20-odd billion budget afford this, we should be ashamed of ourselves. We just afforded the Big Dig and all of these other fancy programs. But you don't want to support your own taxpayers, the people who send you to this building. Seventy to 75 percent of people want this in every poll. We have the money now to support this. Let's lead not follow the public on this issue. Sen. Lees secured support for a roll call.

Sen. Rosenberg said we have this debate each and every year. Each and every year, my colleague and I find ourselves on the opposite side. His speech gets better each and every year, although no truer each year than it was the year before. I too was here in the Legislature in that very dark time when we had to borrow money and raise taxes, the highest tax increase in the history of the Commonwealth. We had a discussion about whether that $1.2 billion tax increase was temporary. The decision was we could not make it temporary because it was the deepest recession since the Great Depression. We had no idea when we would bottom out, so we could not put in statute the tools one would normally use to make it temporary. We chose not to put sunsets or triggers. We worked hard to institute fiscal discipline and correct our problems and to continue to build the economy and make our way out of the mess.

Starting about four years after the tax increase, even though there was nothing in the statute to compel us, we started a seven-year program that continues to this day, where we cut taxes by more than $2 billion. Also, as part of that, we cut income taxes by over $1 billion. We chose to do it by a different method than we chose to increase the income tax. When we increased it, we increased the rate from 5 percent to 5.95 percent.

As we cut the income tax, we used other techniques and ended up cutting the income tax by doubling and increasing deductions, exemptions, special provisions for people paying tuition and college loans, people caring for elders. In this budget itself, there's another income tax cut worth $80 million this year and $160 million when it's fully annualized by giving a tax break for charitable contributions.

Even if we had made such a commitment - and we did not, in my opinion, make such a commitment - we have cut taxes 30 times in the last seven years for over $2 billion. It's disingenuous for those outside the building and others to add to this perception that we have broken a promise. We have not been shy about cutting taxes. The governor's tax cut will disproportionately benefit the wealthiest citizens.

Therefore, I would argue that we should reject this proposed amendment and this tax cut. We have in fact been doing exactly what the gentleman said we should be doing.

Sen. Montigny said to the minority leader - give me a break, as he says so frequently. I'm not sure where the minority party has been the last several years. First of all, many of us on both sides of the aisle see tax cuts as something our constituents benefit from. In this budget alone, $1.93 billion is coming out of the income stream because of the tax cuts put forward.

Do the math, folks. The tax cuts did not get to the governor's desk because the minority party said so. They got there because the majority party sent them. He's done a masterful job taking credit. Year after year, 34 tax cuts since 1994 alone.

In this budget are reflected the earned income tax cut, in fiscal year 2001, $1 million. The elderly circuit breaker tax cut, $10 million. The rental deduction, $3 million. Student loan deductions, $3 million. The list goes on and on and on. In this budget alone, prior year tax cuts increased by $284 million. We also include an $80 million charitable tax deduction. It ramps up in FY '02 to $164 million. It's not only good in returning tax dollars to the taxpayers, it's good if it induces them to give more and help the non-profit sector.

I want to justify my suggestion that the Republicans form a budget buster caucus. In this budget alone, the total amount of amendments would throw this budget so far out of balance that it would look worse than the late 80s and early 90s. It would do more damage. The amendments would add up to more than $300 million off a balanced bottom line. We could only calculate $5 million to offset that.

Ultimately, the tax cuts and spending would equal $1.4 billion. That would be a budget more unbalanced than the darkest day of the 1980s. To suggest that Democrats haven't embraced tax cuts - we've done them over and over and over. Some of us are even grown affectionate of them. When constituents are crying out for better schools and nursing home quality, what they're saying is balance your priorities. Cut what you can, but spend on priorities.

It is difficult when we listen to the minority party referring to promises, referring to whatever, to suggest that we the majority haven't enacted these tax cuts - it's disingenuous. We need to be responsible.

I will conclude with this - regarding reversions, if we're not careful, there's a contradiction that should be mentioned. We stood earlier and heard that we should fund the Registry, we should fund the $5 million amendment for police safety vests. You're suggesting that by the money reverting, it shouldn't have been there in the first place, but in the next vehicle, you're supporting the governor's amendment to spend more money. You can't do both.

Sen. Rauschenbach said I rise to discuss this tax cut the minority party has put forth. In reality, it's an issue that crosses all partisan spectrums and deals with every citizen.

I want to lay out a story of our budget and give a little historical perspective and then look forward. Our budget debate focuses on living within our means, fiscal discipline. The gentleman is right as he talks about the collaborative way we have looked to return money to the citizens and enhance the opportunity for corporate Massachusetts to grow and prosper, create jobs and generate revenues. They're great stories. We've all shared in it. All of us have run on that.

At the same time, reflected on the fact that we want to run the Commonwealth in as responsible manner as possible. The philosophical underpinning of the minority's impetus in putting this forward is what is our role, responsibly so, as legislators as relates to how much money do we need to run the Commonwealth responsibly? And how much money should the citizen have to take out of their pockets to pay for this?

Therein is what this issue is all about. We build a maintenance budget. It's a tough process which the gentleman from Bristol and his capable staff go through for months and months on end. We agree with the House and governor on revenue projections, although we struggled a little this year. We've been conservative in our revenue estimates. And tight with our budgets, not expanding the base, not adding new programs, which we did at the height of the Dukakis era. Nobody wants to revisit that.

These last five years, the economy has been stronger and gotten stronger. We've had enormous surpluses. How have we dealt with those? We said we don't really want to expand the case for certain programs. We do a lot of one-time spending pieces. We come to the floor and say we don't want to take everything that comes before us. If we look at the efforts we've made through earmarks, if we added up everything we've rejected, so far it's over $223 million. We've said no.

A lot of this debate is about what are our priorities? How do we shape them, how do we deliver on them? We say no to a lot of very good things. The gentleman from Bristol knows he says no to hundreds of millions more dollars in his office as he constructs the budget. Why? It's discipline.

But what's the other side of the process? When we go to the governor and the veto process, it's his job to spend the money we prioritize and allot for him. Each and every year, we don't spend all that money. The money that's not spent is called reversions. How much? In 1995, there were $292 million in reversion. In 1996, it was $316 million in reversion. In 1997, $289 million, In 1998, it was $313 million. In 1999, we reverted $452 million. $452 million. What are we going to revert this year? We can't tell, but the rule of thumb is about 2 percent.

Why don't we spend this 2 percent? I'll dwell on the debate about the secretary of state. What do we do to him in this budget? We talked about going back to the line item format for his spending. We're giving him flexibility and control over all of his accounts to move the money around.

Let me tell you a process I call the Gulliver-ization of state government. We started going into accounts and deciding we don't like the way the administration deals with these accounts. Let's set up some controls and limit their ability to move money around, we create strong subsidiary spending. Look at DYS. You can't move money from the KK to the BB, only AA spending comes from this or that. We tie the administration up in knots. We make them come back to us. We don't want them shifting money. And what happens then? They can't spend all this money. They literally can't do it.

Part of the argument here about this tax cut, is it affordable? I have some concerns about the third year out, I don't mind telling you that.

But can we absorb the first two years? Sure we can. Look at the reversions. There's more than a billion dollars float in this budget. That money sits out there. We don't debate the budget in totality. Where do these reversions come from? They come from programs we care about. Income eligible day care reverted $9.2 million. The year before, $5.3 million.

There's a pattern there. Look at the Soldiers Home in Chelsea. Last year, it reverted $360,000. The year before, it was $344,000. The year before that, it was $357,000. Two years before that, $659,000.

The fact is there are two dynamics where we're responsible for. One is that we're constraining the ability of the administration to spend the hard fought dollars efficiently. And two, the citizens don't deserve just what we say is okay for them to have. They deserve everything they're able to have.

We have two obligations here. One is to responsibly look at what we give the administration in terms of flexibility and controls over how they spend money. Just as we've done with the secretary of state, if we let the administration manage efficiently and appropriately, we can do more with less. We gave that message to the secretary of state.

The fact is our government can be more efficient. We know that. The second thing is we know we rise about $1 billion the float. Some of that through a tax cut can well go back to the people whose money it is.

We have to be cautious about the notion that moving in the direction of a tax cut hobbles our ability to provide services. The fact is within the amount of money we spend, there's capacity to move forward with this measure that's before us to reduce the income tax. I hope the amendment is adopted.

Sen. Magnani said the initial proponent of this, CLT, was very, very up-front to say the exact opposite of what he just said, which is that the only way to keep those guys from spending more money is to cut off the air supply. So you can't on the one hand say we don't have to make a choice between spending and cutting, we can be more efficient.

We just funded a $2.5 billion overrun bill. The notion that we don't have to make a choice may sound philosophically attractive but it's the kind of thinking that got us in this trouble in the first place. If you want to cut off the air supply, let's at least cut taxes for people who need it.

Last Friday morning, I was at a senior center giving a workshop on the circuit breaker, a $50 million investment in property tax cuts paid for by state income tax payers. When the minority leader said people want a tax cut and they want this one, he said 70 percent want this. I'd be interested in meeting the other 30 percent.

But when you ask them compared to what, they start giving different answers. If you ask about more money for schools, it's a no-brainer. When I started telling them they were eligible for the circuit breaker, they said they're not eligible because they don't pay state income tax. To a person in that room, you have not only done nothing for them by this amendment, you have hurt them because you have undercut our ability to do a circuit breaker this year, to begin to look at school financing realistically.

If you ask the people do you want a cut in your income tax or have the state start paying for education instead of the property tax, your 70 percent drops really quickly. So please, let's be honest. It is a choice.

We pass this initiative and we cut $2 billion out of the capacity of this Legislature to fund education or health care or send money back to the cities and towns. That's the or-what. I accept that in a vacuum, there isn't anybody who wouldn't like to see a tax cut. This isn't the way to send money back to people who really need a tax break.

Sen. Knapik said sometimes I can't believe what I hear in this chamber. I wonder if there's anybody here who represents the middle class. When we have a tax cut like this, it is targeted directly at the majority of our constituents who don't work for government or have some contract with state government, the majority of our citizens who, quite frankly, deserve a break.

I heard earlier about the taxes and how we willingly cut them over time - this majority party came kicking and screaming to the tax cut debate this decade. They raised it to 6.25 percent. It was like pulling teeth to get it down to 5.95 percent. The people and the governor demanded then that we keep our promise. That's what we're talking about again.

If anybody believes we don't have the capacity to absorb this tax cut, I don't know where you've been. In 1990, the budget was $12.3 billion. From the time of John Hancock, it took 200 years to get there. In scarcely a decade, we nearly doubled it. We've done some great things to serve our needy constituents.

But there are limits to what we can do, and sometimes, we haven't constrained our ability to spend. When you add $11 billion to the base, the day of reckoning will come. We can spend that money, reserve it to another time, or give it back to the people it belongs to.

We hear that all this tax cut is, is a pizza a week. This means several hundred dollars to the young fellow I know who has two children under 18 months old. He's buying a lot of diapers. This tax cut means a lot to that small family.

We have one of the highest tax rates in the nation. We want young people like our legislative aides to get married, start families, stay here and buy homes. But it's expensive. There's a reason why 150,000 signatures were collected last fall. The people of this state know it's time to hold us to a promise this Legislature made over a decade ago.

One final corollary. You finally got your way raising Registry fees. You've been trying for five years, since Bill Weld lowered them. It took the calamity of the Big Dig for you to win. Did we really have to do that? No. But we knew it would make the administration look bad, so we did it. And boy have we heard about it. Those Registry fees are an abomination.

It never should have happened. I hope we're not going to hear any more about benefiting the rich. It preys on our basest fears of class warfare. We're dropping the ball on this income tax issue. We're not listening to the people. I hope we think about the middle class, who this amendment is solely aimed at supporting.

Sen. Walsh said I know each of us can recall certain moments when we have been frightened, humbled. When I first became chairman of taxation, I felt enormous fear at the ability to take from people their income. It's an enormous amount of power, the ability to tax individuals and business. It's an absolutely awesome power.

I feel and I know each of you feel that we just do the best we can. What's the right income tax rate for the people of Massachusetts? In two more years, it's going to be 5.75 percent. Should it be 4.5? How do we compare to the rest of the country?

On May 18 in 1990, one of our colleagues offered an amendment to make the then-income tax temporary, the fact is that amendment failed. It was a 25 to 9 vote. To the credit of the then-senator and now-governor, that senator was one of the nine. The fact is, this is the record of the state Senate. The amendment that became the law did not have any temporary language. The plain, simple language of the law was 6.25 percent. The body chose to avoid that language.

I know facts can get in the way, but that's the record. You've heard of a very reputable commission whose report has been the recommendation of many fine fiscal policies. It found in the early 90s that Massachusetts is 38th in fees and taxes. We now have more current data. We're 40th. That's very competitive. The income tax rate is not necessarily indicative or conclusive on the health of our economy. Our economy is becoming quite skewed. Seventy percent of older women don't have a pension. We are experiencing the most dramatic wage gap in the history of our country. The working poor is growing. The middle class is shrinking. The median income for a family of four here is $47,000 or $48,000. The average family would save $5 a week when this is fully implemented. Five dollars is five dollars. If you have a gross income of $20,000, you'll save $150. The greater your income the more you're going to save.

We never passed a promise. We passed an income tax rate. We passed a law. We've reduced the income tax twice. In two years it will be 5.75. We are not Taxachusetts. We have incredible unmet needs. We were begging the chairman of Ways and Means to give us a yes. We got a no because there wasn't enough dough. Anyone who filed an amendment and got a no, that means we wanted to do good things and there wasn't enough money. We have the largest baby boom in the history of the Commonwealth. We have a lot of things we need to take care of. We don't have enough day care. The Medicaid rates are an embarrassment. I have nursing homes going under because of the farce of Medicaid reimbursements. An income tax fully phased in at 5.75 is fair, competitive, rational and humane.

Sen. Lees said anybody can pull figures out from different studies and she always does that. It's difficult to disagree with anyone who is so sure of herself but in this case she's not right.

I found studies to back me up. Sen. Montigny loves to say to the minority party or anyone who disagrees with him that certain people add to the budget and they're budget busters.

If I was chair of Ways and Means, I would have included the things that I offered and made cuts in other areas. I don't like some of the programs in this budget. He did them though and I respect that. So don't say that boy, you offer budget busters. I wouldn't do in welfare and METCO what you've done. I wouldn't have done some things in the Department of Corrections. We have an amendment coming up about Greenbush that would save $400 million. People had heart palpitations about increasing the MBTA rates.

Don't say the sky or the world is going to collapse because we are offering an income tax. Sen. Montigny hasn't been here that long. You have spent money like crazy. When you say I've been great in not spending $1.9 billion in tax cuts, you've certainly spent a lot more.

We feel very strongly that we can live within our means. Sen. Rauschenbach talked about 3 or 4 percent of the budget being reversions. Someone in the hall said what are you talking about? People don't want to talk about it.

I do believe we made the promise in the Senate. I don't believe the House did. The Democrats were told you can't tie up a future Legislature. But every one of them that got up they said this is temporary, it's short term. I came up with some figures from good organizations and those indicate we pay much higher than the national average in taxes, much higher than New England. This is hundreds of dollars. It's a mortgage. It's a car payment. Let's lead on this issue. You know next year you're going to have to have it anyway.

Sen. Montigny said it's tough to battle with the minority leader because he's quite popular in my district. He whines about how the cable TV doesn't reach that part of western Mass. We do have cable. I refuse to pay the monthly fee. Those with cable think he's an all-around nice guy.

What happens with reversions, the governor has bragged about pumping up the stabilization fund. Reversions end up in the stabilization fund and can be passed on as automatic tax cuts. Programs are paid for by one-time surpluses. This Senate has engaged in tax-cutting with one-time or I should say annual reversions. In a year like this, they would have made for pretty good surpluses but the unfortunate problem is the administration grossly mismanaged the Big Dig to the tune of $2.2 billion.

If that hadn't happened, we would be discussing how best to offer one-time tax cuts or pay-as-you-go capital projects. We would have paid for all the Registry's needs. We voted for 34 tax cuts since 1994. What you're really suggesting is a shell game. We in the majority party would do the right thing. We would have to reverse the far far far more effective targeted tax cuts for rental and child care and the elderly. You would have a far more devastating impact than you do in rejecting this. On the Greenbush line, I am surprised to hear the support from the minority party when the governor is pushing to expand the Greenbush line. We are sent here to make tough decisions. When you come to the table with seven votes, you're able to offer these amendments but we are charged with offering a responsible, balanced budget.

Sen. Tarr said there may be a difference of opinion on Greenbush. You mentioned the overrun. What would it mean if we didn't have to contemplate a 40 percent reduction in federal transportation aid that accounts for far more than $1.9 billion?

How many questions really do make it to the ballot? The citizens are committed to this public policy measure. It was suggested that we will revisit other tax cuts. That's interesting. We have had 30 tax reductions and during that time, the budget has roughly doubled. To assert the tax cuts offset the ability to grow revenues and programs is simply contradictory to the history we've experienced. The arguments now are similar to the arguments then in the dark days. We hear 7 percent of taxes come from corporations. So 93 percent comes from individuals.

It's interesting that we heard the suggestion that citizens would rather have us take money by the income tax and return it to cities and towns by revenue sharing. The charitable contribution deduction is a noble idea. How better to help charities than by expanding the economy and helping people earn more. I am not sure how many states are growing faster than we are.

TAX COMMISSION AMENDMENT: Sen. Pacheco offered a further amendment substituting a new section relative to a special commission to study the effects and implementation a tax reduction would have on services.

Sen. Pacheco asked if a roll call has been ordered on the main amendment. Sen. Birmingham said yes. Sen. Pacheco requested a roll call on the further amendment. There was not support.

Sen. Pacheco said I thank the members for the profiles in courage on the further amendment. It seeks a special commission. It struck me during debate that we ought to have an opportunity to have a full-blown study of this issue.

I was in the House when this tax increase passed. I voted against the tax increase. I was here a number of times when we passed huge tax reductions. We have had the largest tax reduction in the history of the Commonwealth under your leadership Mr. President. If this does not pass, I would vote against the pending amendment because it seeks no remedy in terms of what would be cut or how we would implement this tax cut initiative - what would actually be in the balance. Studies have been done prior to the Big Dig fiasco. So for members of the minority to say don't worry, everything's going to be okay, it brings me back to don't worry, on time on budget. I don't want to do something based on someone's gut feeling that everything's going to be okay. We ought to make sure we know what we are doing when we do further tax reductions. When this is called in the negative, I will question the vote.

Sen. Walsh said on so many issues we could do more study. This commission would continue to study the appropriate income tax rate but for Ways and Means and Taxation to make a recommendation, an awful lot of study was done. The reporting date for this study is Dec. 1. The ballot question, should it be on the ballot, will be in November. This simply will not be helpful. I urged rejection of the further amendment.

By voice vote, further amendment REJECTED. Sen. Pacheco questioned the vote. Sen. Birmingham said the chair interprets that as a request for a standing vote. By a standing vote of 1-13, amendment REJECTED. Sen. Pacheco said he would not further doubt the vote.


Roll Call Vote







All remaining Democrats ...
and Republican Sen. Richard Tisei (?-Wakefield)

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