CLT Update
Wednesday, April 25, 2001

TEAM, MTA call for more new taxes ... again

"It is no secret that MTA opposed Question 4, the income tax cut approved by voters last year. We opposed it because we believed that the state's healthy revenue stream gave us a historic opportunity to invest in world class schools. Now that the tax cut has passed and revenues are dropping, it is clear that future funding for public education is in jeopardy in this state unless the public and the legislature recommit themselves to raising the revenues needed to do the job right."

Mass. Teachers Association
News Release
Apr. 24, 2001

Yes, they're at it again: "More New Taxes! More Is Never Enough! (What's yours is MINE and what's MINE is MINE too!)"

First it was the proposed sales tax on beer and wine and another fifty cents increase on a pack of cigarettes. Then came TEAM's proposal to increase the corporate taxes and the general sales tax from five to six percent.

A small observation was made in The Buzz column of Sunday's Boston Herald:


Remember Jim St. George's "No on 4" campaign to defeat the tax rollback question? St. George said if voters cut their income taxes, the state wouldn't have enough money to spend on essential services like education and health care.

Now St. George is singing a different tune, pointing to the tax cut as proof that voters are tired of seeing corporations get tax cuts.

"We're shifting the taxes away from corporations and onto people," St. George told the Statehouse News Service. "Last year, the public said, we're tired of that and we're not going to take that burden anymore. Now, the question is -- where do we shift that burden back onto?"

CLT responded to that call for a larger "tax take" -- as Jimmy termed it -- on March 15th.

We've provided them with our Voluntary Tax Check-off solution, which TEAM's Jimmy St. George immediately labeled "an obscene joke." The State House News Service then reported Jimmy "would have 'eagerly' given up the tax cut in favor of state services, but now that the voters have spoken, 'what I do personally is irrelevant.'"

Jimmy, what you do "personally" is never "irrelevant" when it sets a good example: It's called leadership.

TEAM and the Massachusetts Teachers Association would have us believe that a fiscal crisis looms without more, more, more revenue -- but they have yet to embrace our Voluntary Tax Check-off.

They seek to increase revenue for allegedly critical "unmet needs" by only $300 million (in this latest proposal) when our proposal could provide them with perhaps hundreds of millions more (if all those who insisted that they didn't need or want the tax rollback elect not to take it).

Of course, their schemes always take that revenue from others.

Jimmy asked "where do we shift that burden back onto?" He's keeping awake nights trying to find the answer ... or answers. But he doesn't need to expend all that energy or lose any more sleep.

Jimmy, look in the mirror, then talk to your friends. It's called the Voluntary Tax Check-off. It's painless, fair, and it will cost nobody anything they don't already have or want. It's not a "tax take," Jimmy ... it's a revenue contribution, and charity is good for the soul.

Chip Ford

PS. The Legislature should only break its 1994 deal with Gov. Weld for the phase-out of the capital gains tax when it's willing to give up its quid pro quo end of the deal: the 55 percent Legislative pay raise Weld granted in exchange. Doing any less would be dishonest and hypocritical -- but what the heck. This is, after all, the Massachusetts Legislature, right?

State House News Service
Tuesday, April 24, 2001

Legislators proposing new $300M increase in tax
on investment income

By Michael P. Norton

STATE HOUSE, BOSTON, APRIL 24, 2001 ... Six months after voters approved a major reduction in the income tax, lawmakers and liberal tax policy advocates are pushing a new plan to raise taxes on investment income. Acting Gov. Jane Swift quickly pledged to veto any tax hike, should one advance.

Under a proposal that will be considered during next week's House budget debate, the state capital gains tax would be raised to 5 percent, or the same rate assessed on wage income. The state has a graduated capital gains tax structure and assets held for more than six years are due to become tax-free this year under a law that cleared the Legislature in 1994 and was eagerly signed by former Gov. William Weld.

Supporters of the plan say it will raise $300 million a year that could be delivered to cities and towns for education, to stabilize struggling hospitals and nursing homes, or to prevent affordable housing cuts or increases in the amounts elders need to pay to participate in a new state prescription drug insurance plan.

Opponents of the plan say it will discourage capital investments in Massachusetts, depress wages and possibly reduce overall state revenues. They say the gradual tax cut, along with a strong stock market, contributed to the improving economy the state enjoyed in the late 1990s and into the new century.

Depending on the outcome of budget talks this spring and summer, state spending is likely to increase by between 5 and 6 percent next year, with the heftiest budget boosts in the areas of health care and education. However, rising fixed costs such as health insurance and pensions are forcing cuts in some areas as the state and national economies continue to struggle after years of prosperity and soaring profits.

State budget writers expect to finish the fiscal year in July with a surplus of as much as $300 million, a relatively modest sum compared to recent years. Looking ahead, state revenue and budget officials looking at a volatile economy are in a continual struggle to develop realistic revenue estimates. And budget writers have told many lawmakers with new spending plans that they're not affordable this year.

James St. George, executive director of the Tax Equity Alliance For Massachusetts Education Fund, said the wealthiest 1 percent of Bay State residents, with average incomes of $1.5 million, are by far the biggest beneficiaries of the gradual capital gains tax phase out.

Citing new data provided by the Washington D.C.-based Institute on Taxation and Economic Policy, St. George said few middle or low income Massachusetts residents benefit from the capital gains tax break because most of their assets are in tax-free retirement accounts and profits from home sales are largely tax-free as well.

St. George also said the report's authors, after surveying economic data, concluded there is no meaningful economic stimulus from federal capital gains tax cuts that exceeded the reductions implemented at the state level. "This is a remarkably ineffective policy to stimulate growth," St. George said.

Through a spokesman, Acting Gov. Jane Swift pledged to veto a capital gains tax hike today. "Governor Swift made it very clear that she will absolutely veto any tax increases," said Swift spokesman Jason Kauppi. "You would think these people have learned from their resounding defeat at the ballot. Voters in November indicated that there is zero appetite in Massachusetts for increased taxes."

Kauppi added that the Swift administration supports $1 billion in new education aid over the next five years and is using revenues from a landmark settlement with tobacco companies to help hospitals and the health care industry.

"The administration put forward a balanced budget that addressed the priorities of the Commonwealth," said Kauppi. "We have sufficient revenues to deal with those issues. Raising taxes is not the way to help a softening economy."

Rep. James Marzilli (D-Arlington), lead sponsor of the budget amendment, said legislators two years ago approved a budget rider freezing the capital gains tax rate at 2 percent. Gov. Paul Cellucci vetoed that provision and the Legislature never attempted an override. And in 1998, Marzilli said, efforts to raise the capital gains tax rate were successful in the House but died during conference talks with the Senate.

Marzilli feels his plan has a chance, although two thirds of members would have to OK an override. He said many citizens are "flabbergasted" that wealthy investors get tax breaks on investment income. At the State House, Marzilli said, key decision makers are "too often captive of the so-called conventional wisdom" that suggests cuts in investment-related taxes automatically spur more investments and jobs.

Another modern Beacon Hill reality holds that tax increases are off the table. The last major tax hike was in 1990 and that boost in the income tax rate helped bail the state out of a serious fiscal crisis. Since then, the Democrat-controlled Legislature has teamed up with Republican Govs. William Weld and Paul Cellucci to approve more than 40 tax cuts. Tax hikes have been quickly ruled off the negotiating table.

With some spending cuts in the offing now, Marzilli says it's time to think about new revenues. "It is assumed that the Legislature has no control over total state revenues and that's just a plain wrong assumption," Marzilli said. "It's up to the members to restore the cuts in services."

About a dozen House lawmakers signed onto Marzilli's amendment after he sent an email to his colleagues Thursday asking for their support. Many current lawmakers were not serving in 1994 when Gov. Weld proposed a legislative pay raise in exchange for the Legislature's backing of the capital gains tax cut. That deal generated a public uproar, but went through.

Massachusetts Teachers Association President Stephen Gorrie said the tax hike proposal is fair, would mainly hit "wealthy investors," and raises "badly needed" revenues that could be spent on education.

"Members of the business communities have said over and over again that the most important resource this state has to offer is an educated workforce," Gorrie said. "Massachusetts has a strong system of public schools, but teachers, faculty, parents and business leaders all know that more needs to be done to prepare today's students to succeed in our competitive high tech economy."

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