CLT Update
Monday, April 30, 2001

House opens budget debate
with drive for more taxes

The following memo is being hand-delivered this morning to every member of the House by CLT Associate Director Chip Faulkner, prior to the opening of the House budget debate this afternoon.

As you can see [in yesterday's Boston Globe report, below], the drive is on for more taxes again. We've provided them with a perfect and simple solution, a voluntary tax check-off that could bring in far more revenue than any of their confiscatory schemes, if only they'll give it a chance.

Chip Ford


To:  Members of the Massachusetts House
        April 30, 2001
Re:  House Budget and new tax revenues

Just in case the subject of new taxes comes up during the budget debate:

The Massachusetts tax burden, per capita, is still the 5th highest in the nation, and will remain high even after the income tax rollback is fully phased in.

But if that's not enough -- and for some people it is never enough -- then there is an easy and ideal way to get more revenue.

Instead of raising the capital gains tax and jeopardizing our economy, or raising the cigarette tax again, or creating a new tax on Joe Six-Pack, simply pass CLT's Senate Bill 1734 or Rep. Fran Marini's House Bill 2093. Senate Bill 1734 will:

1. Provide a check-off on all state personal income tax forms for electing an additional voluntary tax;

2. Create a new table in the Department of Revenue's Schedules and Instructions booklet that provides the difference between the decreasing income tax rate (on Part A and B income) and what it would have been had Question 4, the income tax rollback, not been approved by 59 percent of voters -- the voluntary tax;

3. Require the Department of Revenue to annually report the additional revenue derived from the voluntary tax check-off and the number of taxpayers electing to participate.

House Bill 2093 is similar, letting voters choose to pay a 5.85 percent rate.

Instead of targeted tax cuts, these bills give targeted tax hikes -- and the voluntary target is taxpayers who want to pay more. They are for choice, and against coercion. They answer the question: "Can't we all just get along?" by letting everyone be a winner of last fall's Question 4 tax rollback campaign.

The income tax rollback allows taxpayers to take their tax cut and spend it on their own priorities, including, if they want to share, the charity of their choice. S1734 or H2093 allow some taxpayers to instead choose to continue to pay a higher rate and let the Legislature decide where the money should go.

We hope all legislators and taxpayers who want higher taxes will choose to pay them, instead of raising taxes on capital gains, cigarettes, beer and wine, or anything else.

The Boston Globe
Sunday, April 29, 2001

At the State House, taxes back on agenda
By Rick Klein
Globe Staff

Suddenly, on Beacon Hill, they're talking taxes.

A group of House Democrats wants to increase the capital gains tax. A Democratic senator wants to halt a rollback of the state income tax. The Senate's Tax Committee chief wants a new tax on liquor. And lawmakers in both houses are seriously discussing a 50-cent increase in the cigarette tax.

At the end of a decade in which the state enacted 41 tax cuts, totaling $4.5 billion, a slowdown in the economy has generated a flurry of taxation proposals.

In the state tagged "Taxachusetts," it appears the antitax resistance that hardened during the 1990s is crumbling.

"We are finally capable of having a discussion of the total state and local tax burden," said Representative J. James Marzilli Jr., an Arlington Democrat. "There's a greater willingness to examine some issues that during the 1990s were considered the third rail of politics."

Some of the proposals appear to have little chance of passage. Others, especially the cigarette tax increase, have powerful backers in the Legislature. That tax would give Massachusetts one of the highest tobacco taxes in the nation, at $1.26 per pack.

Representative Paul C. Casey, a Winchester Democrat and the chairman of the House Taxation Committee, spoke of an "undeniable" appetite for limited new taxes in the Legislature. The public, Casey said, is willing to support targeted tax increases, provided that they are directed at important programs. The cigarette tax would raise $150 million to help pay health care costs, according to the tax's advocates.

"There's become a more developed rationale on the part of the electorate," Casey said. "Certain reps have picked up on that overall predisposition."

The Swift administration says lawmakers are overreacting to a sputtering in the economy, and giving in to the easy temptation of new taxes.

"Taxing is something that you do only in the face of an overwhelming compelling public need," said Stephen P. Crosby, administration and finance secretary for Acting Governor Jane M. Swift. "We have enough money to increase the state budget by more than a billion dollars. That ought to be enough."

After taking over as acting governor this month, Swift almost immediately took a "No New Taxes" pledge. Her predecessors, the Republicans Paul Cellucci and William F. Weld, had taken similar vows. Swift may have more occasion to put hers into practice.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, said lawmakers are struggling to adjust to a reality: the loss of more than $1 billion in revenue, forced by the income tax rollback, which passed by ballot initiative last year. The income tax rate will drop to 5 percent by 2003.

"They're looking for additional revenues for programs because of the tax cut," Widmer said. "I don't think it makes any sense at all, on several levels."

Widmer and business groups especially oppose the capital gains change pushed by Marzilli and 18 other House Democrats. It would restore the tax on long-term capital gains to roughly the rate paid on other income. It would generate $400 million annually for the state, Marzilli said.

Casey, though undecided himself, said that the measure could be attractive to the Legislature this term, and that the revenue could help fund expansions in education and health care. Marzilli agreed.

"If you want to expand services on a widespread basis, then you have to expand revenues," Marzilli said. "We should be as flexible in our attitudes toward taxing as we should be toward spending."

The long-term capital gains tax was phased out starting in 1996, and there is now no tax for assets held for at least six years. Advocates say that bringing tax back to 5 percent would generally affect only the richest residents.

But business interests and the Swift administration are opposing the measure. New taxes of this type could scare away businesses, perhaps undoing the work of a decade in which Massachusetts has become more competitive, said Christopher Anderson, president of the Massachusetts High Technology Council.

"We have made progress, and we still have a long way to go," Anderson said. "The proposals that are on the table would bring us immediately back to the problems we had in the '80s and undermine the very measures we have put in place to give us advantages over other states in attracting employers."

Casey disputed that argument. Even though most lawmakers weren't in office for the Dukakis years, they have learned lessons from the late 1980s fiscal crunch, he said. Even now, while talk of new taxes has returned, nobody is going as far as the Legislature did a decade ago, when it enacted across-the-board income tax increases.

The number of tax cuts filed this term, Casey said, is in the hundreds, while just a handful of proposals would increase taxes.

Even Marzilli, the chief backer of the capital-gains tax increase, is simultaneously supporting a tax cut -- an increase in the earned-income tax credit, which reduces the taxes paid by poor residents.

"I don't see a scheme where people have to look over their shoulders and say, 'Oh no, it's going to be Taxachusetts again,"' Casey said. "Will we have a repeat of history by increasing a tax on alcohol or cigarettes? I doubt it. There's a rationale involved here."

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