Democratic senators have launched a movement to delay part
of the $1.2 billion income tax cut that was overwhelmingly approved by voters last year.
State Senator Cynthia Stone
Creem, a Newton Democrat, plans to file a bill tomorrow to put off for one year the next
scheduled reductions of the state income tax rate, and use the money to help close a growing state budget shortfall.
The bill is the first serious effort to revisit the tax
reduction, which was championed by former governor Paul Cellucci and passed by a 60-40 ratio last year. It could erupt
into a fiery political issue on Beacon Hill as leaders try to cope with the prospect of a $1.1 billion budget
gap this year.
Creem said she has lined up several co-sponsors in the House
and the Senate, including the Senate majority leader, Linda J.
Melconian of Springfield.
"We have extreme circumstances," Creem said. "We might be
saving $500 million that we can use to do some of the state functions that people need. Where is the money going to
come from?"
Creem said the money would be a welcome addition to state
coffers, given the precipitous revenue drops of the past three months and the current talk of deep cuts to state programs.
A family of four making about $70,000 a year would not receive a scheduled $175 state tax
cut next year if the bill becomes law, according to Swift administration figures.
"I feel strongly that the voters will understand this new
reality and will support us in postponing the next round of income tax cuts," Creem said in a letter sent to legislative
colleagues.
Senate President Thomas F. Birmingham refused to rule out
reconsidering the tax cut, though he said the Legislature must first make budget cuts and tap into reserve accounts.
Birmingham did not make clear his personal position on the measure.
"It's probably one of the last options, because the voters
did vote for it," Birmingham said. "But I think in these fairly dire circumstances, one should never say never."
Business groups attacked the proposal as ill-timed. The
Massachusetts High Technology
Council yesterday released a plan for an economic stimulus package that would increase the
pace of the tax cut to put more money in consumers' pockets.
Creem's proposal presents a tricky political problem for
Birmingham. He is planning a run for governor, and does not want to be associated with an unpopular repeal of a
voter-approved tax cut. However, his Democratic constituency, including many unions and colleagues in the
Senate, may demand it.
Acting Governor Jane Swift has vowed to veto any delay in
the income tax cut, meaning that the House and the Senate would need two-thirds majorities to overcome her objection.
The Sept. 11 terrorist attacks have altered the political
landscape surrounding taxes and government spending, said Lou DiNatale, a political analyst at the University of
Massachusetts at Boston. Democrats will be able to make a plausible case that more money
is needed to provide crucial government spending in areas like public safety and education,
he said.
"For the Democrats, if they present this properly, it may
not be a bad thing," DiNatale said.
Swift would probably relish the opportunity to flog the
Legislature for trying to raise taxes at the first sign of economic troubles, said Mickey Edwards, a lecturer at Harvard
University's Kennedy School of Government and a former Republican congressman. But that will
resonate only if she's able to continue to provide crucial government services
throughout the economic slowdown, he said.
Creem's bill would freeze the state income tax rate at 5.6
percent next year instead of dropping to 5.3 percent. The rate would then drop to 5.3 percent in 2003 and to 5 percent
in 2004. Creem said she hopes the bill can be signed into law soon so it can be reflected in
this year's budget. The Legislature is four months late in sending a budget to Swift's desk.
House Speaker Thomas M. Finneran declined to comment. House
Ways and Means Chairman John H. Rogers echoed Birmingham's comments about the importance of
controlling spending before revisiting the tax rollback.
State House News Service
Wednesday, October 24, 2001
High Tech leaders' stimulus plan
would speed up income tax cut
By Helen Woodman
STATE HOUSE, BOSTON, OCT. 24, 2001 ... One of the industries
most hurting in the current economic free fall has proposed its own nine-point plan to ease the downward spiral
here in Massachusetts.
A cornerstone of the package put forward Wednesday by the
Massachusetts High Technology Council is an acceleration of the income tax cut now being phased in as the result
of a ballot initiative voters approved last year.
The call to drop the rate to 5 percent as of Jan. 1, 2002
rather than gradually arriving at that point a year later, comes at a time when groups worried about losing state support
for their programs or services are recommending that the tax cut be scrapped altogether. High tech
leaders say the change would pour $450 million more into the state's sinking economy.
While legislative budget writers and Acting Gov. Jane Swift
have warned the state budget must be slashed to accommodate declining tax receipts, advocates argue that the scheduled
tax relief should be abandoned instead. But the technology business leaders disagree.
"Our success will be judged by how well we help the economy,
not just on how we manage state government," said Massachusetts High Tech Council President Christopher Anderson.
"We are deep in a worldwide recession whose impact is felt
by all of us," said MHTC Chairman George Chamillard of Teradyne Inc. The high tech industry is in a particularly
"steep decline" with daily headlines of more layoffs and furloughs, he
said, and the state must avoid the "missteps" of a decade ago when the economy suffered a similar decline.
Lawmakers in the early 90s raised taxes during the decline, putting an extra
burden on struggling workers while enabling a rapid government expansion in the 90s.
Anderson noted state government has more than $2 billion in
reserve funds that can be used over the next three years that, combined with spending cuts, "can help distinguish the state's
response now from that of the late 1980s."
Also on hand at Wednesday's news conference was William
Vernon of the National Federation of Independent
Business. "The focus of the Legislature must not simply be to balance the
annual state budget. That is to a great extent where we went wrong in 1989.
Rather the goal should be a vibrant small business community that is essential to a growing
and successful state economy and the enactment of policies that make the goal attainable. A
balanced state budget is a bi-product of those polices."
The stimulus is needed, according to Wednesday's council
presentation, because government revenues and spending have doubled during the past decade and, despite 41 tax cuts
totaling $3.5 billion, Massachusetts still ranks 11th highest among the states for its tax burden.
In addition to moving the state income tax directly to 5
percent, council members recommended eight other measures they believe would stabilize the economy. They would:
* Spur sagging Logan Airport revenues, and thereby bolster the
larger tourism and hospitality industry by providing federal oversight of security, state-of-the-art security technology,
and a new runway at the airport.
* Reduce unemployment insurance rates, allowing $100 million
more in employer dollars to stay in the economy and preserve jobs.
* Earmark "private activity bonds" for economic development
projects and worker training.
* Eliminate the medical security payroll tax since an
off-budget trust fund has a balance of $145 million and the change would free up $45 million this year.
* Eliminate the mandate that businesses pay 40 percent of their
estimated annual tax payments in the first quarter of the year, thereby making the money unavailable for other
purposes during the year.
* Enact changes that will prevent more lawsuits against HMOs
because such suits imperil the future of the health care delivery system and add to the cost of doing business.
* Allow companies that are not profitable to sell research and
development tax credits to businesses that can better use them to stimulate the economy.
* Steer away from any mandated family leave plan because its
ultimate cost is unknown and it would particularly hurt smaller companies.
Anderson said he's briefed legislative leaders about the
economic stimulus plan but has had no commitments from them.
The council represents 200 high technology companies based
in Massachusetts.
State House News Service
Wednesday, October 23, 2001
State budget chief to announce plans to prevent budget
deficits, crisis
By Michael P. Norton
[Excerpt]
Administration and Finance Secretary Stephen Crosby said
while some are arguing for the tax cut to be delayed, rolled back or cancelled, others, like the tech industry, want to
speed it up. "Which probably means we're in about the right place," he said. "We're on a phase in
which is reasonable."
The Boston Herald
Thursday, October 25, 2001
High-tech seeks help from state
by Eric Convey
[Excerpt]
Bill Vernon, Massachusetts director for the National
Federation of Independent Business, said Beacon Hill lawmakers should avoid the temptation to focus only on balancing the
budget.
"That is to a great extent where we went wrong in 1989," he
said, referring to tax and fee hikes enacted by the Legislature to deal with the collapse of the state's economy....
Several business leaders called on the Legislature to tap
into the so-called "rainy day fund," which contains $1.7 billion and was set up to balance the books in case of a
revenue shortfall.
"If this isn't a rain day, when is it?" Chamillard said.
