The Boston Globe
Thursday, February 28, 2002
Lawmaker floats tax hikes to cover deficit
By Rick Klein
Globe Staff
Faced with "gargantuan and ghastly" revenue losses, House
leaders are circulating a list of 16 possible tax hikes they want members to consider to close a deficit they say will top
$2 billion next fiscal year.
While stressing that he is not endorsing any specific tax
increases, House Ways and Means Chairman John H. Rogers sent a letter to House members outlining a series of politically
unpopular moves, including the halving of the personal deduction, a reduced exemption for
single parents, and limiting deductions for renter and students' tuition payments.
Rogers, a Norwood Democrat, also floated the idea of raising
the cigarette tax by $1 a pack - twice the amount that has previously been discussed - and raising the income tax rate to
5.6 percent, despite a ballot initiative approved two years ago to drop the tax to 5 percent by
next year. Until now, lawmakers have mainly focused on freezing the tax rate at 5.3 percent.
House leaders estimate the budget gap this fiscal year,
which ends June 30, is at least $500 million. They say the deficit for fiscal 2003 will likely be more than $2 billion.
Critics denounced Rogers' letter as scare tactics. But
Rogers said that even with the use of $500 million in state reserves, new taxes will probably have to cover between $1.5
billion and $1.8 billion. And on top of that, he warned, deep program cuts will still be necessary.
"We cannot tax and spend; we must tax and cut," Rogers
wrote. "Harbor no illusion ... about the unpopular task before you; it will likely be your greatest challenge in office.
"Such gargantuan and ghastly [revenue] losses only further
exacerbate an ugly picture," Rogers wrote.
Rogers's list was drawn up to detail the options that House
members are likely to consider when they debate new revenue sources next month. Several members interviewed after a
bipartisan House caucus speculated that the House would only pursue a few large taxes,
such as adjusting the income tax rate, since the added revenue from smaller tax increases is
outweighed by the political danger of voting for them.
Tax increases would require the support of two-thirds of
House and Senate members, since Acting Governor Jane Swift has promised to veto any such move. House Speaker Thomas
M. Finneran cautioned that the House is unlikely to try to pass most of the tax increases
Rogers mentioned.
"There's a limit to the political capacity that any
institution has to all at once do several hundred million, $1 billion, or $2 billion in tax increases," he said. "The first
initial effort goes to the cutting side."
State revenues declined another $100 million this month,
House leaders said. Finneran said the revenue losses are putting the state further in the hole and budget problems are
spiraling far more than he imagined.
But fiscal conservatives ripped into House leaders for
considering so many new taxes at a time when consumers need more money in their pockets. By raising the possibility of
nearly $2 billion in new taxes, Rogers may be setting voters up to feel like they've won something
by only getting hit for, say, $1.2 billion in the coming months, said Barbara
Anderson, executive director of Citizens for Limited Taxation and
Government.
"I think that's some kind of record. I didn't realize there
were 16 taxes that we didn't already have," Anderson said. "That's a nice shopping list. It shows there's absolutely no
limit to the imagination of a state rep hell-bent on raising our taxes."
In a mostly symbolic gesture, Finneran yesterday asked House
members to take voluntary pay cuts for the last four months of fiscal 2002. If all 157 current members opt to take eight
unpaid days, the state will save about $310,000 - putting just a small dent in this year's deficit
but allowing representatives to make an important statement, Finneran said.
"In the context of layoffs that have begun to occur ... I
suggested to the members that we ourselves take steps to involve ourselves in this sacrifice and this pain," Finneran
said. "We are in this together with everybody who participates in public service."
The move was hailed by the state's trial court workers, who
were asked earlier this month to work eight days without pay to save the courts about $10 million. The workers are pushing
judges to follow the lead of their lower-paid courtroom colleagues in agreeing to work
without pay.
"All the credit in the world to the Legislature for
voluntarily acting and sending a message to everyone that this is real," said Richard Iannella, the Suffolk County Register of
Probate. "I think the only one who's not getting the message is these judges."
Senate President Thomas F. Birmingham said through a
spokeswoman that he will consider asking senators to take the same step. While he had not seen Rogers' letter, Birmingham
"supports the aim of being forthright about the size of the fiscal problem and the difficulty in
addressing it," said Alison Franklin, his spokeswoman.
State Representative J. James Marzilli Jr., a frequent
Finneran critic, said he's disappointed that Rogers and Finneran aren't discussing other options. Members should
consider levies that primarily affect big businesses and their top employees. Massachusetts enacted tax cuts
that benefitted businesses during the 1990s.
"It's apparent to anyone in the House leadership now that we
have to raise taxes," said Marzilli, an Arlington Democrat. "But I'm offended by the notion that the only tax increases
that are to be considered are those that fall most heavily on the working poor and the middle
class."
Also yesterday, the Massachusetts Mayors Association asked
that the income tax rate be raised from 5.3 percent to 5.95 percent - the rate that was in effect before voters approved
a phased-in tax rollback in 2000. More than 30 mayors met with Finneran and Birmingham
to impress on them the importance of preserving aid to cities and towns.
Finneran said he was thankful for the input, but he said
members seem to lack the appetite for a tax hike of that size.
"I did point out that the vote and the difficulty will be
borne by the members of the House rather than by them," the speaker said. "I'm not sure that the members will rush to
embrace that. Certainly they won't rush to consider it until we make efforts on cutting the budget
where it can be cut."
Globe correspondent Michele Kurtz contributed to this report.
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The Fall River Herald News
Friday, February 28, 2002
State aims for revenue increase
By Michael W. Freeman
FALL RIVER -- Next week, a group of state lawmakers will hold a
hearing in this city to ask the public's help in figuring out ways to generate more revenue for the state's general
treasury.
In most people's minds, that translates into one thing:
raising taxes and fees.
"The base that we're starting from, generally, is that the
revenue side of the budget is $2 billion out of whack from the last fiscal year," said state Rep. Michael J.
Rodrigues, D-Westport. "If we don't raise one penny in taxes, we've still
got to come up with $2 billion for the next fiscal year."
Rodrigues is a member of a special committee formed by House
Speaker Thomas M. Finneran, D-Mattapan, to study ways to deal with the declining state tax receipts. The
Revenue Working Group, as it's called, will hold three public hearings in the
next 10 days, including one at the Advanced Manufacturing & Technology Center on March 7 at 3 p.m.
On the table: postponing the rollback of the income tax cut,
raising cigarette and gasoline taxes, and establishing an Indian-run casino, with the state collecting a percentage of
its profits.
"The mission and responsibility of this committee is to
present to the full House an a la carte menu of the different revenue enhancement options," Rodrigues said. "We will have a
debate on all of these on the week before we do the budget, which will probably be the last week of
April."
The mission of the Working Group is already being criticized
by Citizens For Limited Taxation.
"I think what they're doing is presenting a false choice,"
said Chip Ford, CLT's spokesman. "It's 'Which taxes will you like us to raise?' My recommendation will be to cut a budget
that has more than doubled in the past 10 years. If we can't find some way to cut an $11 billion
increase in the budget, somebody is not doing their job on Beacon Hill. Tax hikes
shouldn't even be on the table. The problem isn't a shortage of taxes, it's overspending."
Rodrigues said he hopes the general public can give the
Working Group some fresh ideas on how to deal with the state's budget crisis, although he acknowledged that some people might
show up to say they can't afford to pay any more taxes now.
"We take all of that into consideration as we debate and
decide what we're going to do in this fiscal crisis," he said. "It's very important for people to come and testify and
personalize for us what a tax increase will do to them, or what a lack of a tax increase will do to them
personally, if a program they rely on is dependent on a tax increase."
But he cautioned that without increasing revenue, the state
will be facing harder decisions.
"Budgeting is very simple," Rodrigues said. "You can't spend
more than you take in. The problem now is the commonwealth is taking in much less than we did last year."
At the same time, the state's Medicaid program -- which
provides health insurance for the poor -- has increased to $5 billion, and is still growing at a rate of 15 percent a year.
Rodrigues also noted that tax revenues keep falling at a
perilous rate.
"Sales taxes have been pretty good," he said. "People are
still buying products. But sales taxes are a very small component of what we generate in the commonwealth. We exempt
food from sales tax. We exempt clothing from sales tax. The two most purchased
commodities are exempted."
The weak economy and the drop in profits on Wall Street have
hurt this state as well, Rodrigues noted.
"Where we're lacking is in capital gains taxes," he said.
"In the last two fiscal years we collected over a billion dollars from it. As our citizens were making tons of money in
the stock market, we were making tons of money in capital gains taxes. There's not a single
capital gains tax to be taken in this year."
Rodrigues doesn't expect the state to generate much from
corporate income taxes, either, since "Corporations are not making money."
That leaves the income tax, which has lawmakers even more
worried about. In November 2000, Massachusetts voters approved an income tax cut, from 5.8 percent to 5.0 percent,
over three years.
Then came the recession.
"More people are being laid off, so there's less income tax
coming in," Rodrigues said. "Personal income tax revenues are lagging."
Without tax increases, Rodrigues said, few Massachusetts
residents will be spared the pain of future budget cuts. In fact, Rodrigues and the other members of the city's legislative
delegation plan to meet today with city officials -- including Mayor Edward M. Lambert Jr.,
and the members of the City Council, the School Committee and the Diman Regional
Vocational Technical School Board -- to discuss a proposed 10 percent cut
in local aid for the fiscal year that begins July 1. That meeting is at 7 p.m. at the Advanced Manufacturing &
Technology Center, and is open to the public.
"We want to brief them on what to brace for and what to
prepare for on their upcoming budgets," Rodrigues said. "We're telling all local communities to prepare for and budget for a
10 percent cut in local aid. It's the last thing we want to do, but in the last fiscal year, where
we made over $600 million in cuts, we spared local aid. But now we're anticipating up to a
$2 billion drop in revenue. There's no way that local aid can be held harmless."
Rodrigues recalled that during the last recession in the
early 1990s, he was a member of Westport's Finance Committee. He learned a difficult lesson during that period.
"We want to inform communities as quickly as possible so
they can start planning," he said. "We need to learn from our mistakes. During the last recession, I was the chairman of the
Finance Committee at the time, and no one informed us about local aid cuts. It was just
bang, here's your cut. We had no time to plan."
The news today won't be all doom and gloom, Rodrigues noted.
Despite the drop in revenue, "Our capital projects are not
slowing down," he said. "The budget crisis has not affected them."
Work continues on the new Brightman Street Bridge, repairs
to two bridges in Westport, the redecking of the Braga Bridge, plans for a new courthouse on South Main Street and the
early stages of a commuter rail link to Boston.
But even that investment in construction work and jobs won't
solve the state's short term revenue problems, Rodrigues said, which is why the Working Group wants to hear from the
public.
"We are looking at the revenue side of the budget equation,
looking at any and all revenue enhancement opportunities," he said. "We are asking the public for their input. We're hoping,
actually, that some new and different ideas come out of these public hearings. Sometimes
fresh minds can come up with some great ideas."
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The Commonwealth Massachusetts
HOUSE OF REPRESENTATIVES
REPRESENTATIVE JOHN H. ROGERS
February 27, 2002
(617) 722-2990
Dear Colleague:
Our fiscal crisis is so severe that even if we raise taxes
and raid the "Rainy Day" fund, we will still have to make deep cuts on top of the $650 million in cuts already enacted. The
primary solutions encompass painful paring down, prudent use of reserves, and restrained tax
increases.
There is a gaping $3 billion hole in the side of the FY03
ship. Precipitously declining revenues in FY02 will likely make up $1 billion of this hole. The FY02 deficit of $375 million at
the end of January coupled with a poorly performing February at possibly another $100 million
loss augur a disastrous $1 billion deficit by the end of this fiscal year. April alone is
forecasted to croak us with a dreadful shortfall of more than $300 million. Such gargantuan
and ghastly losses only further exacerbate an already ugly picture for FY03.
With looming shortfalls in FY03, it is apparent that deep
spending cuts will only scratch the surface of the FY03 deficit. In addition to innovative non-tax revenue ideas, we
will have to consider sensible options for raising tax revenue.
If we were to realize $1.2 to $1.5 billion through further
cuts and use of reserve funds then we must close the $3 billion gap primarily with $1.5 to $1.8 billion in taxes. The
following, therefore, is not an endorsement of any particular tax increase but simply an illustration to
give you an understanding of the depth of the hole and how Herculean a task
it is for us to patch it:
Description..................Amount in millions
Halving of the personal exemption......$500
Question 4 (move to 5.6%)..............$460
Cigarette tax (dollar increase)........$280
Charitable Deduction...................$180
Gasoline Tax (nickel increase).........$150
Extension of "Under 12" deduction
to elderly and disabled.................$85
Long-term capital gains.................$80
Alcohol sales tax (now exempt from 5%)..$60
Earned income tax credit................$60
Senior circuit breaker..................$30
Tuition deduction.......................$25
Tax credit for title V system repairs...$15
"Under 12" dependent deduction..........$15
Personal exemption for single parents...$15
Rental deduction increase...............$14
Aircraft sales tax exemption.............$8
TOTAL.........................$1.98 Billion
Judicious use of reserves and creative initiatives will
inevitably be part of the solution. Critics of your actions in this crisis will demand that the remainder of the problem be
solved through tax increases alone. Still others will charge that only spending cuts are the answer. Both
critics are wrong because much of both solutions are right.
This brutal truth is this: we cannot tax and spend; we must
tax and cut.
When times are good, public office is merely a great
challenge. In times like these, however, the people of the Commonwealth deserve the bitter truth to be told by us as
quickly and as frankly as possible, and then, they demand that honest leaders foster honest solutions to our
state's troubles.
I know and trust that you are the honest leader that they're
awaiting. Harbor no illusion, however, about the unpopular task before you; it will likely be your greatest challenge in
office.
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Tribune Media Services
February 26, 2002
Politicians testing new ways to raise taxes
By Cal Thomas
Democratic politicians know that when Republicans are
successful in cutting taxes, it generally provides a political boost to the GOP. That's why they're constantly looking for
new ways to get our money without having to call what they take from us a tax and spend on
their pet projects. The federal line subscriber charge on our phone bills (along with numerous
other stealth charges) is one example of a tax disguised as something else. In many cases,
these hidden taxes have the additional benefit of not needing legislative approval.
The new governor of Virginia, Democrat Mark Warner, who
pledged not to raise state taxes when he was a candidate, thinks he's stumbled on a brilliant idea. Instead of raising
taxes and having to defend himself against charges that he "flipped," Warner and some members of the
Virginia Legislature want the people to do it. Warner has proposed that state voters
be allowed to decide through referendums whether they want to increase Virginia sales taxes.
Supporters are attempting to sell this tax increase in a familiar way. If the people decide
not to ante up more money for government, essential services might have to be curtailed or
ended. As always, it's the children who would supposedly suffer because new schools would
not be built. Oh, and the traffic, already gridlocked during rush hour in the Virginia suburbs of
Washington, D.C., would remain at a standstill for even longer periods.
This is a strategy made in political heaven for Democrats.
If Virginians approve a sales tax hike, politicians can report, "We didn't raise your taxes; you did." If citizens vote down a
tax increase, the politicians can blame the people for any real or perceived decline in services
and education -- and escape accountability. Elected officials all over the country will be
looking at what happens in Virginia to see if they might promote this scam in their states.
But wait. In Virginia, leading Republicans in the Legislature are backing the sales tax hike
referendum, even though the GOP enjoys a veto-proof majority. Maybe George
Wallace, the late Democratic governor of Alabama, was right when he observed, "there isn't a dime's
worth of difference" between the two political parties.
Before Virginia politicians (or politicians in any other
state where political pickpockets operate) are given more of the money we earn, the people should demand to see the books.
In Virginia, as with too many other governments, the problem isn't taxes that are too low, but
spending that's too high. According to figures compiled by the American Legislative
Exchange Council, per capita general fund expenditures in Virginia were $778 higher in 1999
than 1990, after adjusting for inflation and population growth.
National Taxpayer Union policy analyst Jeff Dircksen has
called the proposed sales tax hike, "a clumsy attempt to cloak the commonwealth's massive spending growth in a mantle of
legitimacy." Dircksen says taxpayers would be better served by addressing transportation
needs within the current budget, reallocating funds from less important programs (good luck
getting politicians to agree on that) and re-examining privatization and contracting-out
services.
The answer to Virginia's problem and those of other state
governments and the federal government is found in a study by the Congressional Joint Economic Committee. Between
1960 and 1993, the committee says, the economies of states with low or
flat income taxes grew nearly one-third faster than those of states that imposed punitive taxes on income and
investment. And, as is always the case, economic growth produced more tax
revenue for state treasuries because there was more money available to be taxed. The people should be
allowed to vote on reduced spending, not higher taxes.
If Gov. Warner and the Republican Legislature want to boost
sales taxes for roads and education (there is no correlation between the level of spending on education and
achievement), let them lower the income tax rate and finish the phase-out of
the hated car tax, which former Gov. Jim Gilmore promised but was unable to eliminate. One of the oldest
economic truths is that taxes should never be raised during a recession.
It's no surprise that a Democrat wants to raise taxes any
time. Republicans who go along don't deserve the name.
Political columnist Cal Thomas has covered Washington for more
than 30 years. He also is a contributing analyst and commentator to the Fox Television network, and syndicates a daily
radio commentary heard on more than 200 stations.
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The Boston Globe
Thursday, February 28, 2002
Swift shows true grit on tax rollback
By Jeff Jacoby
"All five of the Democrats running for governor would raise
taxes," began The Boston Globe's front-page story on Sunday. Which came as a surprise to exactly nobody: The sun
rises in the east, the Red Sox fade down the stretch, and Massachusetts
Democrats will raise your taxes. These have been facts of life for so long that the memory of man runneth not to
the contrary.
Still, it is possible to discriminate among Democrats of
greater and lesser integrity. Two of the candidates - former state Senator Warren Tolman and Steve Grossman, the former
Democratic Party chairman - refuse, to their great credit, to sabotage the modest income-tax
rollback approved by Massachusetts voters two years ago. (They would raise other
taxes.) The tax rate is scheduled to drop from 5.3 percent to 5 percent next January, thereby finally
repealing the "temporary" tax hike imposed by the Democrats 13 years ago. And in
Grossman's admirable formulation, "I don't think putting our hands right back in the
taxpayers' wallet ... is the right approach."
The rest of the field have no such inhibition. State
Treasurer Shannon O'Brien and former Labor Secretary Robert Reich would both kill - their euphemism is "freeze" - the tax
rollback before it takes full effect. O'Brien says thwarting the voters' decision would be "fiscally
responsible." That is what Democrats always say when they take money away from
citizens in order to give it to the government.
And then there is Senate President Tom Birmingham, who not
only wants to stop the rollback in its tracks but to jack the income tax rate back up to 5.6 percent. That would
amount to one of the heaviest tax increases in Massachusetts history - a
blow to every working man and woman in the Commonwealth.
Characteristically, Birmingham is impressed with his own
high-mindedness. "I've got to really do this budget and not just talk about it," says the Senate leader who couldn't manage
to "really do" the current budget until nearly five months after the deadline had passed.
By contrast, he seethes with contempt for Acting Governor
Jane Swift, who is adamant about defending the tax rollback and has promised to veto any attempt to undo it. "It doesn't
get her a chapter in 'Profiles in Courage,"' Birmingham snaps. "It's the easiest thing in the
world to be in support of tax cuts. But the fact is that it's not responsible at this point."
Well, let's see. Swift is defending the tax cut despite the
opposition of the state's most powerful legislators. Despite the opposition of the state's biggest newspaper. Despite the
opposition of some - maybe most - of the state's corporate big shots. Despite the opposition
of the (misnamed) Massachusetts Taxpayers Foundation, a business organization with great
political clout. And despite the opposition, if the most recent statewide poll is to be believed,
of a majority of Massachusetts voters. "Profiles in Courage?" Maybe not. But her
principled stand is a heckuva lot gutsier than any position Birmingham has taken lately.
It is a classic piece of liberal disinformation to say that
supporting tax cuts is "the easiest thing in the world." For left-wing Democrats like Birmingham, it is the easiest thing in
the world to oppose tax cuts, particularly broad-based tax relief that increases people's paychecks.
Birmingham was against rolling back the income tax when the
economy was booming, and he is against it when the economy lags. He was against it when revenues were up and he's
against it when revenues are down. If there is one fixed star in his political constellation, it is
that income tax rates must never, ever be reduced.
Courage? It isn't courageous of Birmingham to call for
higher taxes; it's predictable. Real courage would mean standing up to the army of special interests and narrow
constituencies that feed at the public trough and telling them to make do with less. True grit would mean
saying no to the teachers unions and the welfare lobby and all the other liberal
pressure groups that clamor for government subsidies and lavish entitlements. Genuine fortitude would
mean showing more concern for those who pay the taxes and less servility to those who
consume them.
But that isn't Birmingham's way. He has always found it
easier to take another bite out of Joe and Jane Taxpayer than to say no to the parasites who feed off the state budget.
Perhaps that is understandable - both Birmingham and his wife, after all, draw six-figure, tax-funded
salaries - but it is hardly courageous.
Jane Swift has her faults - just ask the Republicans who are
trying to draft Mitt Romney - but taking the easy way out when it comes to tax policy is not among them. If she were to break
her no-new-taxes promise, Beacon Hill would cheer, the Globe's editorial page would
applaud, and the state's big-business chieftains would smile with approval. Instead, she is
sticking to her pledge. Whatever else might be said of her, she's got backbone.
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