They will be unpopular but higher taxes are a "necessity" in
the face of state government's fiscal crisis, House Ways and Means Chairman Rep. John Rogers (D-Norwood) told more
than 200 activists and individuals who turned out for the final House hearing on next year's
budget. Rogers' comments on taxes drew loud applause from attendees, who testified to the
unmet needs of the poor and the mentally and physically impaired.
Rogers said that in addition to drafting a budget that
closes a $2 billion-plus revenue gap next year, this year's deficit, with less than four months left in the fiscal year,
may hit $1 billion.
The solutions will involve drawing from the $1.5 billion
left in state reserves, slashing programs and services, and other innovative proposals.
"It's also gonna take some taxes," Rogers said. "This
committee has been out there talking about the very real need to raise taxes. To us, it's a necessity."
Rogers said more than $600 million in budget cuts approved
last fall took a heavy toll on programs that serve needy citizens.
"This continues to be a very very difficult year for
legislators," he said. "Far, far more importantly it's a very difficult year for the people we try to serve. Our spending
document is a reflection of our ideas and principles. How we treat our most vulnerable, our most needy,
our most challenged ... our poor, our eldery, our frail, really defines us as a
people, as a Commonwealth. We will not and can not take taxes off the table."
Rogers offered his comments at 10:30 am, kicking off a
budget hearing that he expected to run for between seven and nine hours.
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State House News Service
Advances: Week of March 11, 2001
House Revenue Group's final
hearing
on "Ways to Grow Revenue"
Tuesday, 10 am, Gardner Auditorium in the State House
While members of the Senate budget writing committee spend
Monday and Wednesday quizzing agency heads about their revenue needs, an eight-member House working group is
in Gardner Auditorium Tuesday conducting its third and final hearing on
ways to grow revenues - raise taxes is the main one - to meet their needs.
The first two forums were in Lowell and Fall River and were
reportedly well attended. Revenue enhancements often mentioned include blocking any further reduction in the state's
income tax, reducing the payout to winners of the State Lottery and exploring the potential
and viability of casino gambling.
Members of the working group, one of several named by House
Speaker Finneran to examine ways to control spending and help balance the books during the next few years,
include ranking members of the Commerce and Labor and Taxation committees along
with a few who sit on the House Ways and Means Committee. Ways and Means chief John Rogers
on Friday called higher taxes a "necessity" given the size of the state's budget gap.
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State House News Service
March 8, 2002
STATE HOUSE, BOSTON, MARCH 8, 2002 ... The biggest development
in running the government as this week went by was that - this week went by.
Another seven days were stripped from the time left to
balance the state budget for this year. That's really important. If your expected expenses are at least $300 million
above your expected income for the year, like Massachusetts' are, the faster you do something about it
the better. The longer you wait, the bigger your spending reductions have to be
in proportion to your total budget.
But the bookkeeping year ends June 30, and state government
leaders have waited a very long time to make the cuts that would make the books balance. Democrats in the Legislature
and Republicans who want to hold on to the governorship are locked in a chess game, and in
chess, observers can wait an excruciating amount of time between moves.
Both observers and players seemed to agree this week that
gamesmanship is going on. Michael Widmer, head of the Massachusetts Taxpayers Foundation, said the two sides -
Democratic Legislature, Republican administration - have waited so long, the only way to
balance this year's budget is spend money sitting in state reserves. That will leave less reserve
money to close next year's $2 billion-plus gap between spending and revenues.
"Our worst fears are coming to pass," Widmer said. "The
leadership is responding very slowly, and we're paying the price." As the projected deficits keep climbing and no cuts are
made, "we're mirroring the late eighties," Widmer said. "We're running faster in place and
losing ground."
John Rogers, head of the House Ways and Means Committee,
said Acting Gov. Swift could end the crisis tomorrow if she wanted to, by convening her cabinet and telling them to cut
immediately. But Republicans will tell you that Rogers and other Democrats are simply trying
to turn Swift into the bad guy, the woman who balanced the budget by denying the needy
their services and support from state government. Rogers said Swift isn't cutting because "it's
unpopular," even though it's her job.
Swift wants the Legislature to change a pension-paydown plan
to free up $134 million; that will lessen the amount that has to be cut this year. But Rogers says that's a ploy to evade
taking real responsibility for getting the books balanced again. He claims Swift should be as
brave as he, and accept the need for higher taxes.
Widmer and Rogers were echoed this week by two groups of
experts. On Tuesday, a panel of bond rating officials said the state shouldn't spend too deeply out of reserve funds,
because once they're gone, there's no way to replace them in future years, though the need
for the spending remains. On Wednesday, a group of economists said Swift might want to
rethink her insistence that the next phase of the 2000 income tax cut approved by voters go
into effect immediately.
Unwavering fiscal conservatives like Barbara Anderson (there
are not too many in either the administration or Legislature) find the discussion pretty ridiculous. Anderson said that the
reserve, or "rainy day," funds, ought to be used when it's raining. And she pointed out that
spending has been rising $1 billion a year for quite a while; therefore, there's got to be
room to cut without too much pain. "Everybody's been putting on fat cells," she said.
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NATICK'S TOTAL REVENUE
| FY |
Tax
Levy |
State
Aid |
Local
Receipts |
All
Other |
Total
Receipts |
| 1990 |
$28,506,589 |
$7,572,731 |
$9,384,296 |
$3,186,063 |
$48,649,679 |
| 1991 |
$29,580,338 |
$7,218,225 |
$9,375,000 |
$1,941,253 |
$48,114,816 |
| 1992 |
$30,594,013 |
$6,099,191 |
$9,936,369 |
$1,297,455 |
$47,927,028 |
| 1993 |
$31,566,074 |
$6,356,886 |
$10,155,766 |
$1,302,887 |
$49,381,613 |
| 1994 |
$33,050,076 |
$6,611,718 |
$10,838,603 |
$2,135,729 |
$52,636,126 |
| 1995 |
$34,526,590 |
$6,879,209 |
$10,973,461 |
$3,326,013 |
$55,705,273 |
| 1996 |
$38,640,056 |
$7,272,593 |
$11,086,857 |
$2,009,526 |
$59,009,032 |
| 1997 |
$39,211,030 |
$7,725,665 |
$12,234,625 |
$3,563,332 |
$62,734,652 |
| 1998 |
$43,251,848 |
$8,136,412 |
$13,140,783 |
$3,580,271 |
$68,109,313 |
| 1999 |
$44,996,424 |
$9,315,488 |
$13,834,596 |
$4,644,575 |
$72,791,084 |
| 2000 |
$46,885,381 |
$10,142,059 |
$14,575,363 |
$4,091,516 |
$75,694,320 |
| 2001 |
$49,413,782 |
$11,055,390 |
$15,878,470 |
$5,662,921 |
$82,010,563 |
| 2002 |
$51,549,010 |
$12,198,559 |
$17,727,470 |
$11,409,684 |
$92,884,723 |
NATICK'S FREE CASH ("RAINY DAY FUND" SURPLUS)
|
FY
|
FREE CASH
|
| 1990 |
$563,348.00 |
| 1991 |
$394,668.00 |
| 1992 |
$143,153.00 |
| 1993 |
$256,598.00 |
| 1994 |
$804,603.00 |
| 1995 |
$1,442,721.00 |
| 1996 |
$1,675,191.00 |
| 1997 |
$2,131,823.00 |
| 1998 |
$2,728,405.00 |
| 1999 |
$3,450,176.00 |
| 2000 |
$3,431,756.00 |
| 2001 |
$3,913,775.00 |
| 2002 |
$3,584,494.00 |
Source: Mass. DOR; Division of Local Services
The Natick Tab
March 8, 2002
Is the tax system hurting Natick?
By Philip Maddocks
Staff Writer
Taxes (and now fees), no matter what form they take, are
generally viewed with equal disdain - by taxpayers and politicians alike.
But not all taxes are created equal and not all equal-sounding taxes, such as the across-the
board income tax cut being implemented in Massachusetts, benefit all taxpayers
equally.
The different effect various taxes have on different income
levels is often misunderstood or unnoticed and, in recent years, reductions in particular types of taxes, such as capital
gains and estate taxes, have contributed to a shifting of the tax burden onto middle- and
lower-income taxpayers, according to a report by the Center on Budget and Policy
Priorities, a Washington D.C.-based research and policy institute [for which
Jimmy St. George is listed as its "State
Contact"! - Chip!].
And one Massachusetts researcher suggests that shortsighted
tax policy, more than the economic slowdown, is to blame for the state's fiscal dilemma and, by extension, Natick's
current budget predicament.
"The squeeze comes from excessive tax cuts that were too
optimistic and went too far," said Jim St. George, director of Tax Equity Alliance for Massachusetts (TEAM) and the TEAM
Education Fund, a statewide research organization that describes itself as an advocate for tax
fairness. "In the late '80s the budget shortfall was the result of excessive spending.
This time it's very clear that overly ambitious tax cuts are the problem. The problem is not largely a
function of the recession. The recession, which appears to be the shortest and
mildest in American history, did not cause the hole in the budget. Tax cuts that went too far are the
problem."
Not only did the tax cuts go too far, says St. George, the
cuts were almost exclusively done to taxes such as the corporate tax and the capital gains tax - taxes whose rates are
tied to the wealth of the taxpayer, known as progressive taxes - while the so-called regressive taxes,
taxes with a flat rate, such as sales tax, remained at the same level.
Point of agreement
St. George's analysis is not universally endorsed. Different
students of the economy cite different influences for the current problems. Some say the tax cuts didn't come soon
enough. Others say that locally, it is Proposition 2½, the 2.5 percent cap on property tax increases,
that needs fixing.
But one matter that even those with different policy views
seem to agree on - from St. George to Barbara Anderson, the executive director of
Citizens for Limited Taxation - is the state's current fiscal problem is tied at least as much to
policy decisions as it is to a slow down in economic growth.
Anderson argues it is the state's spending practices, not
its tax cuts, that set it up for boom and bust cycles.
"They would rather spend money than manage the budget," said
Anderson. "It's just the way the government is. What we should do is try to control the level of spending during the good
years. We should have done the income tax cuts in the middle of the fiscal boom. We could
have rolled back the income tax over seven years. We wouldn't have even noticed it. Now
we have a fiscal crisis."
Michael Meeropol, chairman of the economics department at
Western New England College in Springfield and author of "Surrender: How the Clinton Administration Completed the
Reagan Revolution," said a simple federal revenue-sharing package bridging the gap between
what state revenues are and what they would have been with 2 percent growth would
address a lot of the current difficulties.
"I can't believe the National Governors Association isn't
screaming, 'Forget tax revenue stimulus; give us revenue to make up for the recession,'" said Meeropol. "It's the simplest
stimulus package and states and localities wouldn't be faced with the incredible problems
they are facing now."
Jim Borghesani, a spokesman for Gov. Jane Swift, said the
state is using every means to secure federal grants and subsidies for programs such as public safety and is in constant
contact with the state's U.S. senators and congressmen.
"They were just down in Washington two weeks ago," he said
of the nation's governors. "The Massachusetts governor made the case very clear that for a variety of reasons more
federal aid would be welcome."
"Why would anyone come to the aid of the state with the
fifth-highest tax burden and which showed itself to be a total screw-up with the Big Dig?" wonders Anderson. "The federal
government is waging a war. It has enough on its plate."
Prop 2½ coming up short
Locally, town officials say they have been told not to
expect increases in local aid and to even plan for possible cuts in state aid.
"The state is trying to survive itself; it's not looking to
provide any more relief," said Selectman Jeff Stern.
Stern said today's fiscal dilemma "has been sneaking up on
Natick for years."
While the town is limited to a 2½ percent increase in
property tax revenue, its costs for health insurance and state mandates, such as special education funding - expenses the town
has no control over - as well as collective bargaining agreements for salaries (which typically
have built-in annual increases of 3 percent) are increasing more than 2½
percent.
"There are no easy answers," said Stern. "We all have to
live within 2½ ... We may well be looking at an [operational] override next year, depending on how bad the news
is for the state.
"It all comes down to the bottom line of the level of
services residents want. We as a town need to decide whether the level of service we have now is acceptable or excessive.
The choices are to decide they are excessive and endure the cuts or to say this is pretty much the
bottom line, folks. We don't want to cut 40 teachers and take police officers off the
street. These are the fundamental decisions residents are going to have to make.
"The only true way out is to repeal 2½."
Selectman Paul McKinley agrees.
"Even when the economy turns around - and it will - it won't
be sufficient to solve the problem," he said. "Until the state or the voters undo or revise [Proposition
2½] so that it is based on a rational economic indicator, the town will forever
be fighting the 2½ issue."
"Massachusetts is more restrictive than most states in the
kinds of taxes we allow local governments to raise," said St. George, a past Harry S. Truman Scholar, Alfred P. Sloan
Fellow, and John F. Kennedy Fellow. "I'm not convinced the solution is
to give cities and towns more local options. What you see with those is an increase in the gap between high-
and low-income families."
He argues that increasing local aid is the best solution
locally. Statewide, he thinks what is needed is better planning and more evenly weighted distribution of progressive and
regressive tax cuts and increases.
"We need to make better choices about how we raise and cut
taxes," he said. "The total package needs to be better balanced and we need to make sure when we cut that those cuts
are aimed at working families.
"When you cut progressive taxes like capital gains tax, you
lose huge amounts of money. You can provide $250 to every couple and $125 to every single [taxpayer] for $500 million.
If you target $500 million at the high end, what is that doing?"
Stuck in the middle
According to the report by the Center on Budget and Policy
Priorities, regressive taxes such as taxes on gasoline, tobacco, and goods "impose a disproportionate burden on
lower-income families who must consume (rather than save or invest) a larger share of their
income than higher-income families."
So even though the total dollars paid by taxpayers in the
top income bracket has risen rapidly in recent years, the taxes the top earners are paying relative to their income have
declined because states are cutting the rates at which progressive taxes are levied while income for the
wealthiest families is rising far more rapidly than those in other income
brackets. According to the center's report, from 1989 to 1997, the incomes of earners in the lowest fifth of the
population did not change while incomes of earners in the highest fifth
rose 17 percent and incomes of the wealthiest 1 percent rose by 36 percent.
Massachusetts, in fact, is cited in the report as a clear
example of the way the rapid rise in income for the wealthiest households coupled with cuts in certain taxes has resulted in a
shift of the tax burden over the last decade.
According to the report's authors, by the end of the 1990s
Massachusetts had reduced personal income, investment income, estate, and corporate tax rates - nearly $3 billion worth
of progressive tax cuts - but had left the regressive tax rates largely untouched.
The result, according to the report, is tax changes
legislated from 1991 to 1998 "reduced taxes for the wealthiest taxpayers by an average of $16,000 per year, or 1.6 percent of
their incomes, but cut taxes for poor and middle-income taxpayers by just 0.2 percent to 0.6
percent of their incomes per year, or as little as $7 annually for the poorest one-fifth
of taxpayers."
St. George thinks the state's - and Natick's - current
fiscal woes - can be traced to these tax cuts in the mid to late '90s that were " aimed overwhelmingly at profitable
businesses " through corporate tax cuts, which, he said, flow through to the wealthy business owners, and
a substantial cut in the capital gains tax . St. George said that over a
five-year period the cut in capital gains tax will cost the state over $3 billion in tax revenue. And in terms of equity,
he said, that particular cut is extraordinarily weighted toward the wealthy, with 76 percent of the
benefits going to 1 percent of the population whose average income exceeds $1 million.
"What Massachusetts could have done," he said, "is provide
bigger tax cuts to lower income people and spread the wealth around."
St. George said the state has taken measures to help protect
low-income families, including raising the income tax threshold - the lowest income level at which a family has income tax
liability - to $22,700 for a family of four. Only 11 states have higher income tax thresholds.
"Here in Massachusetts," he said,"we have done reasonably
well for low-income people. We have been extraordinarily generous with the high-income people. It's the people in the
middle that have been left behind."
It's those middle-income families in Natick that, by in
large, will feel the impact locally as well, in some cases they may have to pay extra fees for school bus transportation,
interscholastic athletic participation, for use of the town's recycling center, and for the annual
increase in their property tax bills - all of them a type of regressive tax. And that may
not be the end of it. There is the possibility of an added household fee for trash pickup and perhaps
a Proposition 2½ override in the future.
"The message appears to be that there is not going to be an
increase [in local aid] and there may be cutbacks," said Selectmen Chairman Charlie Hughes. "We're going to be faced
with a revenue shortfall and cuts in services will be an issue."
"Some people walk around and think that [local] government
budgets are fat and wasteful. They're not," said McKinley. "There may be a little fat around the edges - that's the battle
we're fighting this year. It's painful, but we will survive. But when we start making deep cuts,
that's when we start wondering, 'This is the community I bought into, do I really
want to do this?' That's where an operational override may be the only option. You may see operational
overrides becoming a part of the repertoire in coming years."
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