Well here we are, folks: It's Tax Hike Week in Taxachusetts
again.
You just read [above] the memo that's being hand-delivered by Chip
Faulkner to every member of the Legislature, and will be faxed to every media outlet in the state. (I've already
sent it out to those for which I have an e-mail address.)
Isn't it fascinating, as we pointed out, that this is in no
way a "fiscal crisis," but instead a disappointment of diminished expectations and anticipations, as
recognized by House Ways and Means chairman John Rogers?
Legislators and "stakeholders" (I think we know who he meant
by that) are crushed that they can't spend an additional billion dollars next fiscal year, and thus their fabricated
"crisis" was reached!
Talk about "fuzzy math" -- their alleged "the sky is falling" $2.7 billion "shortfall" is based on ridiculous
expectations that billion dollar annual surpluses would continue to roll in for them to spend, increasing the
size and cost of state government a billion dollars more every year
forever!
I was able to talk Barbara out of her idea to have us roll
her up to the State House in a wheelchair (wearing the helmet she must don whenever she gets out of her hospital bed),
carrying a sign: "'Temporary' tax hike; Oh my aching head!" She's improving by the day, but she's not ready for
that yet, and I very much doubt her doctors would have approved it
anyway!
So we worked on the memo yesterday and settled on her slogan
instead as the title for her CLT memo. (It was just too good to resist!)
The Boston Herald
Monday, April 29, 2002
A Boston Herald editorial
Curtain goes up on tax hike drama
The curtain is about to rise on a classic Beacon Hill
melodrama - a tale of agony and pain, a tale of sacrifice and deprivation, deprivation that can only be ended by ... tax
hikes!
But then you knew that, didn't you?
Yes, it will be a week of demonstrations from advocates for
all manner of worthy causes as the House begins debate tomorrow on a menu of possible tax hikes.
The House Ways and Means Committee released its doomsday
budget at the end of last week. It proposes to make some $1.5 billion in spending cuts - some to programs that can
surely take a hit (How many anti-smoking ads does a state really need?) and some to
programs it would be cruel to cut (Methadone clinics! What could they be thinking?).
And the loyal sheep who are the House members are expected
to respond by doing the only sensible thing - raising taxes.
In a memo issued last Friday Steve Crosby, chief of staff to
acting Gov. Jane Swift, tried to stake out a sensible middle ground - both on the issue of tax hikes and spending cuts.
"The Swift administration remains opposed to tax increases,"
Crosby wrote. "This is not because of a mindless belief that any tax increase under any circumstances is inappropriate.
Rather, this position stems from our deep appreciation of the positive effects on the state's
economy and fiscal condition that has been created by establishing fair and competitive tax
rates ..."
The governor has put on the table other revenue sources that
would not hurt the taxpayers of this state nor break faith with those who voted to lower the income tax rate and for the first
time add a charitable deduction. Those alternatives include $274 million more for local aid by
reducing the payout to Lottery players, $146 million more from the tobacco settlement
(that's 100 percent of the annual payment) and $300 million more from the state's cash reserves
(above the $500 million House Ways and Means proposes). The high heavens would not fall
if any of this were done this year. And when the economy picks up each and every one of
these issues could be revisited.
Crosby cautions that those watching the budget debate "not
be misled by scare tactics that overstate the problem" - or, we would add, point to a solution that would do untold damage
to the economy of this state and to its people.
Like all economic downturns, this one will end - likely
sooner rather than later. Employment remains astonishingly strong, so too does economic growth.
Voters aren't being fooled by scare tactics; neither should
legislators.
The Boston Herald
Monday, April 29, 2002
Outnumbered House Republicans plot strategy
to fight tax hikes
by Elisabeth J. Beardsley
Vastly outnumbered House Republicans are preparing to cause
a public ruckus as they dig in against an avalanche of Democrat-backed tax hikes.
The House is slated to begin debating tax hikes today, with
most attention focused on freezing the voter-approved income tax cut, increasing the capital gains tax and ratcheting up
the cigarette tax.
Lacking the numbers to stop tax hikes, House Republicans
plan to exercise the only power they have - forcing roll call votes so that each lawmaker has to take a public stand in an
election year.
"The problem in the House of Representatives is not that we
vote too much," said Assistant House Minority Leader Brad Jones.
Support for tax increases seems to be crystallizing in the
wake of last week's release of the House budget plan, which slashes $1.5 billion from core programs including education and
Medicaid.
Thousands of protesters are expected to swarm the State
House this week, as lawmakers discuss hike taxes for the first time in a decade.
Republicans are also pushing for separate votes on each tax
increase - fearing Democrats will try to bundle multiple tax hikes into a single package, as a way of minimizing the
political damage.
"If the Democratic Party is looking for some level of
gubernatorial support, they should be looking at them as separate pieces," Jones said.
Acting Gov. Jane Swift, who recently abandoned her "no new
taxes" pledge, recoiled from the House's slash-and-burn budget, accusing Speaker Thomas Finneran of "hyperbole and
false choices." Swift warned she would automatically veto all tax hikes, if lawmakers don't
accept her plan to raise money by curtailing Lottery payouts and by dipping deeper into the
state's tobacco settlement.
Finneran's spokesman, Charlie Rasmussen, declined comment on
the GOP complaints. Finneran's lieutenants spent the weekend calling rank-and-file members, gauging the appetite
for taxes.
Those poll results, which were not available yesterday, will
be used to produce an omnibus tax hike package, Rasmussen said.
Serious floor action isn't expected until after tomorrow -
the deadline for election-year challengers to incumbent lawmakers.
"Wednesday is the day the pedal hits the metal," Rasmussen
said.
The Boston Globe
Monday, April 29, 2002
A Boston Globe editorial
The 5.6 percent solution
As the Massachusetts House begins debate on tax increases
this week, Speaker Thomas Finneran has starkly laid out the choices. Legislators need to raise more revenue for state
government or risk the progress that has been made on education and health care over the
past decade. As they ponder solutions, they should focus on those taxes that raise the most
revenue in the most progressive manner - and that can only mean the income
tax.
Finneran believes that the state faces a $2 billion budget
shortfall in the 2003 fiscal year, which begins July 1. He proposes to address it on a three-part basis - one-third by
using reserves, one-third by budget cuts, and one-third by new revenues. It would be better to go
higher on revenues and spare the reserves and essential programs. The reserves in particular
need to be used prudently in case they are needed in the future and to make it easier to
rebuild them for the next recession.
Even the speaker's approach would require the Legislature to
raise roughly $700 million, so small increases in taxes will hardly be enough. One popular approach is to raise the
cigarette tax by 50 cents, and that's worth doing if the money from this deadly addiction is used for
health-related programs. But a 50-cent increase would raise only $150 million. A higher
tax might actually be self-limiting for good reason (people might stop smoking) and bad
(smugglers might bring in cigarettes from low-tax states).
To get really big money, the Legislature could raise the 5
percent sales tax, but there is little support for doing that. A 1 percent increase would yield $750 million, according to the
House analysis, but the sales tax is regressive. Even with the exclusion for food and most
clothing, it affects people of limited means the most.
The state income tax is the largest source of revenue for
Massachusetts. In November 2000 voters passed a ballot measure to lower the income tax from 5.85 to 5 percent over three
years in expectation that economic growth would yield enough money to prevent cuts in state
programs. The recession began a month later, and those projections proved as ephemeral as
Internet company profits.
We on this page believe that the budget crisis is best
resolved by temporarily returning the rate to last year's 5.6 percent and tying future reductions to economic growth. This
would preserve a bit of the cut, as supported by the electorate, but it would also acknowledge the
wretched timing of the initiative petition. A return to 5.6 percent would
generate $685 million in fiscal 2003 and go far to resolve the crisis.
Talk at the State House seems to favor a freeze at the
present rate, 5.3 percent, but that would generate only $230 million. The legislators will have to do better.
Some are looking at reducing the personal exemption to the
income tax, which stands at $4,400 per person. But excluding the first $4,400 in income from taxation adds an important
element of progressivity to the state tax code. It should not be reduced when other
alternatives are available.
Instead, legislators should address the bizarre capital
gains tax structure, which varies from 12 percent on any stock or other asset held for only a year to zero if the asset is
held six years or more. This law was whisked through a somnolent Legislature in 1994 in a deal to
get Governor Weld to sign a legislative pay raise. It is supposed to encourage
long-term investments, but the federal tax, which was reduced from 28 to 20 percent in 1997, has far
more impact on such decisions. Finneran's suggestion that all capital gains be
taxed as regular income has merit.
The Legislature is able to examine tax options at its
leisure only because Acting Governor Jane Swift, Finneran, and Senate President Thomas Birmingham were able to reach
agreement on closing the budget gap this fiscal year. But they relied solely on reserves and a
reduction in the annual contribution to the pension investment fund. The Legislature should
not be tempted to try many such gimmicks next year.
For all the concern about tax increases, the amount of money
being considered, when spread out over all the state's taxpayers, is relatively small. For a single person earning
$50,000 a year, the difference between a 5 percent and a 5.6 percent tax rate would be $5 a week.
The Legislature should not be afraid to impose small additional burdens on taxpayers to
prevent harm to the programs that provide for the common good.
