The Standard-Times
New Bedford, Mass.
Saturday, May 11, 2002
Tax cuts got us into this mess
By Prof. Clyde Barrow
When campaigning to pass Question 4, which rolls back the
state income tax rate from 6 percent to 5 percent over three years, Governor Paul Cellucci and Lieutenant Governor Jane
Swift claimed that the multi-billion tax cut would not require cuts to state services.
They were wrong!
In the current fiscal year, the loss of revenue led to cuts
in most state-funded programs. The cuts include a $70 million reduction in spending on highways at a time when the U.S.
Department of Transportation rates the state's roads, bridges, and highways among the worst
in the country.
Spending on public higher education was cut by $70 million,
which led to a $1,000 increase in student fees at Umass Dartmouth. Massachusetts was one of only five states that
reduced funding for public higher education this year and it cut funding far more than any other state.
Environmental protection, housing assistance, local aid, the
judicial system and public health services were also cut during the current year.
However, those cuts were just the beginning.
The results of the state income tax rollback are crystal
clear in the state budget released by the Massachusetts House of Representatives last week.
Almost every state agency will see cuts in their budgets,
including public health, child-care services and other social services. Economic development programs, including
transportation and workforce development, were cut even more. Even public safety agencies were cut, and
the cuts in state funding for local libraries continue almost to the point of
eliminating them.
The House budget will cut K-12 education by 10 percent and
state and community colleges and UMass by $90 million.
Massachusetts already ranks near the bottom in spending on
public higher education relative to income and as a share of the state budget.
Massachusetts also ranks low in spending for public schools:
49th among the states in spending for K-12 as a percentage of total income. According to a report from the Tax
Equity Alliance in Massachusetts, spending on public schools as a share of income actually
declined by 20 percent over the past 20 years despite recent increases in state spending for
educational reform.
This is an intolerable and shameful situation for the state
that created public education.
The lost state revenue that led to these budget cuts is
usually blamed on the September 11th attacks and the recession that began before and continued afterwards. Budget cuts in
public safety and education must seem a cruel irony to the heroes of September 11th; namely, the
firefighters and police that we rely on for our safety and the teachers, who educate
and care for our children every day, especially those teachers near the World Trade Center who led
children to safety through hellish conditions. But the recent recession is the shortest
and shallowest of any recession over the last 100 years, and it has already ended in the judgment
of most experts.
Neither the recession nor "overspending" caused the current
budget crisis.
What caused the current revenue shortfall is the accumulated
impact of 42 tax cuts totaling more than $4 billion in lost revenue that were passed by the legislature over the last
decade. Many of these tax cuts were literally special interest giveaways adopted in the wee hours of
the night while no one was paying attention, including many legislators.
The Cellucci/Swift party line that taxes could be cut and
services maintained was good election year politics, but it was bad public policy and irresponsible government finance.
At some point we have to ask ourselves if the tax cuts were
worth the loss of public services. Almost all of the tax savings went to households with high income. Taxes for the
lowest 20 percent in income weren't cut at all, and taxes for middle income families was only reduced
by about $200 per year and almost all of that was due to the increase in the personal
exemption.
The House recently passed a set of tax increase, or rather
rollbacks and delays in some of these tax cuts: a freeze on the income tax rollback at 5.3 percent, an increase in the
cigarette tax, a flat tax on capital gains at the same rate as earned income and a reduction in the
personal exemption.
If all of these tax increases pass, the impact on most
families' taxes will be minimal -- a few dollars a week.
None of this is pretty (similar to making sausage according
to Winston Churchill), but it is necessary to maintain the Commonwealth. The bill now goes to the Senate and then to Gov.
Swift, who has said that she will veto the bill, because, as a lame duck, she will not have to
deal with the budget problems her veto would cause.
Clyde Barrow
Director, Center for Policy Analysis
and Dan Georgianna
Professor of Economics, UMass Dartmouth
Return to top
Letter to the Editor
The New Bedford Standard-Times
Re: The New Bedford Standard-Times (May 11, 2002),
"Tax cuts got us into this mess" by Prof. Clyde Barrow
Dear Editor:
It's time someone took the pompous professor of economics,
Clyde Barrow, to task over his irresponsible statements, both here and in other publications. Like his namesake, he feels
comfortable taking from others for his own priorities. In the 1967 classic gangster movie,
"Bonnie and Clyde," Bonnie Parker and Clyde Barrow proudly proclaim "We rob banks."
When another thief from the same era, Willie Sutton, was asked why he robbed
banks he replied, "Because that's where the money is."
Apparently this is the inspiration for Professor Barrow's
robbing of taxpayers.
"When campaigning to pass Question 4, which rolls back the
state income tax rate from 6 percent to 5 percent over three years, Governor Paul Cellucci and Lieutenant Governor Jane
Swift claimed that the multi-billion tax cut would not require cuts to state services." he wrote.
"They were wrong!"
First, not surprisingly, his numbers are wrong from his
opening premise, a sin for any credible economist I should think. In fact, Question 4, the tax rollback, rolled the income
tax rate from 5.85 percent back to 5 percent, where it will finally be restored next Jan. 1 with any
luck. Come now, dear professor, can you not make your points without exaggeration?
Apparently not, as he further stated: "The results of the
state income tax rollback are crystal clear in the state budget released by the Massachusetts House of Representatives last
week." But this too is untrue, on two counts:
1) His aforementioned proposed budget was an "anticipated"
budget that reflected an "anticipated" spending increase of an additional billion dollars over this year's budget, as has
been the trend for many recent years.
2) According to the state Department of Revenue at the close
of FY'01 (last Jun 30):
"Preliminary figures for FY2001 show that income tax
collections were $9.90 billion, an increase of $861 million or 9.5 percent. Withholding tax revenue totaled $7.92 billion, an
increase of $466 million, or an increase of 6.3 percent. Sales and use tax revenue totaled
$3.76 billion, an increase of $190 million or 5.3 percent. Corporate tax collections were
$945 million, down $185.4 million or 16.4 percent."
According to the same source at the close of last month:
"Year-to-date income tax collections total $6.88 billion, a
decrease of $1.028 billion or 13.0 percent. Income withholding collections total $6.1 billion, a decrease of $533 million or
8.0 percent. Total sales and use tax collections are $3.07 billion, a decrease of $6.87 million or
0.2 percent. Corporate collections total $454 million, a decrease of $305 million or
40.2 percent."
Professor, I did my homework. The 13-years overdue
rollback of the "temporary" income tax hike to its current 5.3 percent accounts for only $533 million of your alleged
multi-billion dollar "shortfall." Please note that the actual state revenue shortfall, according to the
Department of Revenue, is $1.03 billion -- $1.67 billion lower than the
fabricated doomsday budget "cut" of $2.7 billion.
He further states: "Massachusetts also ranks low in spending
for public schools: 49th among states ..." Actually, our spending per-pupil is seventh highest in the nation.
And for the record, it was Prussian chancellor Otto von Bismarck
(1815-98) who made the comment about sausages, not Winston Churchill.
Nice try, professor, but some of us were educated in truth
and factual analysis, and we still remember how to think critically for ourselves: A scary thought for a tax-and-spend
advocate, isn't it.
Chip Ford
Director of Operations
Citizens for Limited Taxation
Return to top
