The Boston Herald
Monday, June 10, 2002
A Boston Herald editorial
Tax, tax and tax: Senate can't stop
Consider the senators of Massachusetts: They're going to
raise your taxes by $1.2 billion, and some of them - a majority, one says credibly - want more. Their rapacity is
almost unbridled.
When the budget comes up for debate this week, one of the
amendments will be to bump the income tax rate back to 5.6 percent from the frozen 5.3 percent rate the House provided.
That would make available another $210 million to their $23.2 billion spending plan which,
they say, cuts spending by $900 million.
The question is whether a veto-proof two-thirds of the
senators will support the amendment by Sen. Frederick E. Berry (D-Peabody), vice chairman of the Ways and Means
Committee. He believes a majority would like to see the rate raised, and it's
sad to say he's probably right.
The Senate president, Tom Birmingham (D-Chelsea) has said
before he thought the rate should be raised, and that a majority would support it. The Ways and Means chairman, Sen.
Mark Montigny (D-New Bedford) says it's worth debating - but neither man is committed to
vote that way.
Acting Gov. Jane Swift has pledged a veto of any such
increase if it should reach her desk. The prospect that eight out of the 32 Democrats would join the six Republican senators
to uphold a veto is the only thing that held back Birmingham and Montigny for adding the higher
rate to the package that passed the House. (The veto is a wonderful safeguard for which
everybody ought to thank the authors of the Massachusetts Constitution every week.)
The Senate Ways and Means Committee did change the House tax
menu for the worse. The House proposed to tax capital gains at the same rate as regular income (an effective doubling
of the average capital gains tax rate) instead of the current rate schedule, which imposes
lower rates for longer holding periods and a zero rate for assets held six years or more. The
Senate wants to keep the current punitive 12 percent rate for assets held one year or less,
which, it is said, will yield another $40 million to $50 million.
There is no economic justification for taxing a gain at 12
percent if the asset has been held 11 months and at 5.3 percent (5 percent currently; 5.6 percent if Berry's amendment
prevails) if held for 13 months. If capital gains are to be taxed at all, economic theory says they should
be taxed at no more than the rate applied to wage income, as the House would
do. Birmingham called the uniform rate of the House "a tax break for day traders."
This rhetorical excess shows that the old envy-driven "soak
the rich" motive still rules the minds of Senate leaders, despite the important fact that nearly half of American
households now own stock in one form or another. The people getting soaked are very ordinary.
On taxes, the Senate needs to be told: Enough is enough!
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The Boston Globe
Sunday, June 9, 2002
A bloated fish of a state budget
By Jeff Jacoby
If only budgets danced for everyone the way they dance for
the Massachusetts Legislature. Then it wouldn't matter if you were laid off, your business went through a rough patch, or the
bear market ate into your retirement income. You would never have to cut your budget - not
even if your income was down 12 percent from last year. You could even raise your budget!
Spending more money would be no problem: Just snap your fingers and make somebody
else pay the bill.
Well, if grandma had wheels, she'd be a tea trolley. And if
the House and Senate had any integrity, the state budget wouldn't be climbing by hundreds of millions of dollars at a
time when state revenues have been sinking. In the real world, people spend fewer dollars when
they earn fewer dollars. But on Beacon Hill, spending fewer dollars is never an option. Why
should the state have to make do with less when it is so much easier to force taxpayers to
make do with less?
And so in the next few weeks, the Legislature intends to
shred the voter-approved income tax rollback, wipe out the voter-approved charitable deduction, and slash the personal
exemption by 25 percent.
That's for starters. Legislators also plan to hike taxes on
capital gains (thereby punishing the "rich") and to hike taxes on cigarettes (thereby punishing the poor). They will arrange
for speeding tickets, already among the nation's steepest, to grow steeper still. The House wants
to jack up the price of a driver's license and car registration; the Senate wants to jack
up the fees for nearly all transactions in court.
And in an unusually horrid bit of fiscal cruelty, both
branches, egged on by the Swift administration, are readying a new tax on elderly citizens who commit the crime of not
becoming a public charge. Any resident of a nursing home in Massachusetts who pays her
own way - i.e., who doesn't stick Medicaid with the cost of her care - will be forced to pay
the state $3,300 a year. The chief justification for this new fee is that it would raise $145
million - and the state is sure it needs that money more than old people in nursing homes do.
"This budget is unequivocally balanced," crowed Senator Mark
Montigny, the chairman of the Senate Ways and Means Committee, when his budget came out last week. "We've cut
costs wherever we can." Far from apologizing for knifing the public with
higher taxes and fees, he actually praised the budget as one that "didn't gouge taxpayers." Reasonable people
should be "relieved," he said, "and I hope some people would even be pleased."
Pleased? Pleased that when countless Bay State citizens have
to tighten their belts, Montigny & Co. draft a budget exceeding the one the Legislature passed last fall by more than half a
billion dollars? Pleased that they have the gall to lay that bloated fish on the table and claim,
"We've cut costs wherever we can?"
Well, let's see.
They didn't cut the Quinn Bill, a $100 million a year
giveaway that pays fat bonuses to police officers who take dubious "college" courses, often at worthless diploma mills.
Not only did Montigny & Co. not cut this notorious waste, they increased it.
They didn't repeal the outrageous Section 10 scam that makes
payments to long-term state employees who claim they were "fired" from their jobs - including politicians who lose an
election. This cash cow pays the ex-employee about one-third of his former salary until he
qualifies for a regular pension at 55. More than 1,100 of these payouts have been approved
since 1990, and in numerous cases the employee collecting the cash appears to have
resigned voluntarily. The public loses tens of millions of dollars because of this scam. But
Montigny's budget leaves it intact.
They did nothing to unload the Hynes Convention Center in
the Back Bay, a money-losing rathole that the state has to spend millions of dollars a year to bail out. And they continue
to flush good money after bad down an even bigger rathole in South Boston - the useless new
convention center that will cost more than $800 million to build. Every dollar spent on that
white elephant is a dollar that will never be recouped. But rather than cut its losses now, the
Legislature just keeps on spending.
"We've cut costs wherever we can." Really? Then why does the
Metropolitan District Commission still own and operate two golf courses? Surely the Legislature doesn't consider
golf to be an essential government service - and just think how much money
the commonwealth could realize if it put the Ponkapoag and Leo J. Martin courses up for sale.
From the pointless Emergency Finance Board to the silly
Commission on the Status of Women, from the minuscule health-insurance contributions paid by government employees to
the mindless overspending on education "reform," the proposed Senate budget is a
monument to blubber and waste.
Legislators would never act so heedlessly with their own
money. Why do we let them act this way with ours?
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The Boston Globe
Monday, June 10, 2002
Most states avoiding Mass.-style tax hikes
By Rick Klein
Globe Staff
As states across the country cope with their worst budget
gaps in a decade, few are turning to broad-based tax hikes with the zeal of Massachusetts.
Legislatures and governors nationwide are finding a variety
of methods to close gaping deficits without major tax increases. While some of their ideas are of questionable
long-term wisdom, they are demonstrating that - in contrast to the claims of some Democratic
lawmakers in Massachusetts - there are options.
"Most states are staying away from the broad taxes that
Massachusetts is talking about," said Nicholas Jenny, senior policy analyst at the fiscal studies program of the Nelson A.
Rockefeller Institute, which studies local and state government policies. "There are a lot of
reasons for that - political reasons foremost among them."
This week, the state Senate is slated to approve a budget
for next fiscal year that raises taxes by $1.2 billion, and some lawmakers are talking about increasing taxes even more.
With the House already voting 131-24 in favor of a similar tax package, the Legislature is poised to
close roughly half of next year's $2.5 billion budget gap with new taxes.
Among the nation's 20 most populous states, Massachusetts is
one of only a handful that are looking to rely heavily on broad-based tax hikes to solve budget shortfalls. New York,
Florida, Georgia, Pennsylvania, and Maryland are closing multibillion-dollar gaps for fiscal
2003 by slashing spending and liberally tapping reserve accounts, or by increasing only
narrowly targeted taxes, like fees for permits and licenses and levies on cigarettes.
California, New Jersey, Wisconsin, North Carolina, and
Washington are contemplating closing huge amounts of their budget gaps by borrowing against future payments from the
30-year settlement agreement that the states signed with the big tobacco companies in 1998.
Missouri's Legislature chose to let the voters decide this summer whether to enact $500
million of increases to the sales and gasoline taxes.
Meanwhile, the Massachusetts Legislature is poised to enact
a freeze to a scheduled income tax rollback, an increased tax on capital gains, a 75-cent-per-pack hike on cigarettes, an
elimination of the charitable deduction, a reduction in the amount of income exempt from
taxation, and extra charges for court filings. Lawmakers will be stripping away two
voter-approved tax cuts in the process.
"It's a culture here. That's what we do: We raise taxes,"
said Barbara Anderson, executive director of Citizens for Limited Taxation and
Government. "There's a reason why Massachusetts is the laughingstock of the country."
Although the taxes will be coupled with hundreds of millions
of dollars in spending cuts, state spending still will rise several hundred million dollars in fiscal 2003, which begins
July 1.
"We have a problem when we turn to taxes as an initial and
primary solution," said Stephen P. Crosby, the chief of staff for Acting Governor Jane Swift. "We use them as a first
resort."
Legislative leaders say that's not the case, noting that a
revenue shortfall in the current fiscal year has been made up with emergency budget cuts and extensive use of state reserves.
They contend that their approach - raising taxes by a sufficient amount instead of relying
entirely on one-time revenues like the rainy day fund - is a smarter long-term
policy, since Massachusetts probably will have smaller shortfalls in fiscal 2004 and beyond as a result.
Senate debate over the $23.2 billion spending blueprint is
likely to last three days.
"It's a blended approach, and it's superior to borrowing or
spending all of our reserves," said Senate President Thomas F. Birmingham. "We shouldn't spend all of our reserves
immediately. We should be cautious, because we're told this could be a two- or three-year
problem."
Birmingham stressed that a big portion of the tax package -
more than $200 million - is the result of delaying the scheduled income tax cut and is not an increase of a current
tax. Birmingham said the Legislature intends to go ahead with that cut, and others, when the
economy recovers.
Plus, Massachusetts cut taxes by a large margin over the
past decade, costing state coffers about $4.5 billion a year, said Cam Huff, a senior research associate with the
Massachusetts Taxpayers Foundation. Against that backdrop, a $1.2 billion tax increase doesn't look as
large, and recent public opinion polls indicate that voters generally agree, he
said.
Jenny said Massachusetts was hit hard during the economic
slowdown because it draws a large portion of its revenues from income taxes and capital gains, and both declined sharply
as the economy softened.
Still, a quick glance around the nation at other large
states shows that Massachusetts stands virtually alone when it comes to its disproportionate reliance on taxes to solve its
deficit. California Governor Gray Davis two weeks ago proposed $2 billion in new taxes, but his
state has a budget shortfall of $23.6 billion - nearly 10 times the Bay State's gap.
New York recently closed a $6.8 billion deficit in fiscal
2003 with just $235 million in additional taxes and fees, with the state borrowing heavily and burning through most of its
reserves. Leaders there even found a way to carve out another $700 million in tax cuts over
the next three years to spur business development and help the economy.
Republican lawmakers, who are badly outnumbered in Massachusetts, are fuming over the
Democrats' moves, yet the tax package is, in Birmingham's words, a "fait accompli."
Some analysts believe other states are not pursuing big
broad-based taxes now because such an approach is too politically controversial in an election year, and instead are
turning to stop-gap measures or borrowing. After the November elections, in which 36 governorships
and legislative seats in 47 states will be filled, more states may aggressively pursue
taxes, and look more like Massachusetts, the analysts say.
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