The Boston Globe
Tuesday, October 15, 2002
A Boston Globe editorial
Legislators turn to act
In announcing $201.5 million in unilateral budget cuts last
week, Acting Governor Jane Swift invited the Legislature to come back in to special session and approve another $84.5
million in savings, including a 2 percent cut in its own expenditures.
Budget prospects are so dire, she said, that even if the
state economy begins to turnaround soon - which is not at all certain - it will not grow fast enough or strongly enough to
prevent another budget crisis. The most respected independent voice on these matters, President
Michael Widmer of the Massachusetts Taxpayers Foundation, is now predicting a gap of
between $1 billion and $2 billion for the next fiscal year.
This being the case, it would make sense for the Legislature
to return to formal sessions promptly with the balanced objective that guided it earlier this year: to consider revenue
increases as well as program cuts.
Specifically, the state would be in a much stronger position
if the Legislature approved a temporary increase in the basic income tax rate back to 5.6 percent.
Normally, we would not support major initiatives by the
Legislature after its formal sessions end on July 31 or, particularly, in a lame-duck session after state elections. But
we argued for the 5.6 percent rate earlier this year, along with many others, and we believe the
intervening months - and the cuts put forward by Swift last week - prove that the
Legislature should have insisted on that rate in June.
It is true that the voters approved a ballot question two
years ago that was supposed to cut the rate to 5 percent in 2003. But it is also true that the rate was 5.95 percent just
two years ago. So even at 5.6 percent citizens would be paying lower tax rates than they did recently.
And any increase should be temporary, dropping to the lower rate when the economy
improves.
The alternative is unconscionable.
Among other things, Swift's cuts would reduce Medicaid
coverage for eyeglasses, dentures, and hearing aids; slash the state's model tobacco control program to just 12 percent of
what it was last year; chop significant amounts from health centers and higher education, especially
the University of Massachusetts; and take an average of $520 a year from 46,300
state retirees.
In an interview last week, Swift acknowledged the pain
involved in her recommendations. "Nothing that's left to do isn't tough," she said. But she continued to reject any talk of
a tax increase. "That shouldn't be a first resort or even a last resort," she said.
Yet there must be a limit. The state has already reduced its
order for flu vaccine this fall because it can't afford the doses that are needed. It is up to the Legislature to stop the
damage and pursue balanced action on a budget in crisis.
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Before reading the politically oblivious and factually
incomplete column (how could Shribman possibly miss the single most critical dynamic?) that follows, for honest
and complete comprehension and for information on the raucous Tennessee Tax Revolt against an income
tax and its dramatic impact on today's gubernatorial race, go to:
Real tax revolts are alive and well
in the "Volunteer State"
CLT Update - July 14, 2001
The Boston Globe
Tuesday, October 15, 2002
Tax debate has key role in gubernatorial race,
fate of Tenn. economy
By David M. Shribman
Globe Columnist
NASHVILLE - They are tough, burly men. They sat in a smoky
meeting room at the Ramada Inn a few miles from the airport, preoccupied with finding prison space for criminals,
shutting down the rural methamphetamine labs where household chemicals
are being transformed into highly addictive drugs, and, in lighter moments, planning the annual golf
outing and pistol shoot. But when Phil Bredesen, the Democratic candidate for
governor, turned up at the meeting of the Tennessee Sheriffs Association the other morning, the second
question he was asked was about a different subject entirely: state taxes.
Bredesen, the two-term mayor of Nashville, made it clear he
isn't going to push a state income tax. But the prominence of the question made it clear that all politics this autumn in
Tennessee is tax politics.
There is a variation of that theme in nearly all the 34
gubernatorial races being conducted across the country. The weak economy has produced revenue shortfalls in four-fifths of
the states, helping to account for a combined budget gap of about $40 billion. That's a shortfall
of nearly 8 percent - far higher than the gap during the last period of economic distress
nearly a dozen years ago.
The revenue drops are occurring at a time when states'
health-care costs, which the National Association of State Budget Officers estimates accounts for 20 cents of every dollar
of state expenditures, are climbing at dramatic rates - about 25 percent over the last two years. Here
in Tennessee, which leads the nation in the per capita use of prescription drugs,
the rate of growth of health-care expenditures is by far the highest of any state in the Southeast.
So while Bredesen and his Republican rival, Representative
Van Hilleary, have taken positions on scores of issues, the gubernatorial election here in Tennessee is coming down to
the question that has dominated state politics since the very first days: money - and whether
to take in more of it.
Hilleary, 43 years old, is a Republican of the modern sort,
elected in 1994 as part of the Newt Gingrich revolution, and he's making his opposition to the income tax (and his
conviction that an income tax would be unconstitutional) the centerpiece of his campaign.
"You need a minimum level of taxation because you need a minimum level of government,"
Hilleary said in an interview. "But I don't think taxes and more government is the answer to
every problem."
Bredesen, 58, won't rule out an income tax in his second
term - he said in an interview that eight years is too long a period to make a blanket commitment - but said he believed the
state's outlook and economic structure needed to be changed. The state, he said, could not
survive with what he described as "Massachusetts services and Tennessee taxes." And he
expressed worries that much of Tennessee's recent growth came from the
sewing, assembly, and light manufacturing jobs that migrated here in the past two decades from the Northeast
because the labor was cheap and the chances of unionization were slim -
jobs that, he said, were peculiarly vulnerable to being moved offshore.
At the heart of the state's budget structure is one stubborn
fact: Tennessee is one of nine states that don't have an income tax, though the state does tax dividend income and interest
on certain bonds at a rate of 6 percent. In his second term, Republican Governor Don
Sundquist, a onetime Memphis congressman known as an instinctive opponent of taxes,
changed his mind in the face of continuing budget crises and embraced the notion of an
income tax. The Legislature, however, resisted several income-tax proposals. Instead, state
lawmakers passed a tax package this July, including a penny increase in the sales
tax (except on groceries), giving Tennesseans one of the highest sales-tax rates in the country, with a
base rate of 7 percent. (Only a couple of counties in Oklahoma have higher
sales-tax rates.)
Some budget specialists believe that sales-tax increases
generally stave off economic crises rather than solve them. Tennessee, which relies more on the sales tax than any other
state, is especially vulnerable to continuing budget problems. Tennessee also borders on eight states,
permitting many residents to cross into adjoining states to make purchases.
"Tennessee has a structural deficit - our growing needs
simply can't be financed with the existing tax structure - and it's not going away and may have even worsened with the
increase in the sales tax," says Stanley M. Chervin, an independent tax consultant. "We can
postpone this long-term problem, and in the gubernatorial race the candidates aren't
tackling it. They are staying away from the issue like the plague."
But the issue isn't staying away from them. Hilleary is
throwing the income-tax question at Bredesen at every opportunity - one of his ads shows Bredeson, a former
Lexington, Mass., resident, talking about taxes in front of the Minute Man statue 32 years ago - and the issue is
surfacing in state-legislative elections this fall.
Right now polls indicate that the gubernatorial race is a
dead heat. But the voters and the candidates know that more than the election is unresolved. The future of Tennessee's
economy is unresolved as well.
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