Citizens for Limited Taxation & Government
18 Tremont Street #608 * Boston, MA 02108
Phone: (617) 248-0022 * E-Mail: cltg@cltg.org
Visit our web-page at: http://cltg.org
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*** CLT&G Update ***
Monday, May 19, 1997

Tomorrow the state Senate will begin debating its version of
the FY '98 state budget. It has proposed certain targeted tax
cuts, which will be debated and perhaps amended. Today, CLT&G
hand-delivered the following memo to each of our 40 state
senators:


To: Members of the Massachusetts Senate
May 19, 1997
Senate Budget Tax Cuts

Targeted tax cuts are better than no tax cuts at all --
unless one of them is probably unconstitutional, and one is
attached to an oft-abused federal program.

It might be constitutionally possible to cut the so-called
"unearned income" tax rate for seniors alone, but we do not
expect a cut for only *certain* senior *income* groups will
pass constitutional muster. We support this cut with the
proviso that if the Supreme Judicial Court throws it out, the
Legislature will expand it to wherever the SJC says it must be
expanded in order to become constitutional.

The earned income tax credit has merit in that it allows
low-income working people to keep enough of their earned income
to live on. For those whose income is so low they don't pay
income taxes at all, the transfer payment from the EITC helps
to offset social security taxes which are taken from the first
dollar. But since this proposal piggybacks on the federal
credit, it is useful to note that the federal EITC program has
had a very high fraud and error rate, at least 30 percent
according to IRS admissions. At a hearing in 1994, Clinton
Administration officials admitted the fraud rate might be as
high as 45 percent, partly because illegal immigrants and
prisoners were eligible for the credit. If this is still the
case, we hope the Senate doesn't plan to piggyback on these
abuses.

We support an inflation-adjusted increase in the child
dependent deduction, and like the concept of giving it to those
who do not use the day-care exemption so that a stay-at-home
care-giver gets a break to match the working parent's.

The problem with the student loan deduction is that
taxpayers who struggle to save for their children's education
and minimize the need for a loan do not get any break, and must
now also pay for the loan deduction. It's fair if there is also
a tax cut for all taxpayers, which is what we hope will be
added as an amendment.

With the Dukakis deficit bonds about to be completely paid
off, it is time to begin phasing the income tax rate down to
its pre-Dukakis 5 percent. The so-called "unearned income" tax
should be cut for all savers and investors. However, we are
glad the Senate, unlike the House, is at least *thinking* "tax
cut" and hope that improvements can be made during budget
debate.