Citizens for Limited Taxation & Government
"The Commonwealth Activist Network"
18 Tremont Street #608 * Boston, MA 02108
Phone: (617) 248-0022 * E-Mail: cltg@cltg.org
Visit our web-page at: http://cltg.org
--------------------------------------------------------------------

*** CLT&G Update ***
Wednesday, July 2, 1997

Boston Herald
Wednesday, July 2, 1997

Lead Editorial: An undisciplined budget

We’ve often criticized the Legislature’s budget-makers for trying to hang on to extra revenue instead of giving it back to the taxpayers. The situation is worse than we thought. They literally can’t spend it fast enough.

The Ways and Means committees of the two houses produced a budget only by agreeing to disagree on how to spend the old year’s surplus, which could be $400 million.

The two committees have agreed to put $100 million into the rainy-day fund, but couldn’t agree on their wish lists for the rest. The House committee had one array of $185 million in capital projects for which it wanted to use these operating funds (not usually a good idea); the Senate committee had a different $160 million list. Result? The money will sit there for a while, a temptation for all sorts of mischief.

There’s no bar to the solution we’ve advocated all along:

Give more back. The budget provides only $54 million in three tax cuts. (A doubling of the exemption per child to $1,200, which is the first recognition of inflation in this exemption; a $6,000 credit for people who must replace septic tanks; and an earned income tax credit pegged to 10 percent of the federal credit.) There’s room for four times as much.

Another tax cut is being shuffled off to the Supreme Judicial Court for an advisory opinion—whether the tax on so-called "unearned" income may be cut in half (back to the rate on "earned" income) only for elderly people of moderate income. The Massachusetts Constitution permits different rates on different kinds of income, but requires each rate to be "uniform throughout the Commonwealth."

The rate should be cut across the board. No other state taxes dividends and capital gains at 12 percent. Such a punishing soak-the-rich rate could actually be costing the state money, since it leads the well-off elderly to abandon Massachusetts citizenship (for Florida, say) when it comes time to cash in investments to arrange retirement. Capital gains are not solely a concern of the "rich" -- 84 percent of tax returns recording these gains show incomes under $100,000.

Our budget-makers seem to be slipping back into the habits of their predecessors of the 1980s, giving every claimant something, unable to set reasonable limits. Sure, every program is deserving. But modern politics is the eternal quest for more, and once started, social programs are immortal.

When inflation is running at less than 2 percent (after accounting tor the overstatement of official statistics), what is the state doing spending 6 percent more? Its economy is not growing that fast. Why is the state allotting 8 percent more to higher education? And 8.7 percent more to the courts?

This lack of fiscal discipline is paving the way for trouble.

# # #

NOTE: From the results so far in the CLT&G membership poll, not for long. Citizen-imposed "fiscal discipline" is just over the horizon and coming fast, accompanied by a promise finally kept— one way or the other—that the surplus belongs to those who earned it, and that the income tax hike will be temporary, as was intended . . .. . . or at least as was *promised!*
If the Beacon Hill pols won’t keep their word, then we’ll have to save them from themselves and keep it for them.
And that cut in the so-called "unearned" income is looking more and more attractive too . . .

Chip Ford
Co-director