Citizens for Limited Taxation & Government
18 Tremont Street #608 * Boston, MA 02108
Phone: (617) 248-0022 * E-Mail: cltg@cltg.org
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*** CLT&G Alert! ***
Wednesday, April 2, 1997

The Boston Herald
Wednesday, April 2, 1997

Editorial: A tax increase by stealth

If all goes according to plan, the Massachusetts Senate will raise your taxes today. The senators hope you won't notice.

It may or may not be a good idea, but we're against it. We're always against any tax increase imposed without public debate.

Gov. William Weld, who likes to advertise himself as a tax-cutter, proposed this increase in January. He appears about to get it through the same manipulative back-door tactics by which he traded lower capital gains taxes for a legislative pay raise.

The tax increase would come about by enlarging the Stabilization Fund, the "rainy day" fund. A 1988 law requires that any surplus revenue be returned to the taxpayers once this fund hits 5 percent of total tax revenue minus debt repayment.

This year, for the first time, the fund hit its $543 million ceiling and $235 million is going back to the taxpayers, through bigger personal exemption in the state income tax. This will yield $43 to each taxpayer ($86 on a joint return) and, if the governor's deal slides through, $24 next year.

But after that, kiss the money good-bye.

Weld's bill would change the fund ceiling to 5 percent of *all* revenue -- taxes plus lottery profits, federal grants, fees, everything. That would make the goal $880 million -- and soak up any surpluses for years.

The bill has languished in the Taxation Committee without a hearing date. Last week the House leadership quietly tacked it on to the annual supplemental budget, which members passed as a matter of routine to meet unexpected expenses. It's this bill which the Senate may vote on today.

There has been no chance for Barbara Anderson of Citizens for Limited Taxation [and Government], the state's most knowledgeable and vigorous advocate of lower taxes, to argue at a hearing that a higher fund is unneeded. All she could do was dispatch a hasty memo to interested members of the House last week when she learned that the way had been greased.

"The state," she says, "does not need a savings account."

There has been no chance for anybody to argue that this money should be spent. Not that we'd agree, but these people deserve to be heard.

Speaking of which, the fund has one serious flaw: The Legislature can tap it at any time. Sen. Robert L. Hedlund (R-Weymouth), who's convinced a larger reserve fund is unnecessary, wants to offer an amendment requiring a two-thirds vote of each house and a declaration of need by the governor before the money can be used, as many other states do. He should get that chance, and the Legislature should accept his proposal or something similar -- or this piggy bank could be raided for who knows what.

The Weld administration says Wall Street wants to see a larger rainy-day fund if the state is to maintain a good credit rating. We want to see Administration and Finance Secretary Charles Baker make the case in public. Hedlund argues that Massachusetts is within the guidelines of Council of State Governments for reserve funds. And, of the 45 states having one, ours is 16th in size relative to the state's general fund.

Protecting the state's credit *is* important. If rating agencies are worried, surely a vice president of one will be willing to say so in a public hearing, an essential step before snatching away the citizen's hard-earned cash.

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