CLT&G Update
Saturday, May 30, 1998

Cellucci files $350m tax cut
Citing $1 billion budget surplus, critics urge deeper reduction

By Adrian Walker
Globe Staff


Spurred by soaring state revenues and a budget surplus approaching $1 billion, Acting Governor Paul Cellucci filed legislation yesterday that would trigger a $350 million tax cut.

The proposed cut, which the Legislature must approve, would be achieved by increasing the personal exemption for taxpayers when they file next year. Single filers would save an average of $98, while joint filers would reduce their tax liability by about $196. Head of household filers could save an average of $152 next year, the administration said.

"We think the people of Massachusetts should be getting this money back," Cellucci said. The proposal was immediately assailed by tax-cut proponents, who said he should have pushed for a much larger reduction. They said a $1 billion surplus should yield a $1 billion tax cut, not a reduction nearly two-thirds smaller.

"I think we should be getting back the entire surplus," said Barbara Anderson, co-chairwoman of Citizens for Limited Taxation and Government. "At least he should be making a case for returning all of it, if only because the Legislature has turned back his excellent rollback plan. He should make a major battle out of trying to get it all. I can't see why he wouldn't."

But Administration and Finance Secretary Charles D. Baker said that $400 million of the $1 billion surplus is needed for various supplementary items, such as capital projects, thereby reducing the actual surplus to $600 million in the administration's view. The administration plans to make the $400 million spending request before the fiscal year ends on June 30.

Baker said the final budget figures are subject to change, because they are dependent on June revenues.

"We think this is good news for taxpayers," Baker said.  Tax cuts have been a hot issue all spring on Beacon Hill with Cellucci, the House and the Senate all offering their different visions of tax relief. All but one of the candidates for governor have also put tax cut proposals on the table. The proposal yesterday was immediately seen as a tacit admission by Cellucci that the $1 billion cut he asked for earlier this year, has effectively been shot down by Senate President Thomas F. Birmingham and House Speaker Thomas M. Finneran, and that the administration must now scramble to recover what it can.

The Senate is expected to begin debate on a budget for fiscal year 1999 next week, and Cellucci said the administration hoped to take this money "off the table" in the Senate's deliberations.

Birmingham has offered a $443 million tax cut, retroactive to January, in a plan that would double all the current exemptions. Under his plan single filers would net $131, and joint filers would get a tax break of $262. The House passed a reduction in the rate to 5.7 percent, and increased deductions and exemptions.

Cellucci insisted that he is not giving up the fight for a reduction in the income tax rate from 5.95 percent to 5 percent. He said any permanent tax cut the Legislature approves this spring would come in addition to the one-time cut he proposed yesterday.

Treasurer Joseph D. Malone, Cellucci's rival for the Republican gubernatorial nomination, attacked Cellucci for not fighting for deeper tax reductions.

"He's offering table scraps to the people of Massachusetts," Malone said. "When it comes to liberal spending he just can't say no."

Noting that the state had a surplus of about $800 million last year, Malone charged that over a two-year period only $350 million of $1.8 billion will go back to taxpayers, even if Cellucci's plan passes.

"I think that's crazy, and I think it's an indication that when it comes to spending Paul Cellucci doesn't have a clue how to keep things reined in," Malone said.

The Boston Herald
Saturday, May 30, 1998
Lead Story - Banner Headline

$1B in the black
Bay State's mega-surplus ignites call for tax cuts

By Ellen J. Silberman, Laura Brown and Carolyn Ryan


State officials projected a $1 billion surplus this fiscal year, immediately igniting a political skirmish over tax cuts.

Acting Gov. Paul Cellucci pledged to seek a one-time $350 million tax cut while filing legislation to spend the remaining $650 million -- most of it next month.

"The most important point is that we share this surplus with the taxpayers of this state. They should benefit from this strong economy," said Cellucci. "I want the bulk of the surplus to go back to the taxpayers."

But Treasurer Joseph D. Malone, who is battling Cellucci for the corner office, accused the acting governor of cheating the public by spending most of the extra funds.

"We have a $1 billion surplus and (Paul Cellucci is) offering table scraps to the people of Massachusetts," Malone said yesterday just hours after the Cellucci administration announced that tax revenues were coming in so fast the state would have an extra $1 billion when it closed the 1998 books on June 30.

The size of the surplus caught officials off guard and will add fuel to moves to cut taxes by the end of the year.

At a late-afternoon press conference, Cellucci proposed the $350 million one-time tax cut that would temporarily increase the personal income tax exemption -- saving each taxpayer in Massachusetts $98 in their 1998 tax bills.

Another $100 million would be dedicated for capital projects, such as road repairs, and $185 million would go into a "rainy day" fund.

Cellucci portrayed his plan as a way to keep the Legislature from spending the entire surplus. "What I'm trying to do is take the money off the table," he said.

But Malone said Cellucci had proven again that he was captive to the Legislature's big spending ways.

"Paul Cellucci is growing the Massachusetts government at the Mike Dukakis rate. Big spending, big liberal sending is back in vogue on Beacon Hill and Paul Cellucci is leading the band," Malone said.

"I would look to give every dollar back to the people of Massachusetts," Malone said, pointing our that the commonwealth ended 1997 with an $800 million surplus and didn't give any back to the taxpayers.

Administration and Finance Secretary Charles Baker said the administration didn't have any choice about spending.

"It's not a $1 billion surplus because we have to spend the money," Baker said. He added that with tax-cut plans under discussion in the Legislature, taxpayer stand to get hefty breaks next year.

But Malone said the spending was optional. If the "must do" expenses are legitimate, they could be included in the fiscal 1999 budget -- under discussion by the Legislature -- rather than using up the extra money from 1998, Malone said.

Malone said timing of the announcement -- 4 p.m. on a summer Friday after most legislators had left the State House -- proved Cellucci was ashamed of the proposal.

"It's no surprise that they called this press conference on a Friday afternoon because they understand this isn't good news for the people of Massachusetts. This is a rip-off," Malone said.

Michael Widmer, president of the Massachusetts Taxpayer Foundation, a business-funded think tank that monitors state spending, agreed with much of the spending outlined by Baker, saying both the stabilization fund and the capital fund needed infusions of cash.