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Limited Taxation & Government
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CLT&G Update
Tuesday, July 14, 1998

Greetings activists and supporters:

Remember the bully in the schoolyard, the tough little kid who thought he could do and take whatever he wanted because he was bigger and badder? "Might makes right" he thought, and often got away with it.

The Beacon Hill schoolyard bully has taken away our cookie, then he has offered us back half of it. "Hey, it's the bigger half," he proclaims, like this makes everything more than fair. "You're lucky I'm giving you back any of it, 'cause it's mine now!"

Life in the Taxachusetts schoolyard goes on.

Chip Ford --

State House News Service
Tuesday, July 14, 1998


SHNS . . . TH . . . JULY 14, 1998 . . . Legislative leaders announced a $700 million tax-cut package today doubling the earned income personal exemption while leaving the 5.95 percent income tax rate untouched. If approved, it will be the largest tax cut ever in Massachusetts.

Crafted by Senate President Thomas Birmingham and House Speaker Thomas Finneran, the plan also lowers the tax rate on unearned income from 12 percent to 5.95 percent. The permanent cut is funded with $200 million of the Fiscal 1998 surplus and a $500 million charge in FY 99. Birmingham and Finneran said that still leaves room for a one-time tax cut if they decide to do one.

Taxpayers will see the benefit when they file their taxes next April, with a single filer's income exemption rising from $2,200 to $4,400, a savings of $131. Joint filers would see savings of $262.

Both branches had passed tax cuts worth about $500 million for FY 99, although the House lowered the base tax rate while the Senate emphasized increased exemptions.

The bill also reduces unemployment insurance rates by $116 million, $18 million of which will go toward worker training.

Earlier today, tax-cut activist Barbara Anderson compared legislators to school-yard bullies who stole taxpayers' money.

"It's insulting that you're saying you can have half the cookie back that I stole from you," Anderson said, calling the plan an "invisible tax increase" because it raises the stabilization fund cap to 7.5 percent of revenues from 5 percent.

"We've gotten where we have through a blended approach," Birmingham (D-Chelsea) responded. "There's nothing to apologize about."

"A rational business would save for a rainy day and invest in its long-term profitability. That's the kind of blended approach we have adhered to for the past four years," he said. "We are giving a historic tax cut, we are saving for a rainy day and we are prepared to make investments in our long-term standard of living.

"We have not succumbed to the constant temptation to increase the operating budget in a way that would have mirrored patterns in behavior in the mid to late 80s," Finneran added. "You had all the extra revenues going into operational base programs that could not be sustained. There's a very distinct difference here that I think Wall Street has recognized."

Finneran said legislators haven't decided what to do with this year's $1 billion budget surplus; he mentioned a one-time tax cut, a trust fund for the Central Artery/Tunnel and filling up the stabilization fund to its new cap as possibilities.

The fiscally conservative Massachusetts Taxpayers Foundation applauded the tax cut plan as "broad and balanced relief" combining the best parts of the respective House and Senate proposals.

Responding to this morning's news reports about the plan, Cellucci said he wouldn't veto the plan because it goes so far toward his own plan for returning the budget surplus and permanently reducing tax rates.

"What we expect to get next week is a huge down payment," Cellucci said. "I'm not going to put a much-needed tax cut at risk. I want this to move forward. It's not the way I would have done it, but it will help our families and our economy."

Speaking to reporters just minutes later, Attorney General Scott Harshbarger, who is running as a Democrat for governor, said Cellucci was trying to take credit for legislators' work. Harshbarger then suggested using $200 million of this year's surplus for a "Community Protection Revenue" fund. The CPR fund would give emergency grants and loans to communities to help cover education, police and public works projects, he said.

Democratic gubernatorial candidate Brian Donnelly proposed using $500 million of the surplus for a "Children's Trust Fund," to renovate community centers and pay for after-school programs. Donnelly said parents should ask themselves if they'd rather invest in their children or have an extra $200 at the end of the year.

Treasurer Joseph Malone, who is running against Cellucci in the primary, said he would veto the entire tax package unless it returns all of the surplus to taxpayers, and rolls back the income tax rate to 5 percent.

"I didn't get into politics to say we'll accept much less than what is fair, what is right. That's the difference between the fiscal conservative that I am and the go-along, get-along guy Paul Cellucci is," Malone said. "Either the Legislature could override my veto or they would feel the heat and that would create debate."

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