Limited Taxation & Government
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CLT&G Update
Thursday, July 16, 1998

Greetings activists and supporters:

* The House Democrats and Republicans yesterday decided that half the cookie was all we deserved even though the schoolyard bullies took that whole cookie away from us in the first place. They unanimously voted (149 - 0) to adopt the Finneran/Birmingham "tax cut" package.

* And where were the remaining 11 members of the "Best Legislature Money Can Buy" who failed to cast their votes during these hazy, lazy, crazy days of summer? Two are out for medical reasons (Barbara Hyland and Michael Ruane), but where were the other nine? The milk cartons will be out shortly for a nationwide beach search!

* If you think the Massachusetts Legislature is democracy in action, the following excerpt comes from an Adrian Walker Boston Globe report this morning, "$685m deal will upgrade courthouses - State reaches accord on labor."

After years of delay, legislative leaders have reached agreement on a deal to spend $685.3 million renovating courthouses across the state ...

Senate President Thomas F. Birmingham and House Speaker Thomas M. Finneran reached a compromise that allows the project to go forward three years after it was first proposed. Birmingham and Finneran agreed that some of the major projects will be performed by union labor, resolving the main issue that had delayed the deal.

The bill had already passed both chambers of the Legislature and was technically referred to a conference committee. But rather than appoint a committee, Birmingham and Finneran simply cut the deal themselves, as they have on other bills....

So all of us have Thomas M. Finneran representing us in the One-Man House, Thomas F. Birmingham representing us in the One-Man Senate, and another 198 pieces of over-priced window dressing wandering around the State House corridors trying to figure out ways to convince us that they're necessary.

* Finally the SJC got what it wanted and was owed: The "quid" payment for the "pro quo" of killing term limits, the payraise repeal, and the Free the Pike petitions. The high court's patience has paid off. What'll the Legislature hold over their heads the next time? Stay tuned, it's inevitable!

* Have you noticed that, when it comes to tax cuts, the Legislature doles them out in static dollars; but when it comes to their money grabs, they take it in percentages? For example, the new "tax cut" package doubles the personal exemption, ie., for single filers from $220 to $440, but increases the "rainy day" stabilization fund from 5 percent to 7.5 percent of all revenues.

It doesn't take a CPA to figure out why:  Inflation.

Even at 2 or 3 percent per year inflation, every year the personal exemption is worth less and less to the taxpayer. Then, when they finally get around to adjusting it for inflation once again, they call it giving us another tax cut.

But at 7.5 percent, the "rainy day" slush fund is automatically adjusted for inflation. Under this new package, with the Legislature's $475 million "deposit" of our excess taxes extracted, it'll immediately jump from $950 million to $1.42 billion before the automatic tax cut ever again kicks in -- but it will also keep growing with inflation.

* And it's set up as the Legislature's personal slush fund, so they can tap into it whenever Finneran and Birmingham agree on another way to spend some or all of it.

* The schoolyard bullies have won over us again. Take your cookie crumbs, smile, and gush in gratitude. "Better the crumbs than nothing," we're told by the emasculated window dressing aimlessly wandering the corridors of power calling each other "representative."

Chip Ford --

The Boston Globe
Thursday, July 16, 1998
Metro | Region

In rare show of unity, House OK's $700m tax-cut package
By Tina Cassidy
Globe Staff

In an unusual show of election-year bipartisanship, the House yesterday unanimously passed a $700 million tax-cut package.

The plan doubles the exemption for earned income, saving about $131 for a single filer and $262 for joint filers; and cuts in half the 12 percent tax rate on interest and dividend income.

The new tax rate for unearned income would be phased in Jan. 1, 1999. Interest and dividends gained this year, therefore, are not subject to the lower 5.95 percent rate.

As for the doubling of exemptions, taxpayers will be able to receive 75 percent of the phased-in savings on their 1998 tax returns and 100 percent of the savings after that.

The plan also increases the size of the stabilization, or rainy day, fund, from 5 percent of current revenues to 7.5 percent, allowing reserves to grow from $950 million to a maximum of $1.42 billion. That item alone could cost $475 million.

Further, the plan would reduce unemployment insurance rates by $116 million and add $18 million for a workforce development program.

And the state tax code would be brought in line with the federal tax code in several areas, including Roth and educational Individual Retirement Accounts; and capital gains on the sale of a principal residence.

The bill does not include Acting Governor Paul Cellucci's proposal to lower the income tax from 5.95 to 5 percent, which would cost over $1.2 billion when fully phased in by 2001.

For a family of four earning $50,000 a year, Cellucci's plan would save them $384, and a family of four earning $75,000 would save $600; a single parent earning $30,000 a year would save $213; and a single person earning $25,000 would save $198.

However, the plan passed by the House yesterday would save a family of four $262 a year in personal exemptions when fully phased in. A single parent would save $202, and a single filer would save $131.

Because of the gap between the two proposals, Citizens for Limited Taxation [and Government] and Treasurer Joseph D. Malone called on Cellucci and other Republicans to reject the plan and hold out for a larger tax cut.

But the Republicans joined the House Democrats in passing the package 150-0. And Cellucci is expected to sign off on the deal.

"Cooperation is the name of the game," said Representative David M. Peters, a Charlton Republican and minority leader. "We supported the tax cut based on its merits. Was it everything we wanted? No. But we voted for it because we felt it was a good package."

Meanwhile, Cellucci was expected to testify before the Joint Committee on Taxation yesterday during a hearing on his income tax reduction plan. But the acting governor did not show.

"I think it's a disgrace," said the committee's Senate chairman, Warren E. Tolman. "This is a guy who, if I listen to my TV, he's fighting hard for a tax cut. But when the bill is heard, not only does he not show up, but he doesn't even send a representative to debate and discuss this important public-policy proposal."

Cellucci aides said the acting governor was in New Bedford announcing a grant for the local jail. They said the Legislature did not notify his office about the hearing.

"This is legislative trickery aimed at detracting attention from the fact that Governor Cellucci has gotten and will sign the biggest tax cut in history this year," Ilene Hoffer, his press secretary, said.

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