Limited Taxation & Government
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CLT&G Update
Friday, July 17, 1998

Greetings activists and supporters:

Yesterday the Senate passed the Finneran/Birmingham "tax cut" package and sent it along to the governor for his signature. In the entire 200 members of the state Legislature, only one representative of the people stood for principle and not simply for political expediency and, once again, that one heroic senator was Bob Hedlund, Republican of Weymouth.

He voted "no" and insisted that the tax cut be enlarged and the promise made in 1989 be kept, and he again argued that the "rainy day fund" scam be eliminated.

Senator Hedlund, it must be tough and lonely standing up for honor and integrity among that crowd. You have our gratitude.

The most important thing to remember about this "largest tax cut in the state's history":  IT RETURNS ONLY A HALF OF THE LARGEST TAX INCREASE IN THE STATE'S HISTORY!

I never thought I'd ever, ever again think about doing another petition drive...

Chip Ford

State House News Service
SENATE . . . SHNS . . . July 16, 1998

[ . . . ]

Sen. Hedlund said I recognize the hard work and the historic nature of this package, but I think it's a lost opportunity. I will vote no. We really could have done a lot better at returning money that rightfully belongs to the people of the Commonwealth. We are going to see now with the second increases in a year in a half an increase in the stabilization fund from 5 percent to 7.5 percent of revenues. This will put us at $1.4 billion-plus, second only to Alaska which funds their stabilization fund through oil revenues and does not have an income tax. It is unlikely that we will see the tax reduction fund allow returns to the taxpayers. It is a lost opportunity to not move to the 5 percent income tax rate. We had a promise to live up to -- eliminate the surtax imposed in the late 80s now that the bonds have been paid off. We are enacting a major piece of tax policy change with the stabilization fund and there have been no hearings on this issue. Is this an amount that's justified? I don't know.

Sen. Hedlund said it's unfortunate that what is driving this change is not a discussion on economic prosperity. It's an attempt to hide money from taxpayers. That troubles me. Of the 45 states that have a rainy day fund, we are one of the only ones that have no rules governing the use of that fund, which some call a legislative slush fund. It can be used for almost any purpose.

[ . . . ]


The Boston Globe
Friday, July 17, 1998
Metro | Region

Senate sends tax cuts to Cellucci
By Tina Cassidy
Globe Staff

The Senate yesterday approved the $700 million tax cut package, 37-1, sending the legislation to Acting Governor Paul Cellucci, who has said he will quickly sign it into law.

Taxpayers can expect to see some of the benefits on their upcoming tax returns in two areas: Increased personal exemptions and eased taxes on capital gains from the sale of a principal residence and on individual retirement accounts.

The House unanimously passed the same tax package Wednesday.

One senator, Robert Hedlund, voted against the measure. "I think we could have done a lot better," Hedlund, a Weymouth Republican, said during debate.

The package doubles the exemption for earned income, saving $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 5.95 percent tax rate for unearned income would be applied to tax year 1999.

As for the doubling of exemptions, taxpayers will be able to receive 75 percent of the phased-in savings this year and 100 percent of the savings the following year.

The plan also allows the state's stabilization, or rainy day, fund to grow by as much as $475 million to $1.42 billion. The proposal also reduces unemployment insurance rates by $116 million, funneling another $18 million toward creating a workforce development program.

The bill does not include Cellucci's proposal to lower the income tax from 5.95 to 5 percent, which would cost more than $1.2 billion when fully phased in over three years.

The Boston Herald
Friday, July 17, 1998

Tax cut politics can be a killer
Op-Ed by Rachelle G. Cohen

Life must be so gosh-darn simple when you know you are right, when the world is black or white and not all those messy shades of gray, when all you have to do is talk, not act, and certainly never worry about the consequences of those actions. [1]

So hey, Paul Cellucci, you just whip out that veto pen of yours and show those smarmy Democrats what you're made of. You just stand right up there in front of that battery of TV cameras and reporters (who don't have anything else to cover but the heat wave anyway) and explain why it is that the taxpayers won't be getting a $700 million tax cut.

Then you do two things: (1) You kiss your political future goodbye and (2) you check yourself in to a secure facility for the terminally stupid, where you can enjoy the company of your Republican primary opponent, Joe Malone, and the hierarchy of Citizens for Limited Taxation and Government. [2]

Sure, Senate President Tom Birmingham and House Speaker Tom Finneran have the acting governor right where they want him. It's not pretty, but what can you expect when you send a guy into battle without any troops to speak of behind him? And face it -- the Republican Party has been practicing its own form of unilateral disarmament for years.

So Birmingham and Finneran, who have little in common other than the "D" after their names, have at long last found common ground, and if they can get the Republican acting governor over a barrel in the process -- well, does it get any better than that?

In addition to giving taxpayers a $700 million cut, they have agreed to increase the amount socked away in the state's rainy-day fund to nearly $1.5 billion. That's an entirely excessive amount (the Massachusetts fund is currently near the $1 billion mark -- the third largest in the nation). So it is, fiscally speaking, a perfectly idiotic idea. [3]

But there aren't 12 people in the entire state who understand the concept, which makes it a little hard to explain in a 30-second spot. [4]

Of course, two of those 12 people are Barbara Anderson and Chip Ford of Citizens for Limited Taxation and Government, who along with Malone think Cellucci should veto the tax cut. [5]

For Malone, of course, it's a two-fer. He gets to say he's for a bigger tax cut (and who isn't?) And urges his rival to commit political suicide at the same time.

For Anderson and Ford it's a quest for the perfect tax cut. They no doubt forget that adage about the best often being the enemy of the good.

They note, If the Legislature does nothing but allow the present rainy-day fund law to work as promised, the tax cut will be bigger than if you pass this personal exemption increase." Doubling the exemption gives taxpayers back $443 million. Anderson and Ford insist taxpayers would get back $475 million if the rainy-day fund were not tinkered with.

However, they conveniently forget that a legislative increase in the personal exemption is for this year, next year and for all the years after that. The give-back via the rainy-day fund is for one year only. [5] And it only continues *if* the good economic times keep rolling and *if* the Legislature doesn't find more ways to spend tax dollars. And would you really like to bet $700 million on that premise? [6]

The governor's staff would live to find a way to attack just the enlargement of the rainy-day fund in the tax cut, but they have not found a magic bullet -- sending the bill back with an amendment puts the tax cut at risk.

However, all is not lost. Apparently some amiable discussions continue between the governor and legislative leaders on a modest one-year tax rebate. So when Finneran says, "This is not the last word on taxes," we should take him at his word -- and take the $700 million too.

My Response to Rachael Cohen:

[1] Yes, Shelley, indeed life is simple when the difference between right and wrong is clear and constant, not situational, and when convictions are strong.

[2], [3] and [4] Shelly, how can we be "terminally stupid" for being among the "twelve people in the entire state" whom you believe understand a "perfectly idiotic idea" for what it is and oppose it? Further, your condescension is arrogant and elitist: We "twelve" are not alone.

[5] If you read our memo to the Legislature, we called for more than you reported -- including a long-overdue increase in the personal exemption at least adjusted for inflation. Why didn't you report all the facts instead of just those which conveniently fit your silly theme.

[6] You wouldn't "like to bet $700 million on that premise" -- half of last fiscal year's excess revenue . . . but you're willing to bet the other half on the same crew in the vague hope that Finneran's cryptic if "amiable" words will lead to an honest return of all the taxpayers' hard-earned money? How do you rationalize this disjointed leap of faith even in your own mind?

Shelley, the most important thing to remember in your celebration is that this "largest tax cut in the state's history" returns only a half of the largest tax increase in the state's history.

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