Limited Taxation
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CLT Update
Wednesday, January 6, 1999

"We can support a reduction in the state's income tax rate, but not before the Commonwealth's needs are met."

With that significant qualification, the Boston Globe today has dismissed keeping the promise and returning the income tax rate to 5 percent.

But just when will the "needs" ever be met to their satisfaction ... how can they ever be met? The state budget has annually grown faster than the rate of inflation for almost a decade. Massachusetts has the largest budget in its history, $20 billion. Still, we're told, there remain all these "unmet needs."

"Needs" will remain endlessly "unmet" so long as there is a tax revenue surplus. New "needs" will be discovered and mount faster than surpluses can possibly increase -- even if the "need" is a frivolous increase in the "Rainy Day" fund, now consuming over $1 billion of our tax overpayment.

The debate once again has begun over what to do with the "embarrassing riches" extracted from the broken promise, our continuing tax overpayment. Though the honorable and honest thing to do is to return it to its rightful owners -- the taxpayers who earned it -- for too many this option isn't even a fleeting consideration.

It never is, for those who possess ill-gotten gains captured by whatever means, or for those who want a share of the booty.

Chip Ford --

The Boston Globe
Wednesday, January 6, 1998

For Cellucci, an uphill battle from here
By Brian C. Mooney
Globe Staff

[ . . . ]

A tax cut of any significance may also be beyond Cellucci's grasp, despite brimming state revenues and the likelihood of a budget surplus this fiscal year. The Massachusetts Taxpayers Foundation now projects the state will be in the black, $300 million to $500 million, by June 30. The surplus should be used to pay capital costs now cannibalized by long-term borrowing for the $10.8 billion Central Artery/Ted Williams Tunnel project, Michael Widmer, president of the business-backed watchdog group, said this week. Highway and other building projects are being sacrificed to the Big Dig's demands, Widmer said.
"We think we need to solve the capital problem first," Widmer said.

In a recent interview, Finneran, a hawk on debt and capital spending, agreed with Widmer. That spells trouble for a Cellucci tax cut, which would cost $230 million in the first year of a three-year phase-in and $1.2 billion fully implemented.

Of course, all of this presumes the continuing hum of the economy, now generating revenues 5.6 percent above budget projections. Cellucci's own budget writers, however, say last year's $1 billion in tax cuts will produce record refunds this spring, and they see a cooling economy through the year 2000. They also envision a budget surplus near the low end of the taxpayers' foundation range. That would be enough to offset year one of the governor's tax-cut proposal, but not much else.

Moreover, the faint hint of an economic sputter may have sounded this week. On Monday, Cellucci's Department of Revenue reported record December tax revenues but with one exception: Sales and use tax collections actually dipped 1.7 percent compared to the prior December, reflecting a drop in consumer spending. Not a good sign.

[ . . . ]

Wednesday, January 6, 1998
Using the surplus wisely

A strong economy in Massachusetts has yielded unexpectedly high tax revenues and produced a sense of fiscal euphoria. That should not exempt the state from its obligation to plan for the future. Governor Cellucci wants to cut personal income tax rates from 5.9 percent to 5 percent over time - and a case can be made for judicious moves in that direction - but other pressing needs deserve close attention.

Looming large among these is a hefty backlog of capitalprojects, many of them overshadowed by the hugeCentral Artery reconstruction but still vital to local needs.

Transportation dominates capital projects, but many communities also need new school construction as enrollments rise. Many courthouses and jails are a disgrace and impede the orderly functioning of justice. In all, more than $7 billion in capital projects authorized by the Legislature remain unfunded because they would put the state over its $900 million borrowing cap.

Paying for some of these projects out of general revenues would justify increased borrowing in the future if the economy took a downturn and state revenues slowed. The state cannot constitutionally run an operating budget deficit, but prudent spending on capital projects to help stimulate the economy would provide a real boost without inflicting any immediate burden on taxpayers. Likewise, an increase in the state's gasoline tax, currently 21 cents a gallon, would take the pressure off general revenues and help fund badly needed transportation projects. We can support a reduction in the state's income tax rate, but not before the Commonwealth's needs are met.

Capital projects, unlike operating budgets, are one-time charges that do not commit the state to programs far into the future. They are prudent and appropriate uses of budget windfalls.

A Boston Herald editorial
Tuesday, January 5, 1999
It's Cellucci's turn to use bully pulpit

The real Cellucci administration - not the "acting" one - officially gets to move into the State House Thursday, and a somewhat jaded and skeptical public is looking for a reason to cheer.

It takes a lot to capture the public imagination these days (not everyone can be a former pro wrestler). And following a governor noted for both his top-notch intellect and his quirkiness (Yes, we will miss the armadillo and the Charles River dives.) is not an easy job.

But Paul Cellucci has more than a few things going for him. He is, after all, a creature of the Legislature  and when itcomes to dealing with an overwhelmingly Democratic House and Senate, this isn't a bad thing. And he is your basic middle-class guy, putting two kids through college and coping with some rather well-publicized debts - pretty much like most of his constituents.

So with the bully pulpit of the governorship at his disposal, Paul Cellucci has a real opportunity this week to speak to and to speak up for that overburdened class of citizens who just want a little more paycheck left at the end of their week. We know that too many of this state's young wage earners are leaving for places where the cost of living - including the tax burden - is lower. It's time to stop this brain drain by lowering that cost of living.

Department of Revenue officials confirmed yesterday that state tax collections grew 8.9 percent in the first six months of the fiscal year that began last July 1. During the same period last year collections had grown 6.6 percent and even that figure had state coffers filled to overflowing.

The Massachusetts Taxpayers Foundation is already projecting a surplus for this fiscal year of $300 million to $500 million.

So before the let's-spend-it-all crowd in the Legislature gets a chance to have it, the governor's top priority must be to fulfill his campaign pledge of a cut in the income tax from 5.95 percent to 5 percent. The spending cap suggested by Harvard economist Martin Feldstein is a fine idea, but nothing compares to taking revenue off the table and putting it back in the pockets of those who earned it. And nothing is fairer, either.

We look forward to hearing the new governor's vision of state government, of how it can become more business-friendly. A cut in unemployment insurance costs (that's another fund full to overflowing) and abandoning the state's onerous pay-to-play tax appeal system (one of the few such systems in the nation) would be a good start. And a real budget planning process that looks beyond the current year is also much to be admired.

But nothing can match the dramatic appeal - and the good sense - of an income tax cut. It won't happen, however, without a direct appeal to the public. This is the time to make that appeal.

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