In his first official act as governor, Paul Cellucci yesterday filed
legislation to lower the state income tax rate to 5 percent from 5.95 percent over the
next three years, ultimately saving the average family $600 a year, according to
administration figures.
His plan immediately hit a wall of skepticism when Senate President
Thomas F. Birmingham said he favored a more progressive approach of increasing earned
income tax exemptions rather than restoring the rate to 5 percent.
"We in the Legislature have supported tax cuts which provide the
same dollar benefits to everybody," said Birmingham, a Chelsea Democrat. "The
governor's proposal provides a lot more to the wealthier people and a lot less to the vast
majority of middle- and working-class taxpayers."
But Cellucci's plan appeared to have at least one Democratic ally:
The fiscally conservative House Speaker Thomas M. Finneran.
"I think there's some sentiment in the House for doing just a
very straightforward, simple approach on rates, but that was articulated pretty
aggressively last year," the Mattapan lawmaker said.
However, like Birmingham, Finneran said the size of the fiscal
year-end budget surplus would largely influence how much of a tax cut will be granted.
Some expect that the budget surplus could be as much as $350 million
by the end of the fiscal year, less than half of 1998's level. And one fiscal watchdog
group believes the surplus should be used to help allay an impending "crisis"
over the state's capital budget, which pays for improvements for roads, bridges, and
public buildings.
The Massachusetts Taxpayers Foundation yesterday said it expects a
fiscal disaster brought on by the huge cost of the Central Artery project, a reduction in
federal highway funds to pay for the Big Dig, and a growing need to fix the state's roads
and bridges.
Finneran and Birmingham said the report was worrisome.
But Cellucci rejected its premise and said the tax cut was a
priority.
"It also continues what we've been trying to do over the last
eight years, and that is to make life more affordable for the people of our state,"
Cellucci said. "Tax cuts go into the pockets of families and I believe they can spend
those dollars a lot better than the government can."
Under the current framework, the state gives just about everyone the
same earned income exemption, regardless of how much money they make each year. For tax
year 1998, single filers will be exempted $4,400, for a savings of $131; joint filers
$8,800, for a $262 rebate, and heads of households $6,800 per year, for a $202 return.
There was also an additional, one-time tax cut worth $200 million last year.
By contrast, Cellucci's rate-cut plan would give an average family of
four earning $75,000 a year $600 in savings each year; single parents earning $35,000 with
one child would get $228 back; and a single person earning $25,000 would get $154.
Cellucci said lawmakers should honor the "promise" they
made nearly a decade ago to restore the income tax rate to 5 percent once the economy was
again sound and debt was retired.
That time is now, the governor said, noting that the state has an
overflowing billion-dollar rainy day fund and an astounding 2.9 percent unemployment rate.
Birmingham said he is more inclined to support a plan like last
year's doubling of the earned income tax exemption, which will cost the state more than
$400 million a year once it is phased in entirely.
He is questioning whether the state can afford Cellucci's plan, which
would cost more than $1 billion annually, especially when more money is needed to improve
education and the Central Artery project is siphoning money from the state's strained
capital budget.
Finneran said he did not believe a promise was made during the 1989
budget debate. [Mistah Speakah, peruse the evidence at http://cltg.org/cltg/cltg98-1/tempquot.pdf -- we've
left it posted there just for you - Chip Ford] But if one were: "We've
given back in tax cuts multiples of a billion dollars already," he said. "Dollar
for dollar, the promise, if one was made, has been redeemed."
Cellucci filed the same tax cut proposal last year that he proposed
yesterday, but he was forced to compromise with the Legislature, getting an increase in
the earned income exemption instead.
Birmingham said lawmakers would once again be more likely to approve
an increase in the exemption over the rate reduction.
The Boston Herald
Tuesday, January 12, 1999
Respecting the debt limit
A Boston Herald editorial
The Massachusetts Taxpayers Foundation is absolutely right, the Big
Dig is putting a strong squeeze on the ability of the state to build all the projects it
wants to. But rather than boost tolls and fees beyond what's already planned to support
more borrowing as the foundation recommends, it's better to postpone low-priority work.
The watchdog group is concerned that the state is jeopardizing its
future by not rebuilding its infrastructure, whether that be roads or libraries.
Money has to be borrowed to finance such work, but the state finds
itself maxed out on its credit card. The Weld-Cellucci administration pledged to limit
general-purpose borrowing to $1 billion a year, exclusive of MBTA debt, and has managed to
observe that limit only by pledging future federal aid to repay some obligations.
This limit is an important support of the state's restored double-A
credit rating, and an important curb on future taxes. But Mass. Taxpayers believes Gov.
Paul Cellucci won't be able to hold the line.
"In view of the intense pressure to complete a backlog of
[transportation] projects already in the pipeline, [the foundation] projects that
non-Artery spending could outstrip the administration's plans by up to $1 billion over
five years," the report states. Call it $200 million a year. And non-highway projects
could receive only $500 million a year under the administration's plan, the foundation
complained, though the Legislature has authorized $12 billion in borrowing.
The governor is just going to have to resist that "intense
pressure." And it is no great tragedy for the state if borrowings for courthouse
renovation, new college buildings, prison cells and the like are limited to $500 million a
year. That ought to be enough to get started on the greatest needs. One of the things a
governor is paid to do is to put prisons at the head of the line and purchase of open
space to preserve scenery at the end of the line.
Should the state increase tolls on the Massachusetts Turnpike
Extension, not to $1 in 2002 as planned (from 50 cents) but to $2, impose similar
larger-than-planned increases on the Boston Harbor crossings and keep all the old Registry
of Motor Vehicle fees, all to support an addition of $1.6 billion to a debt that totals
$14 billion?
The politicians would never reduce these fees after the need has
passed or the debt paid off, that's a lead-pipe cinch. Our debt is the third heaviest in
the nation, both in dollars and as a percentage of income. More debt is not justified.