Limited Taxation
Post Office Box 408     Peabody, Massachusetts   01960     (508) 384-0100
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CLT Update
Wednesday, March 31, 1999


Today on Beacon Hill, the Joint Committee on Taxation will hold a hearing on income tax proposals, including Senate 1523, the Citizens for Limited Taxation bill to rollback the state income tax rate to 5 percent.

I will be making three points when I testify before the Committee: 1) That it has been ten years since the "temporary" income tax increase was passed; 2) That the size of the state surplus is now estimated at from $300 million to $600 million, and; 3) That in addition to the surplus, there will be a windfall from the tobacco company settlement, reimbursing the state for Medicaid costs that were originally covered by that "temporary" income tax increase.

And if the lobbying effort doesn't work in the Legislature, Governor Paul Cellucci has pledged his field organization to join us in a petition drive this fall (see the Boston Herald story, below).

Barbara Anderson --

Limited Taxation
Post Office Box 408     Peabody, Massachusetts   01960     (508) 384-0100

MARCH 31, 1999
S.B. 1523, Rollback of the State Income Tax Rate from 5.95 to 5 percent

Citizens for Limited Taxation will testify Wednesday before the Joint Committee on Taxation in favor of S.B. 1523, the state income tax rollback, which was filed by Senator Robert Hedlund, CLT, and others.

This bill would reduce the rate from 5.95 percent to 5.6 percent for Tax Year 1999, to 5.3 percent for 2000, to 5 percent for 2001. The full impact in Fiscal Year 2001 is estimated to be approximately $1.2 billion.

The 1989 income tax increase was intended to be temporary and is now almost ten years old. Since the bonds for which the tax rate was increased have been paid, the extra .95 percent is now creating a surplus every year. This year's surplus is estimated at between $300-$600 million, and is probably larger. In addition, the tobacco settlement will be available soon to reimburse taxpayers for the cost of the Medicaid bills that were the rationale for the 1989 tax increase in the first place.

Clearly, the state can easily afford to keep its promise that the rate would return to 5 percent when the fiscal crisis was over.

Executive Director Barbara Anderson will give the Committee CLT's 1989 media collage which proves that the income tax increase was meant to be temporary, while Associate Director Chip Faulkner distributes a bumper sticker memo -- "A Tax Cut is a Pay Raise" -- to all legislators. Director of Operations Chip Ford will be available by telephone.

Governor Cellucci and Senator Hedlund are also expected to testify in favor of the income tax rollback at the 1 PM hearing.


The Boston Herald

Wednesday, March 31, 1999

Cellucci promises to get $1.2B income tax cut
on 2000 ballot
by Ellen J. Silberman

Gov. Paul Cellucci will vow today to use his political muscle to launch a referendum drive to slash the state's income tax by $1.2 billion if state lawmakers refuse to make the cut this year.

Sources said Cellucci has agreed to use his statewide organization to put the ballot question -- which failed to get enough signatures last year -- to voters in 2000.

The move is designed to pressure legislators, who have ignored Cellucci's call to cut the income tax rate from 5.95 percent to 5 percent.

Sources close to Cellucci said the governor believes the initiative would be successful if it reaches the ballot next year.

"The Legislature should pass the tax cut but if they don't, they could find themselves on the wrong side of a popular ballot initiative in the year 2000," a source close to Cellucci said.

Cellucci will make his threat at a hearing this afternoon, where the Taxation Committee plans to discuss dozens of tax proposals - and ignore Cellucci's plan.

Senate President Thomas F. Birmingham and House Speaker Thomas M. Finneran have repeatedly resisted Cellucci's call for a major income tax cut.

Lawmakers instead passed a tax bill last year increasing the personal exemption and cutting the unearned income tax rate.

By backing a ballot initiative, Cellucci's aides hope to repeat the success of 1998, when the reluctant Legislature slashed the tax on unearned income after corporations put the question on the ballot.

In 1998, Barbara Anderson's Citizens for Limited Taxation tried -- and failed -- to put the $1.2 billion income tax cut on the ballot. Pundits and lawmakers widely read Anderson's failure as a sign that the voters' tax cut fervor had faded since the early 1990s.

But Cellucci's camp believes their effort -- fueled by the field organization that won the 1998 election -- will be more successful.

Getting a petition on the ballot is an extremely long process, which will begin this year and continue until next spring.

If Cellucci's team manages to gather enough signatures to get the tax cut on the ballot, the Legislature will have until May 2000 to pass a tax cut on its own.

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