Limited Taxation
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CLT Update
Friday, June 4, 1999

It's time to sit up a pay real close attention, folks. Up on Beacon Hill the pols are scheming fast and furiously on devious ways to spend our money, and every day a new plot is contrived to squander more of it.

Between it being pay-back time for the teachers union for spending over a million bucks of its members' dues to kill our petition, an outright attempt to buy off senior citizens and manipulate them against younger taxpayers, and an ambitious senate president conspiring to use our money to set himself up for a run for governor, the feeding frenzy is on and white hot.

When even the misnamed Massachusetts Taxpayers Foundation recognizes the problem, you know it's a problem! According to an Associated Press report today:

"The conference committee is going to be a lulu," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed watchdog group.

"There is no slack in either budget so the conferees will have to go head-to-head on the major priorities," he said.

While the Senate Ways and Means budget was $20.83 billion, the House budget, passed last month, added up to about $20.73 billion, a difference of about $100 million. Cellucci's budget was lower at $20.55 billion.

Widmer said the Senate's budget is higher than the others, both because there is more to spend - revenue estimates have increased since the beginning of the year - and because the Senate has proposed a smaller tax cut.

The budget signed last year was $19.53 billion.

"We're pushing the spending envelope," said Widmer. "The budget is expanding at a rate that can't be supported long-term by normal revenue growth."

Yesterday CLT delivered the following memos to every member of the Legislature.

Chip Ford --

A CLT Memo

To:  Members of the General Court
Re:  S.B. 1495 -- Senate President Birmingham's "Circuit Breaker" for Senior Citizens

Senate President Thomas Birmingham desires to use our state tax dollars to bribe senior citizens to vote to raise others' property taxes for new schools?

At the May 25th hearing on his bill "to provide assistance to low and moderate income elderly property taxpayers," he addressed seniors who were present. He expressed concern about property taxes that are forcing them to leave their communities. In a reference to overrides of Proposition 2, he stated sympathetically, "you are not in a position to make a fair, rational assessment of proposals to increase spending."

So he offered them cash: Their own if they still pay income taxes; someone else's if they don't.

It's true that senior citizens were the strongest supporters of Proposition 2 and are property taxpayers' first line of defense against overrides that go too far. While seniors are often accused of voting against education, they might well define education differently than those who settle for mediocrity and failure in return for increased funds.

Many senior citizens simply cannot afford higher property taxes. This was one of the primary reasons why we offered Prop 2 relief almost 20 years ago and have applauded the Legislature's support of that initiative law.

Not all were supportive, however. We've been suspicious of the circuit-breaker concept because it was initiated by those who opposed Prop 2 . One of the sponsors of S.B. 1495, Sen. Magnani, often voted for changes in Prop 2 that would have made the property tax burden far worse for senior citizens.

Sen. Birmingham has not attacked Prop 2 so we accept that his concern for seniors is genuine. However, seniors would be unwise to trust politicians. Politicians have admittedly broken the promise of a past Legislature on the income tax rate and can as easily break a promise about a "circuit breaker."

If seniors stop voting against overrides, their and their neighbors' property taxes will increase indefinitely, while the circuit breaker could be repealed by future legislators who, legislators themselves tell us, cannot be bound by a promise of an earlier legislature.

We also fear for the next tier of property taxpayers: without the protection of senior votes against overrides, they might see their taxes become even less affordable. Low and moderate income homeowners, who must pay not only taxes but mortgages and student loans while caring for elderly parents and saving for their children's college tuition, also are hurt by overrides.

The income tax rollback will help all taxpayers with these costs. Once that promise has been kept, the next tax cut could include a circuit breaker. Better yet, we could use the property tax to fund only property-related expenditures, and use existing broad-based state taxes to fund education vouchers. This would really help senior citizens, if that is in fact your goal.

A CLT Memo

To:  Members of the General Court
Re:  Senate Alleged Tax Cut Package

1. Circuit Breaker Tax Credit

Purpose:  Bribe senior citizens who are burdened by property taxes to vote for Proposition 2 overrides.

Impact:  If seniors, believing that the Legislature can be trusted, stay at home for override elections, they could pay higher property taxes until they lose their home or die, while their circuit breaker goes the way of the income tax rollback and capital gains tax phase-out, i.e., another broken promise. And, low and moderate-income younger taxpayers get hit with higher property taxes too.

2. Increase Rental Deduction

Purpose:  Partially adjust the rental deduction, created by Proposition 2 1/2, to inflation. Good idea.

Impact:  Would help renters save toward a down-payment on a house that becomes increasingly unaffordable as property taxes increase with overrides (see item 1).

3. Capital Gains Tax Increase

Purpose:  To increase the capital gains rate that was phased-out in return for a legislative pay-raise in late 1994.

Impact:  Proves to the business community that the Legislature cannot be trusted to keep its side of a deal, while reiterating to all citizens that the Legislature cannot be trusted to keep its word.

4. Repeal of Pay to Play Provision

Purpose:  States that the taxpayer is innocent until proven guilty.

Impact:  About time.

5. Enhance Earned Income Tax Credit

Purpose:  Give a "tax cut" to people, many of whom don't pay taxes.

Impact:  Back-door welfare check, using money stolen from real taxpayers.

6. All Deductions

Purpose:  Minor tax cut substitute for keeping the Legislature's word on major income tax rollback for all taxpayers.

Impact:  Governor puts real tax cut on Year 2000 ballot.

The Boston Globe
Friday, June 4, 1999

Senate budget pleases some, irks Cellucci
By Tina Cassidy, Globe Staff

The Senate released a record $20.8 billion spending plan yesterday with big increases in education and health care funding, but without the kind of broad-based tax cuts sought by both the House and Governor Paul Cellucci.

The budget drew immediate praise from the AARP, the Massachusetts Teachers Association, and other groups that would benefit from the freer spending, but it was criticized by fiscal watchdogs and Cellucci, who said such outlays could not be sustained in future years.

Cellucci has already threatened to veto a section that would freeze the cut in the capital gains tax before it is fully phased out, for investments held at least six years.

"Since Jane Swift and I sent over the budget it seems to be growing significantly," Cellucci said, referring to the spending plan he and his lieutenant governor submitted in January. "Geez, what does that sound like? It sounds like the late 1980s. I think we've learned from that period that that's not the way to go. I'm a little bit concerned."

Others said a budget offering all things to all people may be a way for Senate President Thomas F. Birmingham to gather support for a possible gubernatorial bid, courting key constituencies like the education establishment and the elderly.

"This budget looks more like a campaign document than a blueprint for responsible spending in the 21st century," said House Ways and Means chairman Paul Haley, a Weymouth Democrat.

"There does seem to be something in there for everybody," said Chip Ford of Citizens for Limited Taxation and Government, a group fighting for the rollback of the income tax rate from 5.95 percent to 5 percent, something Birmingham, a Democrat from Chelsea, opposes.

"I don't see this so much as political," Birmingham said. As for a tax cut, "That's the politically easy course to take."

The Senate budget, for the fiscal year that begins July 1, is ideologically removed from the $20.7 billion House plan, which emphasizes capital improvements over new spending programs, and Cellucci's $20.4 billion outline focusing on a tax cut.

Education is the centerpiece of the Senate budget, allocating $140 million more than the House plan would for everything from early childhood programs to state college scholarships.

The budget would raise the per-pupil expenditure to $150 statewide, up from $125, for nearly 1 million students.

The budget would fund MCAS remediation cut by the House and would increase spending for school nutrition, after-school programs, and libraries. The Senate plan would be generous toward higher education, offering the University of Massachusetts a $40 million increase. And it would provide a new scholarship plan that would enable those families making less than $32,000 a year to go to a state college for free; those earning slightly more could go for as little as $1,000 a year.

Although the Senate plan does include tax cuts, they are mostly targeted toward the elderly, specifically, $50 million in property tax relief for seniors. The budget proposal also recommends an increase in the deduction for renters from $2,500 to $3,500, and making interest paid on student loans fully deductible.

Other highlights:

  • Campaign-finance reform would receive $13 million to fund the new, sweeping clean elections movement.

  • Inmates who file "frivolous" lawsuits would lose their so-called good-time by doing so and would have to pay for the legal work involved.

  • Additional funding that would lower the caseload at the Massachusetts Commission Against Discrimination.

Unlike the House, the Senate did not propose sweeping changes in funding for the Massachusetts Bay Transportation Authority, or fare increases.

Meanwhile, Cellucci and state Treasurer Shannon O'Brien unveiled a joint legislative proposal to use $275 million of the expected surplus this fiscal year to pay off high-interest state bonds and issue lower interest notes.

Cellucci and O'Brien said the newly borrowed funds would be used to finance highway and bridge projects around the state.

Frank Phillips of the Globe Staff contributed to this report

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