BOSTON -- The Cellucci Administration this week will release a report showing a
sweeping tax cut backed by the governor would help Massachusetts withstand a major
The report, compiled by the Office of Administration and Finance, is designed to
help boost support for Gov. Paul Cellucci's proposal to cut the state income tax rate from
5.95 percent to a flat 5 percent.
One of the most important things the tax cut will do is convince companies not to
pull out of Massachusetts if the economy sours, according to the report.
"We want to create a business climate so that during the next recession a lot
of businesses don't go out of the state or go south or go west," Finance Secretary
Andrew Natsios told the MetroWest Daily News. "We're trying to create an incentive to
keep them here when the economy goes south."
Natsios did not release details of the report, but said it bolsters claims made by
Cellucci that the tax cut will strengthen the state's fiscal well-being in an economic
The report also shows that the dramatic tax cut will spur business growth and help
fuel the state's ongoing boom.
"The initial evidence is that there will be a huge economic expansion and
increased economic activity in the state," said Natsios, a native of Holliston.
"I'm not an ideologue on this. I want to see what the data is showing and what the
data is showing is that this will have a very beneficial effect."
The release of the report coincides with the state's budget impasse.
The tax cut is a key part of Cellucci's version of the state budget, but is not
included in either the House or Senate's version. Senate President Thomas Birmingham and
House Speaker Thomas Finneran are continuing to debate the budget plan, which is more than
two months late.
Natsios' report is also designed to counter critics who say the state cannot
afford the loss of $1.4 billion in annual revenue Cellucci's tax cut would create.
The liberal Tax Equity Alliance of Massachusetts, which opposes the tax cut, on
Saturday released new data from the Congressional Budget Office which they say shows
Cellucci's plan would widen the gap between the rich and poor in Massachusetts.
That data shows the richest 1 percent of the U.S. population has seen its income
skyrocket by 115 percent in the last 20 years while middle-income families have
experienced a growth of just 8 percent.
"It's clear that middle- and low-income families in Massachusetts and across
the country are not fully sharing in the economic boom," said TEAM executive director
James St. George. "It's time for Gov. Cellucci to join the legislature in fighting to
help the working families who struggle to make ends meet."
Cellucci is undeterred by the criticism and by the reluctance of the
Democrat-controlled legislature to approve his tax cut.
Last week, Cellucci filed papers with the Secretary of State's Office -- the first
step in a signature drive he hopes will force the question onto the November ballot next
If the legislature won't approve the tax cut, the voters will, Cellucci predicted.
Natsios' report is intended to help Cellucci quell fears that the dramatic tax cut
Natsios said the data collected by his office -- including a state-by-state
per-capita comparison of taxation levels shows Massachusetts is one of eight states
in the country with the fiscal resources to withstand a major 18-month recession.
One reason for the state's strength is the billions it has stored away in the
so-called "rainy day"and unemployment insurance funds, Natsios said.
Another reason is that the state has become more business-friendly since the
disastrous recession of the late 1980s. Making the state even more attractive to business
by cutting the income tax rate will create even more of a buffer against an economic
downturn, he said.
"As the tax cuts ratchet in, it will convince businesses here to stay rather
than leave," he said.
Natsios, one of the architects of Proposition 2½, rejected the claim by opponents
of Cellucci's tax proposal that a lower income tax rate will not draw more businesses to
Natsios, who sat on the board of a major non-profit before joining the
administration, said businesses look to income tax rates when deciding whether to move to
a state or leave.
"I know taxes influence corporate decisions because I sat through boards of
directors meetings where the decision was made," he said. "When I hear people on
the left say it's irrelevant and it doesn't make any difference, that's total (nonsense).
"If your costs are not competitive with foreign competitors or competitors in
other parts of the country, you move," he said.
"The study not only demonstrates the state's strengths, it also shows what
Massachusetts should avoid in the event of a recession," Natsios said.
"In past recessions we always raise taxes," Natsios said. "That
delays the recovery. You don't raise taxes in a recession, that's nuts."