Limited Taxation
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CLT Update
Thursday, October 21, 1999


In last Sunday's editorial, "A budget, at last," the Worcester Telegram & Gazette made a couple of very important observations:

Government growth. Once again in fiscal 2000, state spending overall will grow at about three times the rate of inflation. The $20.8 billion spending plan is up $1.3 billion from the $19.5 billion budget sent to the governor a year ago.

The full extent of new, long-term spending commitments are as yet unknown.

Tax relief. Despite record-breaking revenue collections and an expected $8.3 billion tobacco windfall, income tax relief is more symbolic than substantive.

The proposed reduction in the income tax rate from 5.95 percent to 5.75 percent represents about $60 per family -- but only after it is fully phased in over three years.

That sop to taxpayers is unlikely to derail the current initiative petition drive to return the "temporary" rate to the former 5 percent. ...

Today came word that the first installment of the state's share, millions of additional revenue dollars -- initially sought to reimburse taxpayers for their burden of funding Medicaid costs for decades -- is about to arrive and not one cent will be used for its alleged purpose. Talk about legalized bait-and-switch scams?

Excerpts from:


The complaint alleges that "each year, the Commonwealth must spend millions of dollars to purchase or provide medical and related services for Massachusetts citizens suffering from diseases caused by cigarette smoking." ... The "smoking-related costs to the Commonwealth" are said to include, but not be limited to, "medical assistance provided under Massachusetts' Medicaid program ... and "medical assistance provided under the CommonHealth Program. ...

... require liable third parties to repay or make good the amount of Medicaid expenditures paid out as a result of their unlawful conduct. Nevertheless, the "magic" word appears in the federal Medicaid statute, which obligates the Commonwealth to "seek reimbursement" for Medicaid expenditures from liable third parties. ...

"As the Supreme Judicial Court has held, reimbursement is simply "repaying or making good the amount paid out."

It was primarily those very Medicaid costs -- the costs and the fact that the Dukakis Administration had for years put off paying the bill while he ran for President of the U.S. on the "Massachusetts Miracle" -- that brought the state to the brink of bankruptcy in 1989 and forced the Legislature to raise the income tax rate "temporarily" until the bill was paid!

The state government budget that has doubled in a dozen years to over $20 billion, it now has hundreds of millions more in extorted money pouring in over and above the scurrilous demand for overpayment of the "temporary" income tax increase, and only a bone is tossed to us taxpayers. The pols continue to wring every dime they can out of us while the Gimme Brigade whines on that it still isn't enough, they need "More! More! More!"

CFord-Sig2.gif (4854 bytes)

Chip Ford

Had enough yet?

Had enough yet? If so, now you can actually do something about your own political and financial survival!

If you haven't requested your petition package yet, you've got only 27 days left before the absolute deadline! Click below while you still have time to save yourself from rapacious greed and limitless self-interest -- or you have nobody to blame for it but yourself!

Get your petition package -- while there is still time!

As always, thanks to those of you already with us who are out there practicing the only means of political self-defense remaining, collecting signatures for the initiative petition process.

Excerpted from:

Snuff the Facts
By Peter Van Doren
Assistant Director of Environment Studies
Cato Institute

January 16, 1998


Smokers shoulder a heavy government-imposed financial burden. Some of it they pay directly, through cigarette taxes. Some they pay indirectly, as in the ... liability settlement between the states and tobacco companies, which will ultimately come out of the pockets of cigarette consumers. ... How well off are the people who bear that burden? Families with less than $30,000 a year in income earn only 16 percent of total income in the United States, but they pay about 47 percent of federal tobacco taxes. In addition, African Americans are more likely to be smokers than are whites. Thus, absurdly heavy taxation of cigarettes hits hardest those who can least afford it and redistributes resources from poorer blacks to more affluent whites.

So why are politicians going after smokers and tobacco companies? For the same reason that Willie Sutton robbed banks: there's a lot of money there. The 25 percent of the population that smokes is a convenient unorganized source from which the rest of the population can extract revenue. Taxing smokers because we can take their money easily is theft (more often than not from people who can ill afford to be robbed) dressed up in good intentions.

State House News Service
October 20, 1999

Reilly: $98M Tobacco Settlement Check
May Arrive Within Weeks

By Elisabeth J. Beardsley

STATE HOUSE, BOSTON, OCT. 20, 1999 ... Attorney General Thomas Reilly says a check for $98 million -- the first installment of Massachusetts' $8.3 billion tobacco settlement windfall -- could arrive in state coffers as early as next month.

"We're cautiously optimistic that the monies will be distributed sometime in November," Reilly told the News Service yesterday. "It's not final, but we're making progress."

The disbursement date has been a moving target for the last year. Previously, Reilly has warned lawmakers to plan conservatively and not bank on receiving the money until June 30, 2000, th  latest possible date stipulated under the multi-state master settlement with the tobacco industry.

Forty-six states last year reached a $246 billion, 25-year settlement with the five leading tobacco manufacturers, after the states sued to recover the costs of treating smoking-related illnesses. Former Attorney General Scott Harshbarger brought suit on Massachusetts' behalf.

Last week, in announcing a fiscal 2000 budget agreement, House Speaker Thomas Finneran (D-Mattapan) and Senate President Thomas Birmingham (D-Chelsea) indicated they expected the tobacco money as early as January. They also announced plans for spending and investing it.

Now, Reilly says, the final piece that's been holding up the money appears poised to fall into place sooner than expected. Under the settlement agreement, 80 percent of the 46 states had to reach "finality" before money could be released. That required disposing of any legal challenges to individual states' participation in the settlement agreement. ...

This state's first settlement installment is by far the smallest in the 25-year payment schedule, which will amount to a total of $7.6 billion. Massachusetts was awarded extra money for its leadership role in the lawsuit, bringing the state's total up to $8.3 billion.

The second installment, due to arrive in 2000, will be $259 million, said Reilly spokesman Brian Heffron. By comparison, new education dollars this year - by far the biggest categorical increase in state spending - total $245 million.

In 2001, the amount goes up to $280 million, then to $336 million in 2002. The biggest single payment comes in 2003, with $339 million. From 2004 to 2007, the state will receive $283 million per year. From 2008 to 2017, the annual amount is $289 million. The yearly check goes back up to $323 million from 2018 to 2024, and beyond. Those figures don't include interest.

Anti-tobacco activists are thrilled that the money appears to be on its way sooner than expected. "I'm pretty excited about getting this money six months early," said Massachusetts Coalition for a Healthy Future Director Lori Fresina. "There are a lot of needs out there related to tobacco."

Fresina, who is also the legislative agent for the American Cancer Society, said she would have been nervous about the potential early arrival, if not for the accord announced last week by Finneran and Birmingham on how to spend the tobacco funds. Activists were concerned the money would be spent on things unrelated to tobacco control, as in many other states.

The Finneran-Birmingham agreement would place 70 percent of the annual funds into a trust fund. The other 30 percent will be spent each year on tobacco control and health programs.

Activists had requested that 25 percent of the overall settlement be dedicated to fighting smoking. Legislative leaders agreed to dedicate 25 percent of the settlement funds to be spent each year, which activists said was a good start. That will mean an additional $22.5 million for tobacco control in the first year, nearly doubling the existing budget of $31.6 million.

"Had we not had a Legislature that supported further and substantial investment in tobacco control, I would be pretty concerned," Fresina said. "Until you get that agreement that they've bought in and they're supporting the same values, you have to keep up the fight."

Most states that are slated to receive tobacco money, including Massachusetts, are spending the bulk of it on non-tobacco control items. As of early September, 23 states had passed enabling legislation or appropriation acts concerning the disposition of the tobacco money, according to the National Conference of State Legislatures.

But states appear to be limiting outright spending of the tobacco money. Within the 23 states that have set their plans into statute, only 12 percent of the money they expect to receive in the first year was allocated for specific programs or activities, NCSL data shows. That amounts to $1.1 billion of the $8.8 billion the tobacco companies will pay out to states by June 30, 2000.

Most of the tobacco money is being placed into interest-generating trust funds and endowments. As of last month, 19 states had passed laws creating trusts. Those states plan to live off the interest, but the principal could be accessed if a Legislature wanted to. Four states have passed laws creating endowments, which will only allow interest earnings to be spent.

Of the money states plan to spend right away, the bulk -- 51 percent -- is going toward health care services. Under Finneran and Birmingham's agreement, which has not yet been signed into law, most of the spending money will be applied to health programs, including catastrophic drug coverage for senior citizens.

NCSL breaks down the other half of the planned immediate spending like this -- 14 percent for education and scholarships; 11 percent for children's services, 7 percent for tobacco control and smoking cessation; and 7 percent for long-term care and drug coverage for the elderly. The rest has been earmarked for emergency priorities such as job creation projects in Alabama and flood prevention in North Dakota.

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