CITIZENS   FOR  LIMITED  TAXATION  &  GOVERNMENT
and the
Citizens Economic Research Foundation

 

CLT Update
Friday, February 8, 2002

MTF: Instigating class warfare


That rainy-day fund will only go so far. Further reductions in state spending are a sure thing, but what about higher taxes, including delaying the income tax cut championed by Acting Governor Jane Swift and her mentor, Paul Cellucci? The ground is shifting under the most important state budget debate in a decade. I spent yesterday with my ear to the ground. Here's what I heard downtown:

The Boston Globe
Feb. 8, 2002
Memo to Beacon Hill

By Steve Bailey


The Taxpayers Foundation, a non-partisan think tank, points to three factors that could send the state budget crashing:

  • State tax revenue, which grew at 10 percent a year thanks to capital gains, dropped 5 percent the first half of this year.

  • The voter-approved income tax rollback takes away another $1.46 billion....

...The foundation also would delay the income tax rollback and limit spending from the state's reserve fund.

The Salem Evening News 
Feb. 07, 2002
Taxpayers' group: State budget headed for late '80s repeat


"The ground is shifting," "Downtown" Steve Bailey declared this morning in his Boston Globe business column.

No it's not, Steve.

The Massachusetts Taxpayers Foundation has always opposed our income tax rollback.

What has shifted is, the "highly-respected, non-partisan" MTF no longer is speaking with its omnipotent Voice Of Authority. Instead, Bailey went to its individual corporate members -- usually silent, unidentified partners -- for their opinions without identifying them as MTF officials.

We do the rest of the job today for Steve Bailey.

When these business leaders -- the driving financial force behind MTF -- call for sacrifice, we at CLT hope that they will lead by example, offering up the corporate welfare special tax exemptions they've received over the past decade (ie., Raytheon, an MTF member). If returning those special interest tax savings isn't enough to support the spending levels they advocate, only then can they propose "delaying" Joe Six-Pack's long-overdue income tax rollback with any moral authority whatsoever.

PS. Do you suppose there's a reason why Steve Bailey failed to identify the following as officials of MTF - are we perhaps beginning to rock their lofty pedestal?


William Van Faasen, chief executive, Blue Cross and Blue Shield of Massachusetts:

Peter Meade
Exec. Vice President - Corp. Affairs
Blue Cross Blue Shield of Massachusetts
Boston
Mass. Taxpayers Foundation
Board of Trustees


Richard Syron, chief executive, Thermo Electron in Waltham and former president of the Federal Reserve Bank of Boston:

Mass. Taxpayers Foundation
Board of Trustees


David D'Alessandro, chief executive, John Hancock Financial Services:

Thomas E. Moloney
Chief Financial Officer
John Hancock Financial Services, Inc.
Mass. Taxpayers Foundation
Executive Committee
Board of Trustees


Frederick Breimyer, chief economist, State Street Corp.:

David A. Spina, Vice Chairman
Chief Executive Officer
State Street Corporation
Mass. Taxpayers Foundation
Executive Committee


Karen Kruck
Senior Vice President
State Street Corporation
Mass. Taxpayers Foundation
Board of Trustees


Chad Gifford, chief executive, FleetBoston Financial Corp.:

James E. Mahoney
Senior Vice President
FleetBoston Financial
Mass. Taxpayers Foundation
Executive Committee
Board of Trustees
Program Committee


WHO IS THE MASSACHUSETTS TAXPAYERS FOUNDATION?

Executive Committee

Board of Trustees

Program Committee

See: A CLT BLAST FROM THE PAST - 1991

Chip Ford


The Boston Globe
Friday, February 8, 2002
Business Section
DOWNTOWN

Memo to Beacon Hill
By Steve Bailey
Globe Columnist

The state's budget hole is getting deeper, the cuts more Draconian every day. Tax collections fell a startling 18 percent in January alone, and the Massachusetts Taxpayers Foundation in projecting a budget gap of as much as $500 million this year and $2.1 billion next year. What to do?

That rainy-day fund will only go so far. Further reductions in state spending are a sure thing, but what about higher taxes, including delaying the income tax cut championed by Acting Governor Jane Swift and her mentor, Paul Cellucci? The ground is shifting under the most important state budget debate in a decade. I spent yesterday with my ear to the ground. Here's what I heard downtown:

William Van Faasen, chief executive, Blue Cross and Blue Shield of Massachusetts: "I am in favor of postponing the [tax] rollback," Van Faasen says. "There is too much uncertainty, too much fragility. I am very worried about the instability of the health-care industry in Massachusetts and the long-term consequences of that. ... The tax cut is very shallow and broad. No one's life is dramatically changed by postponing it. Many lives are dramatically hurt by not properly funding the health-care needs in the short term. My view is not political or ideological. I would like to think it is practical."

Richard Syron, chief executive, Thermo Electron in Waltham and former president of the Federal Reserve Bank of Boston: "I would be willing to forgo some of the proposed tax cuts." Unlike Swift, Syron, an economist, does not think delaying the cuts will hurt the economy. "Postponing the tax cuts will not be a fiscal retardant. I don't think state taxes act much on the state economy." What Syron has learned along the way: The longer you delay, the worse the problem gets. "We have some substantial experience with that here in Massachusetts."

Jack Connors, chief executive, Hill Holliday Connors Cosmopulos: "I have no problem with a freeze on the Cellucci tax cut now. The people who are getting hurt here can least afford to be hurt. If we marginalize a lot more people it is going to cost us a lot more money than we can even imagine. We were just getting to where the tide really did raise all boats. Now we are thinking of tossing them back over? Not a good idea."

David D'Alessandro, chief executive, John Hancock Financial Services: "I feel really strongly about delaying the tax cut," D'Alessandro says. "If we don't do something, the economy will lag even longer. ... The governor can get re-elected by raising taxes because all the Democrats are going to have to agree. Therefore no one should worry about getting elected or getting re-elected because of the tax freeze." The effect of higher income rates on business: "It won't cut Hancock's business."

Frederick Breimyer, chief economist, State Street Corp.: State revenue is being affected by a slide in corporate profits and a fall-off in capital-gains taxes, he says. Sales taxes, on the other hand, have held up well. What has made the situation "far more difficult" was the voters' decision in 2000 to lower the income tax rate at just the wrong time, creating a "structural change" in revenue that we will have to live with. "We have made it worse," Breimyer says. "What we should do is suspend it [the tax cut] until we can afford it. That would be the prudent thing to do."

Chad Gifford, chief executive, FleetBoston Financial Corp.: "The forces line up in favor of delaying the proposed tax cut. When you are looking at shrinking revenue and uncertain cuts, it sure indicates to me we should not be decreasing taxes at this time." Like Syron, Gifford does not agree with Swift that postponing the tax cut will prolong the recession. "I am not an economist, but I don't believe this is going to have an effect on the economy. It is more important for the state to retain a strong financial footing and help those most in need."

I think these people are trying to tell you something, governor.

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The Salem Evening News 
Thursday, February 07, 2002

Taxpayers' group:
State budget headed for late '80s repeat

By Kathleen McLaughlin
News staff

IPSWICH -- The state budget crisis could continue to deepen even as Massachusetts and the rest of the country pull themselves out of recession, says Michael Widmer, president of the Massachusetts Taxpayers Foundation.

Widmer laid out a scenario of mounting deficit for the North Shore Chamber of Commerce members gathered yesterday at Ipswich Country Club.

"What I'm worried about is that if we fail to address it, we will find ourselves in a worse situation a year from now," Widmer said.

Even if the economy recovers, the state might have to make draconian budget cuts for the fiscal year ending in June 2004, undo tax law changes of the 1990s and float bonds to cover the deficit, he said. "I'm not saying it will happen," he said. "The numbers suggest that is a distinct possibility if we don't address it now."

The Taxpayers Foundation, a non-partisan think tank, points to three factors that could send the state budget crashing:

  • State tax revenue, which grew at 10 percent a year thanks to capital gains, dropped 5 percent the first half of this year.

  • The voter-approved income tax rollback takes away another $1.46 billion.

  • Finally, health care costs, which make up a quarter of the state budget, are rising 10 percent to 15 percent.

The foundation predicts a fiscal year 2003 revenue shortfall of $1.7 billion to more than $2 billion. Widmer said that's assuming tax revenue growth comes back at 3 percent. "We're assuming in those numbers an economic recovery."

Widmer spoke to an audience that included state representatives Brad Hill of Ipswich and Michael Cahill of Beverly, who is in the race to succeed gubernatorial candidate Shannon O'Brien as treasurer.

"There's a huge game of political musical chairs taking place," Widmer said, and neither Gov. Jane Swift nor the Legislature has done its part to head off the problem.

Swift's 2003 budget makes a series of "risky and unwise assumptions" about the recovery, he said.

"We think for the short-term, we need more reductions," Widmer said. Those are likely to come in aid to cities and towns. The foundation also would delay the income tax rollback and limit spending from the state's reserve fund.

"If all else fails, we can luxuriate in the Patriots," he joked.

Widmer couldn't offer much comfort for people in the audience who are already feeling the state budget cuts. North Shore Community College President Wayne Burton said that while the college has record enrollment for spring, it just received notice that another $150,000 must come out of the budget. How can the college do its part for a competitive economy, he asked, with that kind of budget?

The foundation has always advocated investment in education, Widmer said. "It's important to strike a balance."

Cahill, who sat next to Burton, pointed out that cuts like the one NSCC was ordered to make are coming toward the close of the budget year. "How are we going to avoid using the reserve?" he asked

Widmer agreed that it is inevitable, but he said it's up to the Legislature to make sure $800 million doesn't become $1 billion, or more. "We absolutely have to husband our remaining reserves."

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