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

 

CLT UPDATE
Wednesday, July 24, 2002

"We've Only Just Begun"
More massive tax hikes coming


House lawmakers overwhelmingly reinstated a $1.14 billion tax hike yesterday - less than 24 hours after acting Gov. Jane M. Swift nixed it....

The five-tax package now proceeds to the Senate, where President Thomas F. Birmingham, a gubernatorial candidate, has described it as a "fait accompli." ...

"Every day is more amazing," said Senate Minority Leader Brian P. Lees (R-East Longmeadow). "The contempt that the Democratic leaders have for the taxpayers just blows my mind." ...

Democrats claimed they'd received no constituent complaints about the tax hikes. Rep. Gale Candaras (D-Wilbraham) added that business groups and local officials supported the package.

"We didn't make this decision in a vacuum, in some insular and abstract way," she said. "The support for that vote has been enormous."

The Boston Herald
Jul. 24, 2002
House reinstates $1.14B tax increase


Lawmakers are just postponing difficult decisions until next year, when the state, having used much of its reserves, will have few options other than to cut deeper or hike taxes again, critics said.

"Massachusetts is slipping back to our old tax and spend ways," said state Rep. Francis Marini, R-Hanson. "Unless there is a miraculous turnaround ... you will not be able to afford to have a similar budget next year unless you engage in another round of massive tax increases."

House budget chief Rep. John Rogers, D-Norwood, refused to rule out the possibility more tax hikes next year if the economy fails to rally.

"It's possible. We're not going to take anything off the table," Rogers said.

Associated Press
Jul. 24, 2002
Massachusetts House overrides Swift tax veto


House Ways and Means chairman John H. Rogers said additional tax increases may be necessary in the fiscal 2004 budget if the economy does not rebound. The 2004 fiscal year begins July 1, 2003. "Everything's back on the table next year," said Rogers, a Norwood Democrat, responding to questions from reporters. "We're not going to foreclose any options at this point."

Republicans predicted that Democratic legislative leaders will launch a rush to raise taxes for fiscal 2004, particularly corporate taxes, in January - after November's elections. Assistant minority leader Bradley H. Jones Jr. said Democratic leaders have not curbed their impulse to spend and have not cut aggressively.

"We've put off the tough decisions," said Jones, a North Reading Republican. "You have a structural deficit here, and they're going to be right back here next year to raise more taxes."...

"We need to be responsible and responsive to the people we represent," said House minority leader Francis L. Marini, a Hanson Republican. "We're spending more money this year than we did last year. How can anyone justify that as a responsible thing to do, and at the same time tell taxpayers to ante up another $1.2 billion?" ...

Barbara Anderson, executive director of Citizens for Limited Taxation and Government, said lawmakers have demonstrated that they can't institute the cuts necessary to control spending in a meaningful way. That means they'll be faced with a similar revenue shortfall next year, with fewer reserves to rely on, she said....

Anderson predicted that Democrats early next year will attempt to boost the income tax to 5.6 percent, and could seek to increase the sales tax and dismantle Proposition 2, which limits the amount communities can increase property taxes in a given year.

"They've lost all control," she said. "Next year, they're in no better shape than they were this year. They didn't do the cutting, so they've got the same bulky budget." ...

When asked what would happen if voter backlash leads to approval this fall of a Libertarian-led ballot initiative to eliminate the state income tax, Rogers laughed it off, saying the $9 billion it would drain from the government would be unacceptable and he would move to repeal the measure.

The Boston Globe
Jul. 24, 2002
More tax hikes next year called possible


By making an across the board hike in the capital gains rate retroactive to Jan. 1, lawmakers were prepared to scoop up one-time revenues by effectively blindsiding taxpayers who had made decisions based on a different set of rules....

"Mr. Gordon sold his interests in (Store 24) in April of this year and, as you might guess, will be severely impacted by the effective date of the changes in the state's capital gains tax," Gordon's lobbyists, Stephen Roche and Kristine Glynn, wrote in a June 24 letter to Senate Conference Committee chief Michael Knapik (R-Westfield). "We would urge the Conference Committee to change the effective date of the capital tax changes to July 1, 2002, or Jan. 1, 2003." ...

In the end, they settled for May 1.

Lawmakers reached a compromise on July 15. And Bob Gordon's big gain got in under the wire....

No secret the middle class has little voice on Beacon Hill these days.

"The lesson is if you want to get anything done around here, you need a lobbyist," says one state lawmaker....

Like any lobbyist worth his salt, Roche coincidentally maxed out to Senate President Thomas F. Birmingham's campaign with a $200 check just in time, on April 24.

The Boston Herald
Jul. 24, 2002
Hill played gains tax dating game
by Cosmo Macero Jr.


Chip Ford's CLT Commentary

Get ready for another round of massive tax hikes next year.

This Legislature is utterly out of control, and it has no intention of changing. It recognizes that it is spending taxpayers into oblivion and it simply doesn't care; it just blindly, selfishly careens on. It can't help itself, and it's not even going to try. It plans to just keep on spending, and spending, and spending ... and billing taxpayers for its gross incompetence.

Another "fiscal crisis" -- in reality another spending crisis -- is inevitable next year. The tax-and-spend Beacon Hill pols know this, we know this, anyone who's paying even the slightest attention knows this. They've done nothing to change the equation this year ... nothing but raise taxes.

Most of them are incapable of cutting spending, reducing the cost of government. Incapable. The only way to change the equation is for voters to toss out as many of the useless bums as is humanly possible. It is the only way, and if we didn't recognize this before, they've proven it today, admitted it themselves. None can deny the reality any longer.

House Republicans put up a great and principled fight yesterday, but it was futile: the fix was in, the dirty deal done, as we and everyone else had predicted. By a vote of 122-29 Governor Swift's veto of the biggest tax increase in state history was overwhelmingly overridden by the so-called House of Representatives. [The House roll call vote]

But how do the five members who failed to vote at all explain their failure?

This is allegedly "The Best Legislature Money Can Buy," for which we pay over $50,000 base salary per year to each member, along with an additional $7,500 for per diems and another $7,500 for office expenses. All they need do to earn this pay is to appear a very few times in the course of a year to vote, and their most important vote is for their single-most critical part of their job: producing an annual balanced budget. Yet five members of this "full-time" Legislature weren't present to vote?

Were they hospitalized, struggling through a family emergency, or just away on vacation during their manufactured "fiscal crisis"?

This is called Absent With Out Leave -- AWOL -- in any environment where one's presence is considered important.

The list of AWOL "representatives" appears below. Were you among the unrepresented yesterday? If you were, that certainly qualifies as taxation without representation.

"'Everything's back on the table next year," said Rogers, a Norwood Democrat. "We're not going to foreclose any options at this point.'"

"When asked what would happen if voter backlash leads to approval this fall of a Libertarian-led ballot initiative to eliminate the state income tax, Rogers laughed it off, saying the $9 billion it would drain from the government would be unacceptable and he would move to repeal the measure."

The biggest tax increase in state history is about to be imposed. If voters fail to replace many of them in November, we predict they'll break that record next year with an even bigger tax hike ... and laugh that off too.

Chip Ford


AWOL Members of "The Best Legislature Money Can Buy"
- Taxation without Representation -

Rep. David C. Bunker (D-Holden) "representing" Hubbardston, Phillipston, Rutland, Templeton and Winchendon;

Rep. Peter J. Larkin (D-Pittsfield) "representing" precinct A of ward one, all precincts of wards two, three, five, six and seven, of the city of Pittsfield;

Rep. Mary Jane Simmons (D-Leominster) "representing" Leominster;

Rep. Ellen Story (D-Amherst) "representing" Amherst and Pelham;

Rep. James E. Vallee (D-Franklin) "representing" precincts two, three, four and five of the town of Bellingham and the town of Franklin.

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The Boston Herald
Wednesday, July 24, 2002

House reinstates $1.14B tax increase
by Elisabeth J. Beardsley

House lawmakers overwhelmingly reinstated a $1.14 billion tax hike yesterday - less than 24 hours after acting Gov. Jane M. Swift nixed it.

The ink was barely dry on Swift's veto before House members voted, 120-29, to restore the biggest tax hike in state history.

The five-tax package now proceeds to the Senate, where President Thomas F. Birmingham, a gubernatorial candidate, has described it as a "fait accompli."

Previous votes have demonstrated a comfortable two-thirds margin for override, prompting Senate Republicans to throw in the towel even as they prepare a token opposition.

"Every day is more amazing," said Senate Minority Leader Brian P. Lees (R-East Longmeadow). "The contempt that the Democratic leaders have for the taxpayers just blows my mind."

The tax hike is one part of lawmakers' solution for plugging a deficit exceeding $2.5 billion. They're also relying on $1 billion in program cuts and $800 million in "rainy day" reserve funds.

In a repeat of last week's tax debate, neither Speaker Thomas M. Finneran nor his leadership team offered any defense or explanation.

Instead, a handful of rank-and-file Democrats squabbled with the tiny band of Republicans for nearly three hours - in front of a largely empty House chamber.

Democrats claimed they'd received no constituent complaints about the tax hikes. Rep. Gale Candaras (D-Wilbraham) added that business groups and local officials supported the package.

"We didn't make this decision in a vacuum, in some insular and abstract way," she said. "The support for that vote has been enormous."

Fewer than two dozen Democrats were on hand when debate began, and that number dropped to half a dozen by the time the vote was called.

In a highly unusual move, House members began the tax debate immediately after gaveling into session at 11 a.m. yesterday. Usually, House lawmakers handle informal tasks in the morning, holding off on serious debate until after 1 p.m. - when live television broadcast of the session begins, per contract with the House.

Republicans accused Democrats of trying to sneak the tax hike past the public, after ignoring revenue alternatives like casinos.

"The TV cameras weren't on," said Assistant House Minority Leader Bradley H. Jones (R-North Reading).

Eight Democrats bucked Finneran by voting against the tax hike, including two chairmen - House Personnel and Administration head James R. Miceli (D-Wilmington) and Health Care chief Harriett L. Stanley.

Like other Democrats who left the reservation, Stanley (D-West Newbury) said she didn't like being forced to take an up-or-down vote on a whole stack of tax hikes, not all of which she supported.

"Packages are for vacations, not for tax policy," Stanley said.

Outside the State House, advocates for the poor set up a vigil they say they will maintain until state leaders restore at least $7.3 million in cuts that affect shelter beds for about 4,000 people.

"It's a moral crisis," said Massachusetts Housing and Shelter Alliance Director Mary Ellen Hombs. "We've got a state of emergency."

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Associated Press
Wednesday, July 24, 2002

Massachusetts House overrides Swift tax veto
By Steve Leblanc

BOSTON (AP) The Massachusetts House voted overwhelmingly Tuesday to override acting Gov. Jane Swift's veto of a $1.1 billion tax package.

The measure now heads to the Senate, which is also expected to reject Swift's veto.

Supporters of the tax package in the Democratically controlled House said it is needed to fend off deeper cuts to state services in the wake of plummeting revenues.

But Republican opponents said higher taxes will hurt the state's competitiveness.

Lawmakers are just postponing difficult decisions until next year, when the state, having used much of its reserves, will have few options other than to cut deeper or hike taxes again, critics said.

Massachusetts is slipping back to our old tax and spend ways," said state Rep. Francis Marini, R-Hanson. "Unless there is a miraculous turnaround ... you will not be able to afford to have a similar budget next year unless you engage in another round of massive tax increases."

House budget chief Rep. John Rogers, D-Norwood, refused to rule out the possibility more tax hikes next year if the economy fails to rally.

"It's possible. We're not going to take anything off the table," Rogers said.

He defended the latest round of hikes, saying the House has already voted to make significant spending cuts to health care, courts, transportation and humans services.

Other supporters of the tax package, one of the largest in state history, echoed Rogers, saying the breadth and depth of cuts needed to balance the budget without higher taxes is unacceptable.

"We have to come in here with our hearts. We have to come in here with compassion," said Rep. David Flynn, D-Bridgewater.

Earlier in the day, Swift urged lawmakers to sustain her veto and reject the tax package. But lawmakers overrode the veto with a 120-29 vote, overwhelmingly along party lines.

Swift said lawmakers should consider alternatives, including siphoning more money away from the state Lottery by reducing prizes. House Speaker Thomas Finneran rejected that proposal.

Swift also said Tuesday that she was searching through the $22.9 billion state budget plan approved by the Legislature last week to make "hundreds of millions of dollars in vetoes."

"My role in the coming days will be to comb through every single line item of state government and make sure that ... the books of the commonwealth are balanced," Swift said.

The $1.1 billion tax package would freeze the state income tax rollback at 5.3 percent. The tax rate was scheduled to drop to 5 percent in January as part of a ballot question approved by voters in 2000.

The package would also:

Reduce the personal exemption from $4,400 to $3,300 for individuals and $8,800 to $6,600 for couples;

Postpone deductions for charitable donations;

Raise the tax on a pack of cigarettes by 75 cents.

Tax capital gains income at 12 percent for the first year and at 5.3 percent rate after that.

The nonpartisan, business-backed Massachusetts Taxpayers Foundation said the real bottom line of the fiscal 2003 spending plan is about $23.4 billion, not the $22.9 billion quoted by House and Senate leaders, an increase of approximately 2.6 percent, or $600 million compared to the last budget.

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The Boston Globe
Wednesday, July 24, 2002

More tax hikes next year called possible
House votes override of Swift's $1.14b veto

By Rick Klein
Globe Staff

Just minutes after the House approved a $1.14 billion package of tax increases over a gubernatorial veto yesterday, the House's chief budget-writer refused to rule out further tax increases next year.

House Ways and Means chairman John H. Rogers said additional tax increases may be necessary in the fiscal 2004 budget if the economy does not rebound. The 2004 fiscal year begins July 1, 2003. "Everything's back on the table next year," said Rogers, a Norwood Democrat, responding to questions from reporters. "We're not going to foreclose any options at this point."

The options are limited, Rogers said, because the Legislature dipped heavily into cash reserves this year, in addition to raising taxes and fees, to fill a gap created by slacking revenues. The $23.4 billion in spending approved by the Legislature includes $900 million from reserves. That leaves just $170 million in a rainy-day fund that last July held $2.3 billion.

Republicans predicted that Democratic legislative leaders will launch a rush to raise taxes for fiscal 2004, particularly corporate taxes, in January - after November's elections. Assistant minority leader Bradley H. Jones Jr. said Democratic leaders have not curbed their impulse to spend and have not cut aggressively.

"We've put off the tough decisions," said Jones, a North Reading Republican. "You have a structural deficit here, and they're going to be right back here next year to raise more taxes."

This year's tax package was vetoed by Acting Governor Jane Swift on Monday. But yesterday it passed in the Democrat-controlled House, 120-29, easily surpassing the two-thirds majority needed to override the veto. The issue is expected to be taken up by the state Senate tomorrow, where easy approval is virtually assured by the heavily Democratic body.

The package includes a freeze of the voter-approved income tax, increases in the capital gains tax and the cigarette tax, elimination of the charitable deduction, and a reduction of the amount of income exempt from taxation. According to the Department of Revenue, the package will cost the average nonsmoking Massachusetts resident $317.

Republicans tied up proceedings on the House floor for more than three hours yesterday to argue against the $1.14 billion tax package. They blasted Democrats for supporting tax increases when they have failed to shrink the size of the budget. An analysis by the business-backed Massachusetts Taxpayers Foundation, reported in the Globe yesterday, found that actual state spending is set to increase by approximately $600 million this year over last.

"We need to be responsible and responsive to the people we represent," said House minority leader Francis L. Marini, a Hanson Republican. "We're spending more money this year than we did last year. How can anyone justify that as a responsible thing to do, and at the same time tell taxpayers to ante up another $1.2 billion?"

But Rogers defended the current round of taxes after the vote, saying they were necessary to stave off even deeper cuts that would have sacrificed crucial state services. Even though overall spending is slated to increase this year, some areas of the budget have been scaled back significantly, Rogers said.

Lawmakers have imposed cuts on health care - including the elimination of Medicaid benefits for 50,000 poor adults - environmental programs, and higher education. Rogers said because of inflation and nondiscretionary costs like health insurance, the state would need to spend $1 billion more than the budget they approved just to maintain the level of services offered by the state last year.

"Anyone who knows how state government operates knows we've been cutting left and right," he said.

In addition to the tax increases, the budget also includes $100 million in increased fees and assessments, including higher fees at courthouses and the Registry of Motor Vehicles.

Barbara Anderson, executive director of Citizens for Limited Taxation and Government, said lawmakers have demonstrated that they can't institute the cuts necessary to control spending in a meaningful way. That means they'll be faced with a similar revenue shortfall next year, with fewer reserves to rely on, she said.

The Legislature's package freezes the income tax at 5.3 percent, despite a voter-approved ballot question that called for rolling it back to its previous level of 5 percent. Anderson predicted that Democrats early next year will attempt to boost the income tax to 5.6 percent, and could seek to increase the sales tax and dismantle Proposition 2, which limits the amount communities can increase property taxes in a given year.

"They've lost all control," she said. "Next year, they're in no better shape than they were this year. They didn't do the cutting, so they've got the same bulky budget."

When asked what would happen if voter backlash leads to approval this fall of a Libertarian-led ballot initiative to eliminate the state income tax, Rogers laughed it off, saying the $9 billion it would drain from the government would be unacceptable and he would move to repeal the measure.

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The Boston Herald
Wednesday, July 24, 2002

Hill played gains tax dating game
by Cosmo Macero Jr.

All those chili dogs and Fun Dips and Very Fine juice drinks add up.

Not to mention the scratch tickets, coffee and cigarettes.

After 35 years in the convenience store business, Bob Gordon last April sold Waltham-based Store 24 and its $100 million in annual revenue to Tedeschi Food Shops Inc. of Rockland.

But it was barely a month later when word surfaced that a huge capital gains tax hit was being cooked up on Beacon Hill.

By making an across the board hike in the capital gains rate retroactive to Jan. 1, lawmakers were prepared to scoop up one-time revenues by effectively blindsiding taxpayers who had made decisions based on a different set of rules.

The irony of it, as Michael Widmer of the Massachusetts Taxpayers Foundation points out, is that capital gains have been in the dumps right along with the stock market - the single biggest factor screwing up the state's budget.

But the ills of Dow Jones aside, the retroactive provision - hiking the rate to 5.3 percent - was still threatening to gouge taxpayers who had, for instance, sold qualified real property or other assets for a gain at any time this year.

Taxpayers like ... Bob Gordon.

"Mr. Gordon sold his interests in (Store 24) in April of this year and, as you might guess, will be severely impacted by the effective date of the changes in the state's capital gains tax," Gordon's lobbyists, Stephen Roche and Kristine Glynn, wrote in a June 24 letter to Senate Conference Committee chief Michael Knapik (R-Westfield). "We would urge the Conference Committee to change the effective date of the capital tax changes to July 1, 2002, or Jan. 1, 2003."

In the end, they settled for May 1.

Lawmakers reached a compromise on July 15. And Bob Gordon's big gain got in under the wire.

It's worth noting here that by changing the rate's sliding scale to a flat 5.3 percent, lawmakers are sticking it not only to corporations and small businesses, but middle class families as well. Households with incomes totaling $50,000 or less accounted for 40 percent of those who reported capital gains or losses in 2000.

Moreover, the Legislature is reneging on a deal made in 1994, when they traded then-Gov. William Weld a capital gains tax phaseout in exchange for a pay raise.

"I guess the players are different," says Richard Lord, president of Associated Industries of Massachusetts.

No secret the middle class has little voice on Beacon Hill these days.

"The lesson is if you want to get anything done around here, you need a lobbyist," says one state lawmaker.

By those rules, then, you owe a debt of gratitude to Bob Gordon and his hired guns if you sold your vacation house or bailed out of your portfolio in the first quarter.

The reality is this: No way was the House and Senate going to agree to put off the capital gains changes until next January - giving taxpayers all those months to plan accordingly.

"The discretion had always been between May 1 and July 1," says Widmer.

The MTF says "very rough" estimates suggest taxpayers will get to keep between $30 million and $60 million thanks to the May 1 retroactive date change.

No word on how much Gordon saved.

"I don't think I'm in a position to offer you a number. But I would characterize it as a very significant gain, and (what would have been) a very substantial capital gains tax hit," says Roche, whose lobbying firm, in this case at least, is appropriately called the Victory Group.

Like any lobbyist worth his salt, Roche coincidentally maxed out to Senate President Thomas F. Birmingham's campaign with a $200 check just in time, on April 24.

"I think the important thing is this guy built a company over 35 years, and he made a decision to sell his interests in the company this year," Roche adds. "He was only one of a number of individuals caught in this retroactive period."

The word from AIM is that lawmakers picked May 1 because that was roughly the time when plans for the tax hike became public. But some state senators were discussing the tax hike in mid-April.

Still, I have a tough time believing that Gordon's personal tax window played no role in the compromise.

But to the victor goes the spoils, I suppose.

And there's not much more to say except ... thanks Bob?

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