CLT UPDATE
Tuesday, April 29, 2008
Tax Freedom Day yesterday:
No wonder Mass. is 6th latest in the nation
Massachusetts taxpayers are on track for a small
income tax rate reduction next year, as long as revenues hold up above
inflation and Beacon Hill doesn’t undercut a 2002 law that lawmakers
used as a compromise while freezing a scheduled tax cut that year.
According to newly published financial documents, tax revenue growth so
far this fiscal year puts the state on pace to trigger an income tax
rate rollback from 5.3 percent to 5.25 percent next tax year, costing
the state between $50 million and $60 million in fiscal 2009.
The income tax rate reduction is the first on a complicated path to
restoring the rate to 5 percent ...
State budget officials estimated in January that revenues for the fiscal
year that ends June 30 would not meet the threshold, but receipts have
continued to break records ...
“If I were them, I would look at that income tax repeal on the ballot in
November, and I’d start showing a little respect for people,” said
Barbara Anderson, executive director of the Citizens for Limited
Taxation....
Budget experts predict a revenue slowdown next fiscal year, with a
consensus estimate of 3.8 percent growth. But actual revenues have
consistently outperformed projections in recent years, and are running
$772 million above the original estimate for this year. The House of
Representatives on Monday began debating the fiscal 2009 budget....
Anderson said it would behoove legislators politically to allow the
rollback to proceed.
“How come you only don’t have money when it comes time to let the
taxpayers keep some when it comes time to do what they told you to do?”
she asked, adding that whether the ballot initiative passed in November
would “[have] to do with how angry are people when they walk into the
voting booth.”
State House News Service
Monday, April 28, 2008
Tax revenues put state on track
for income rate cut
Last week, Citizens for Limited Taxation disseminated
poll results that found that six in seven Massachusetts residents would prefer
the Legislature to cut spending rather than raise taxes. The poll of 500 likely
voters, conducted between April 9 and April 13, found that 72 percent of
respondents would vote against Proposition 2½ overrides and that two-thirds want
the Legislature to roll back the income tax rate to 5 percent from its current
5.3 percent. The poll, conducted by Fabrizio, McLaughlin & Associates, had a 4.4
percent margin of error.
State House News Services
Advances - Week of April 27, 2008
[Excerpt]
Massachusetts legislators are sounding the alarm, claiming
they don't know what they'll do if the voters pass an initiative on the ballot
this fall to eliminate the state income tax.
We know precisely what the legislators will do if voters vote to eliminate the
tax: They'll ignore them and keep taxing us anyway....
The vote, however, could turn out to be useful. It can show legislators — once
again — just how tired taxpayers are with unchecked state spending. And it can
show voters — once again — the limits of the ballot initiative process....
Voters in Massachusetts suffer from the unfortunate delusion that they live in a
democracy. They mistakenly believe that, if they use a process provided to them
in the state constitution and pass a law that includes words like "binding" and
"mandatory," then their elected legislators must do as they are told.
The very idea sets eyes rolling on Beacon Hill.
In 2000, voters passed a referendum ordering the Legislature to roll back the
income tax from a "temporary" level of 5.95 percent set in 1989 to its
"permanent" level of 5 percent. Lawmakers gradually reduced the rate to 5.3
percent but froze it at that level in 2002, claiming further reductions were
unaffordable....
Voters can order whatever they wish; the Legislature will do as it pleases.
Perhaps if legislators truly respect the voters and really fear what might
happen if the income tax were repealed, they will do what voters asked in 2000 —
roll the income tax back to 5 percent.
That might do much to assuage voters' wrath this November.
A Salem News editorial
Monday, April 28, 2008
Respect voters and roll back income tax
Lawmakers are scrambling to add hundreds of pet projects to
the House version of the state budget, despite dire warnings of a $1.3 billion
spending gap and a looming recession.
The amendments range from $50,000 to clean algae on Nahant Beach and $140,000
for a salt storage depot in Randolph to $150,000 to battle the Winter Moth worm
and $750,000 to eliminate mold at the Stoughton Fire Station.
That’s on top of $90,000 for a shellfish propagation program on Cape Cod,
$100,000 for a wind turbine at the McGlynn Elementary and Middle Schools in
Medford, and $50,000 for film festivals on the Cape and Islands.
Known as "earmarks", the budget amendments are favored by rank-and-file House
lawmakers who see them as the best hope they have to bring home state dollars
for popular local projects - from fixing the public pool to paying for a teen
pregnancy program....
Lawmakers shouldn’t be looking to protect special projects when the state is
facing a budget shortfall, according to Barbara Anderson of the anti-tax
group Citizens for Limited Taxation.
"Wake up and smell the economy," Anderson said. "Even with the tax increases we
don’t have the money for the budget we have, never mind adding anything. Where
are they getting the money for earmarks?"
Associated Press
Monday, April 21, 2008
House lawmakers hope to add
pet projects to budget
State lawmakers are responding to warnings of a fiscal
meltdown by larding the budget with $1.3 billion in new spending - much of it
pork - that would double next year’s deficit and shower money on golf courses,
merry-go-rounds and local parades.
The Boston Herald
Friday, April 25, 2008
Pols pork it up again
House Dems pile it on as fiscal crisis looms
State legislators feel pretty passionately about them as well
— passionate enough to ignore the fiscal plight of those who pay for it all and
attempt a $1.5 billion spending spree beyond the already bloated state budget.
Legislators have collectively filed more than 1,500 amendments that would add
$1.5 billion to Gov. Deval Patrick's proposed $27.9 billion budget, even in the
face of a recession and a gap of $1.3 billion between proposed spending and
expected revenues.
So, don't let your legislators tell you they are "cutting to the bone" or
"putting the brakes on spending" without taking a look at their proposed
earmarks.
An Eagle-Tribune editorial
Monday, April 28, 2008
Even with budget in the red,
legislators spend more
Governor Deval Patrick's quest to tighten corporate tax laws
and reap hundreds of millions of dollars in new revenue might be undermined by a
last-minute amendment providing new offshore tax breaks that was tacked onto the
legislation by the House, according to state officials.
The complex amendment was backed by the House leadership and approved with
little debate during mid-evening voting two weeks ago as representatives were
adopting the overall tax package. Several lawmakers said they were unaware of
the details of the provision, which was sought by the state's largest business
lobbying group.
The provision would permit large corporations to avoid up to $200 million in
state taxes a year if they maintain large portions of their business operations
overseas ...
There was little public debate on the five-page, highly technical amendment, and
it passed on a voice vote, without a roll call vote. Several lawmakers later
admitted they did not realize the full extent of what they were voting on.
"It's somewhat embarrassing," said Representative Jay R. Kaufman, a Lexington
Democrat who, after the vote, started looking into the issue. "Since it was
introduced at the last minute - and there was a desire to get this voted on that
day - there was an understanding we would be working with incomplete
information."
The Boston Globe
Thursday, April 24, 2008
Tax measure could cost state millions
Late amendment would create break
on corporate offshore holdings
Chip Ford's CLT Commentary
According to the
Tax Foundation
in its annual report, national Tax Freedom Day – the day
taxpayers have earned enough money to pay all of this year's federal,
state and local tax obligations and nothing else – fell on April 23 this
year. Massachusetts, as usual, trailed behind, celebrating its own
Tax Freedom Day only yesterday, April 28, five days later.
Tax Freedom Day in Massachusetts is 6th latest in the country,
behind only Connecticut, New York, New Jersey, California, and
Washington state. New Hampshire, 35th, celebrated it on April
15th.
They keep telling us we're "not Taxachusetts any
more," but facts are stubborn things: Every year Massachusetts
shows up in the basement for Tax Freedom Day among the 50 states.
In last year's (2007) report, Tax Freedom Day
across the nation arrived two days later than in 2006; on average
Americans worked strictly to pay for government from January 1 until
April 30. In Massachusetts we'd worked until May 6th -- which was
also two days later than the previous year.
In 2007, Massachusetts rated ninth from the bottom;
we worked longer for the government than people in 41 other states
during 2006.
Tax Freedom Day: The Song!
http://www.youtube.com/watch?v=bjy8KWsPtDE
Is there any wonder why -- why this year
Massachusetts has dropped from 9th down to the 6th heaviest
tax burden of any state in the nation -- why Tax Freedom Day
finally arrived here only yesterday? Why beginning just today what
can start keeping what we earn now that the taxman has been paid?
Just look at the Beacon Hill tax-and-spend culture.
It's evolved into
tax-and-spend-then-borrow-and-spend-then-tax-even-more.
The $28 billion state budget now being discussed at the
State House for next fiscal year (FY2009) will be a billion dollar increase in
spending over this current fiscal year's ($26.8 billion)
as adopted last spring.
All we've heard for months is that the state is in another
"fiscal crisis" with a $1.3 billion budget "gap" -- but state tax revenue
has not
only surpassed "expectations" but broken the record. The State
House News Service reported:
"[Tax revenue] receipts have continued to break
records, even amid a national economic downturn.... Through March,
inflation-adjusted baseline tax revenue growth was 3.2 percent more than
the same period last fiscal year.... [A]ctual revenues have consistently
outperformed projections in recent years, and are running $772 million
above the original estimate for this year."
Clearly we aren't experiencing a shortage of revenue,
a revenue "crisis." Clearly the state is facing the usual
spending crisis it never confronts. There is never enough of
our money to spend and spend and spend -- on wants, not needs.
The needs are largely ignored while the wants will never be satisfied.
What's "The Best Legislature Money Can Buy" to do
will all this wealth taken from us?
It could break another record by keeping its word,
the pledge it made when it
killed the voters' tax rollback in 2002.
All the planets are aligned in the difficult trajectory the Legislature
arranged to "trigger" a miniscule reduction in the income tax -- the sop
they threw voters back then after giving them the middle-finger Beacon
Hill salute. It could reduce the income tax rate from 5.3 percent
to 5.25 -- its last "promise" though that won't amount to even the
proverbial "cup of coffee a day." It's not much -- and still will
likely take until 2014 to reach the traditional 5 percent income tax
rate -- but it'd be a shocker. Imagine, politicians on Beacon Hill
actually keeping their word? Nah, I doubt it.
Want to bet "The Best Legislature Money Can Buy"
weasels out of even that paltry reduction -- a "cost" to the state of a
relatively mere $50 million? After all, members of the House of
Representatives have already proposed some 1,500 earmarks that if
adopted could add an additional $1.5 billion in spending to the $28
billion now under consideration.
"The Best Legislature Money Can Buy" is in the midst
of its members' annual feeding frenzy, when strange things happen
overnight. Look at the "mid-evening" vote on tax increases a few weeks ago.
It has now surfaced that, not only did the Legislature hike taxes on
smokers and businesses -- but a select few large corporations with
interests offshore got a big wet kiss from the leadership: A
$100-$200 million annual tax break
that comes close to canceling out the tax increases.
"It's somewhat embarrassing," one clueless legislator
responded after having this inconvenient little fact pointed out to him.
"Since it was introduced at the last minute - and there was a desire to
get this voted on that day - there was an understanding we would be
working with incomplete information."
No recorded roll call vote; most of our "full time"
legislators didn't even know what they were voting on --
and once again something came back and bit them on their ignorance. Can't you just
hear them? Aw shucks, it's only $100-$200 million. Gimme a
break.
"The Best Legislature Money Can Buy" indeed.
Watch their antics closely, especially after dark. Animal House is
playing at a State House near you.
 |
|
Chip Ford |
State House News Service
Monday, April 28, 2008
Tax revenues put state on track for income rate cut
By Jim O’Sullivan
Massachusetts taxpayers are on track for a small income tax rate
reduction next year, as long as revenues hold up above inflation and
Beacon Hill doesn’t undercut a 2002 law that lawmakers used as a
compromise while freezing a scheduled tax cut that year.
According to newly published financial documents, tax revenue growth so
far this fiscal year puts the state on pace to trigger an income tax
rate rollback from 5.3 percent to 5.25 percent next tax year, costing
the state between $50 million and $60 million in fiscal 2009.
The income tax rate reduction is the first on a complicated path to
restoring the rate to 5 percent and would come at a time when Beacon
Hill leaders are aggressively pushing corporate and cigarette tax
increases.
State budget officials estimated in January that revenues for the fiscal
year that ends June 30 would not meet the threshold, but receipts have
continued to break records, even amid a national economic downturn.
“Based strictly on revenues right now … we’re trending towards doing
it,” said Department of Revenue spokesman Robert Bliss. “But this is
another one of those, it ain’t over ’til it’s over.”
If revenues hold steady through June, with policymakers waiting intently
for the release this week of the bellwether April figures, and inflation
doesn’t rise significantly, the tax cut would kick in during an election
year, when lawmakers are loath to revise their constituents’ tax bills
higher. At the same time, a citizen-generated initiative headed for the
November ballot would cut the income tax rate in half next year, then
eliminate it in years after that.
“If I were them, I would look at that income tax repeal on the ballot in
November, and I’d start showing a little respect for people,” said
Barbara Anderson, executive director of the Citizens for Limited
Taxation.
Through March, inflation-adjusted baseline tax revenue growth was 3.2
percent more than the same period last fiscal year. If revenues stay on
track, the reduction would apply to the tax year beginning Jan. 1, 2009,
slicing into revenues for the second half of fiscal 2009, for which
policymakers are working to solve a budget gap they estimate at $1.3
billion.
Budget experts predict a revenue slowdown next fiscal year, with a
consensus estimate of 3.8 percent growth. But actual revenues have
consistently outperformed projections in recent years, and are running
$772 million above the original estimate for this year. The House of
Representatives on Monday began debating the fiscal 2009 budget.
In opening remarks during Monday’s floor debate, House Ways and Means
chair Rep. Robert DeLeo (D-Winthrop) acknowledged that "the path of
least resistance” in finalizing the House budget would include dipping
further into reserves and reaching for more revenue. “That path would
not be the best for the Commonwealth of Massachusetts,” DeLeo said,
referring to “a likely recession.”
The looming rollback dates to fierce tax policy debates earlier in the
decade, when state revenues were collapsing shortly after voters,
through a 2000 ballot question, mandated that the income tax rate
decrease from 5.75 percent to 5 percent.
Lawmakers froze the reduction in 2002 at 5.3 percent, installing a
series of growth-based requirements before the state shaved the income
tax rate further. After insufficient revenue increases in fiscal 2002
and 2003, growth has been sufficient the last four fiscal years for the
state to gradually restore personal exemptions that were lowered. Top
lawmakers often point to the triggers as proof that they are cognizant
of voters’ thirst for lower taxes.
Tax year 2009 would be the first of six reductions of half-a-point each,
if revenues sustain their growth. After that, the state would also
reinstate the deduction on charitable donations.
Democratic leadership in state government – now in possession of all
three policy-making branches – has been resistant to trimming the income
tax rate in recent years, and this year is looking to raise the
cigarette tax and beef up the state’s corporate tax intake by closing a
series of so-called loopholes.
Through a spokesman, Senate President Therese Murray declined comment.
Tax policy experts said the comparatively minor revenue injection the
state would see from blocking the rollback wouldn’t be worth the
political trouble.
“We do need the money, but I think it would be a mistake for them to
undo that,” said Michael Widmer, president of the business-backed
Massachusetts Taxpayers Foundation. “We need a lot more money than the
$50 million. If we want to close the gap, then we need to have a serious
conversation about revenues. But the $50 million is on the margins.
There’s so much skepticism on the part of the voters about the income
tax reduction, I think the only responsible thing is to carry out the
law.”
Anderson said it would behoove legislators politically to allow the
rollback to proceed.
“How come you only don’t have money when it comes time to let the
taxpayers keep some when it comes time to do what they told you to do?”
she asked, adding that whether the ballot initiative passed in November
would “[have] to do with how angry are people when they walk into the
voting booth.”
Unless the Legislature unexpectedly enacts the proposed voter law by May
7, supporters would have to gather 11,099 signatures by July 2 to place
the question on the Nov. 4.
The Salem News
Monday, April 28, 2008
A Salem News editorial
Respect voters and roll back income tax
Massachusetts legislators are sounding the alarm, claiming they don't
know what they'll do if the voters pass an initiative on the ballot this
fall to eliminate the state income tax.
We know precisely what the legislators will do if voters vote to
eliminate the tax: They'll ignore them and keep taxing us anyway.
In this case, that's a good thing. Eliminating the income tax completely
would be a disaster.
The vote, however, could turn out to be useful. It can show legislators
— once again — just how tired taxpayers are with unchecked state
spending. And it can show voters — once again — the limits of the ballot
initiative process.
The ballot proposal comes from the Coalition for Small Government, led
by one-time Libertarian candidate for governor Carla Howell. The ballot
question would phase out the state income tax by cutting it from 5.3
percent to 2.65 percent in 2009 and eliminating it altogether in 2010.
An identical question got 45 percent of the vote in 2002 and carried in
a number of North Shore communities, including Peabody, Danvers and
Middleton. The repeal would save the average taxpayer about $3,600 a
year. It would cut $11 billion from state revenues, forcing legislators
to pare back the state's $28 billion budget.
"If it were to pass, it would create tremendous problems," Sen. Bruce E.
Tarr, R-Gloucester told reporter Edward Mason. "What would come in its
place could be worse."
State Rep. Barry Finegold, D-Andover, told Mason the state would have to
increase other taxes to make up the $11 billion loss. Note that it does
not occur to a legislator to cut spending by that amount.
"No one likes to pay taxes," Finegold said. "We all have to do our
share. Every fire department would be voluntary. One out of three
teachers would be laid off."
Don't worry, legislators. You know as well as we that it is a simple
thing to ignore the results of a citizen initiative petition.
Voters in Massachusetts suffer from the unfortunate delusion that they
live in a democracy. They mistakenly believe that, if they use a process
provided to them in the state constitution and pass a law that includes
words like "binding" and "mandatory," then their elected legislators
must do as they are told.
The very idea sets eyes rolling on Beacon Hill.
In 2000, voters passed a referendum ordering the Legislature to roll
back the income tax from a "temporary" level of 5.95 percent set in 1989
to its "permanent" level of 5 percent. Lawmakers gradually reduced the
rate to 5.3 percent but froze it at that level in 2002, claiming further
reductions were unaffordable.
In 1998, voters passed a Clean Elections law by a 2-1 margin.
Then-Speaker Thomas M. Finneran first ordered a "study" of the law to
determine its impact, then later declined to fund it. After the Supreme
Judicial Court ordered the Legislature to fund the bill, Finneran still
refused to provide adequate funds. So the SJC ordered a sale of state
property to raise money for it. The Legislature finally killed the law
in 2003.
Voters can order whatever they wish; the Legislature will do as it
pleases.
Perhaps if legislators truly respect the voters and really fear what
might happen if the income tax were repealed, they will do what voters
asked in 2000 — roll the income tax back to 5 percent.
That might do much to assuage voters' wrath this November.
Or, voters could always employ the only surefire way to get lawmakers to
listen — vote them out of office. That's an election result that can't
be ignored.
Associated Press
Monday, April 21, 2008
House lawmakers hope to add pet projects to budget
Lawmakers are scrambling to add hundreds of pet projects to the House
version of the state budget, despite dire warnings of a $1.3 billion
spending gap and a looming recession.
The amendments range from $50,000 to clean algae on Nahant Beach and
$140,000 for a salt storage depot in Randolph to $150,000 to battle the
Winter Moth worm and $750,000 to eliminate mold at the Stoughton Fire
Station.
That’s on top of $90,000 for a shellfish propagation program on Cape
Cod, $100,000 for a wind turbine at the McGlynn Elementary and Middle
Schools in Medford, and $50,000 for film festivals on the Cape and
Islands.
Known as "earmarks," the budget amendments are favored by rank-and-file
House lawmakers who see them as the best hope they have to bring home
state dollars for popular local projects - from fixing the public pool
to paying for a teen pregnancy program.
The amendments have come under scrutiny in recent years. House leaders
have tried to discourage earmarks. Last year about half of the $41
million in budget vetoes issued by Gov. Deval Patrick targeted earmarks.
The earmarks often don’t add to the bottom line of the budget, but
instead require that a set amount of funds in a larger line item be set
aside for a specific project.
But top budget officials in the administration say the amendments still
tie up funds and make it harder to address wider statewide needs.
The criticism has done little to stem the crush of budget amendments.
More than 1,500 have been posted on the House’s budget Web site. The
deadline for filing amendments was Friday.
The rush comes despite an economic downturn and just weeks after House
lawmakers approved a dollar hike in the tax on a pack of cigarettes. The
estimated $175 million from that tax is slated to help pay for the
rising cost of the state’s landmark health care law.
Only a fraction of the so-called earmarks are likely to survive.
House lawmakers need to remember the state’s tough fiscal times,
according to Jim Eisenberg, spokesman for House Ways and Means Chairman
Robert DeLeo, D-Winthrop, who unveiled the House version of the budget
last week.
"It is a difficult year financially and we are keeping that in mind,"
Eisenberg said.
The House budget relies on a mix of new taxes, cuts and funds from the
state’s "rainy day" savings account to balance spending.
Lawmakers shouldn’t be looking to protect special projects when the
state is facing a budget shortfall, according to Barbara Anderson
of the anti-tax group Citizens for Limited Taxation.
"Wake up and smell the economy," Anderson said. "Even with the tax
increases we don’t have the money for the budget we have, never mind
adding anything. Where are they getting the money for earmarks?"
But lawmakers defend the process. They point out that the budget is the
one spending bill that must be approved. In a tightly controlled
legislative process, it’s typically their best chance _ however slight _
of bringing money back home to their districts.
The earmarks typically fall into a handful of categories.
There are social service and health amendments, like the $50,000 for
teen pregnancy prevention programs in Southbridge, $260,000 for violence
prevention programs for high risk youth in Boston, and $250,000 for a
colorectal cancer awareness education program.
Then there are cultural and tourist amendments, like $250,000 for the
Free Shakespeare Company in Boston, $75,000 for collaborations between
the Boston Ballet and Opera Boston and $100,000 for the Waltham Tourism
Council.
The most popular kind of earmarks are for local infrastructure projects
like $180,000 for a biofilter system in West Boylston or $25,000 for
improvements to the Holland Pool in Malden.
Each amendment will be looked at carefully before the House starts
debating the budget next week, Eisenberg said.
"We’re going to do an independent analysis on all of the amendments and
make recommendations to the speaker and the members," he said. "One of
the points of the analysis is how each amendment effects the bottom
line."
The Boston Herald
Friday, April 25, 2008
Pols pork it up again
House Dems pile it on as fiscal crisis looms
By Casey Ross
State lawmakers are responding to warnings of a fiscal meltdown by
larding the budget with $1.3 billion in new spending - much of it pork -
that would double next year’s deficit and shower money on golf courses,
merry-go-rounds and local parades.
A Herald review of House budget amendments shows that individual
lawmakers have proposed hundreds of millions in new expenses, even as
their leaders and the state treasurer have cautioned that revenues could
drop sharply in the months ahead.
Among the spending requests:
● $1.5 million by Newton
Rep. Kay Khan to repair an irrigation system at a Newton golf course;
● $250,000 by South
Boston Rep. Martin Walsh for the Hub’s First Night celebration;
● $100,000 by Holyoke
Rep. Michael Kane for his town’s St. Patrick’s Day Parade;
● $50,000 by Kane for a
merry-go-round at a state park in Holyoke.
“There’s been all this talk of a $1.3 billion
deficit, but I guess we found out where it’s really going,” said House
Minority Leader Brad Jones, who has railed against excessive spending.
“It’s frustrating, but it’s not surprising.”
Democratic legislators defend their proposals, saying that many of the
amendments would pay for legitimate needs such as elder care and
substance abuse treatment.
They also argue that the spending items that often bring criticism - the
proposals for gazebos and local summer festivals - are a reflection of
the myriad requests they get from constituents.
“I strenuously disagree with the notion that this is irresponsible,”
said state Rep. Kathi-Anne Reinstein (D-Revere). “We have an obligation
to the people of our districts to advocate for things that are important
to them.”
Reinstein’s $50 million in requests include tens of millions for elder
care and home heating assistance. She also proposes $150,000 for repairs
to a local park and $25,000 for summer programs on Revere Beach.
State Rep. Barbara L’Italien (D-Andover) proposes $125 million in new
spending, the second most in the Legislature. She said much of the money
would pay for special education services - both to expand key programs
and help communities cope with ever-rising costs.
“It would go a long way toward assisting communities, and many of the
proposals have bipartisan support,” she said.
Jones (R-North Reading) said he agrees that many of the spending
requests are legitimate, but his concern is that lawmakers are failing
to identify ways to afford their wish lists.
“You still have to ask where you’re going to get the resources,” he
said.
Khan, a Newton Democrat, defended her request for $1.5 million to fix
the irrigation system at Leo J. Martin Golf Course in Newton.
“If you drive by the golf course in August, it looks like a desert,”
Khan said. “Just because we’re talking about a poor economy right now,
it doesn’t mean people still can’t do things to improve their health.”
Budget watchdogs say the real test of the House’s fiscal mettle will
come next week as lawmakers convene to decide which amendments will be
included in the $28 billion budget and which will be rejected.
Said Noah Berger of the Massachusetts Budget and Policy Center:
“Representatives have to be careful not to devote money to
less-than-crucial services.
The Eagle-Tribune
Monday, April 28, 2008
An Eagle-Tribune editorial
Even with budget in the red, legislators spend more
It isn't only Congress that is in love with earmarks.
State legislators feel pretty passionately about them as well —
passionate enough to ignore the fiscal plight of those who pay for it
all and attempt a $1.5 billion spending spree beyond the already bloated
state budget.
Legislators have collectively filed more than 1,500 amendments that
would add $1.5 billion to Gov. Deval Patrick's proposed $27.9 billion
budget, even in the face of a recession and a gap of $1.3 billion
between proposed spending and expected revenues.
So, don't let your legislators tell you they are "cutting to the bone"
or "putting the brakes on spending" without taking a look at their
proposed earmarks.
Rep. Michael A. Costello, D-Newburyport, wants to add $28 million. He
told Statehouse reporter Edward Mason, "You can spin the story that I'm
adding millions of dollars (but) I don't think we'll add to the bottom
line."
Actually, it doesn't take any spin at all, Representative, to say that
you are trying to add millions to the budget. It takes some serious spin
to try to pretend that you're not.
Costello is not alone, of course. And he is not even close to the most
generous — with other people's money, of course.
Rep. Barbara L'Italien, D-Andover, is in second place when it comes to
attempts to add to the budget, with $125.8 million in proposed added
spending, most aimed at special education services.
That may be a worthy cause, but as Minority Leader Bradley Jones Jr.,
R-North Reading asks, "Where is the money coming from?"
Apparently that's not something they worry about. Rep. Anthony Verga,
D-Gloucester, is looking to add another $16.3 million. He said he and
his colleagues "do this every year. We know there are certain things we
can't afford. That doesn't mean we aren't going to ask for them."
Verga says legislators know there is no extra money, but that filing
earmarks is a bit like the rest of us buying lottery tickets. "It's like
the lottery," he said. "It's a million-to-one. But maybe they'll draw my
number."
That's refreshing candor, but shocking irresponsibility. If legislators
know they can't afford something, they shouldn't be trying to spend more
taxpayer money to get it.
And then there is Rep. William Lantigua, D-Lawrence who, among other
things, is looking to add $58,227 to the budget for the Hispanic
performance group Taller Bohike.
Perhaps some earmarks are necessary — there is a legitimate argument to
be made that local representatives know the needs of their district
better than the governor or the House speaker does. But if lawmakers
wish to salvage their diminishing fiscal credibility, especially in the
face of an impending referendum to eliminate the state income tax
entirely, they will do the prudent thing — the thing any financial
counselor would tell taxpayers to do with their own personal budgets: If
you know you can't afford it, don't even try to spend it.
The Boston Globe
Thursday, April 24, 2008
Tax measure could cost state millions
Late amendment would create break
on corporate offshore holdings
By Matt Viser
Governor Deval Patrick's quest to tighten corporate tax laws and reap
hundreds of millions of dollars in new revenue might be undermined by a
last-minute amendment providing new offshore tax breaks that was tacked
onto the legislation by the House, according to state officials.
The complex amendment was backed by the House leadership and approved
with little debate during mid-evening voting two weeks ago as
representatives were adopting the overall tax package. Several lawmakers
said they were unaware of the details of the provision, which was sought
by the state's largest business lobbying group.
The provision would permit large corporations to avoid up to $200
million in state taxes a year if they maintain large portions of their
business operations overseas, according to an estimate by the state
Department of Revenue. The tax-shelter strategy has proved controversial
in other states.
Administration officials say the maneuver could essentially make a wash
of the revenue raised by corporate tax reform, a cornerstone of
Patrick's agenda that was expected to bring in $217 million in the first
six months of 2009.
"It would allow companies to shift money overseas and avoid taxes in
Massachusetts," Navjeet K. Bal, the state's revenue commissioner, said
in an interview yesterday. "This is a real concern for us."
The offshore tax break still must be considered by the Senate, along
with the rest of the tax bill, before reaching Patrick's desk. Through a
spokesman, Patrick said the administration will lobby senators to change
the plan.
"We look forward to continuing to work with the House and the Senate to
craft a final loopholes plan that will ensure tax fairness and provide
much needed revenue," said the governor's spokesman, Kyle Sullivan.
The state Department of Revenue is not identifying companies that could
benefit from the provision, but it points to a lawsuit by Illinois
against Wal-Mart and other large corporations that have employed similar
offshore tax shelter strategies.
The Massachusetts Budget and Policy Center, which analyzes the state
budget and tax policies, is planning to release a report today that
details the consequences of the House amendment, which was adopted April
10.
"It looks like what this amendment does is create new opportunities for
tax avoidance and new loopholes," said Noah Berger, the executive
director of the Boston-based nonprofit. "That goes in exactly the wrong
direction."
Representative Daniel E. Bosley, who sponsored the amendment, disputed
the state's estimates as inflated and suggested the Department of
Revenue's criticism was motivated by other provisions in his amendment
that remove some regulatory power from the department.
"I just don't trust their figures," Bosley said of the department. "It's
a ridiculous estimate. They're just bad at numbers."
The amendment was sought by the Associated Industries of Massachusetts,
according to officials at the organization, which advocates on behalf of
the state's business community.
"We don't think this is a particularly good time to be jacking business
taxes," said John Regan, an executive vice president of the Associated
Industries of Massachusetts.
Since he took office last year, Patrick has sought changes in the tax
code to raise more revenue by closing what he considers to be loopholes.
But he was repeatedly rebuffed by House lawmakers who said tax increases
would send the wrong messages to businesses. When the House signaled it
would embrace the plan and voted it through this month, it was
considered a major breakthrough.
Under a compromise, the House adopted most of the governor's proposals,
which would bring in about $217 million in new revenue during the first
six months of 2009. But they could lose $100 million to $200 million
every 12 months in the future because of the Bosley amendment, according
to state estimates.
There was little public debate on the five-page, highly technical
amendment, and it passed on a voice vote, without a roll call vote.
Several lawmakers later admitted they did not realize the full extent of
what they were voting on.
"It's somewhat embarrassing," said Representative Jay R. Kaufman, a
Lexington Democrat who, after the vote, started looking into the issue.
"Since it was introduced at the last minute - and there was a desire to
get this voted on that day - there was an understanding we would be
working with incomplete information."
Senate President Therese Murray declined to comment yesterday, but the
Senate's chief budget writer said they would carefully examine the
Department of Revenue's concerns.
The Department of Revenue "is our tax collector," said Senator Steven C.
Panagiotakos, chairman of the Senate Committee on Ways and Means. "We
are going to take what they say very seriously and see what makes sense
and what doesn't."
The issue hinges on a complex tax regulation called combined reporting,
which is designed to prevent large, multistate corporations from
shifting certain profits to other states that have lower tax rates. The
House-approved corporate tax legislation would require companies in
Massachusetts to combine all income and apportion the Massachusetts
share.
But while the overall bill tightened that rule, Bosley's 2,300-word
amendment inserted language that could allow certain corporations to
shift a large portion of their income to overseas subsidiaries and avoid
paying corporate income taxes in Massachusetts.
Several major corporations, including Wal-Mart, McDonalds, and
Burlington Northern Santa Fe Corp., have exploited these tax codes in
other states, such as Illinois and Minnesota, according to state
officials.
Wal-Mart, for example, set up a small real estate office in Florence to
control billions of dollars of the retailer's property in the United
States, the Wall Street Journal reported in November. The Illinois
Department of Revenue last year demanded $26.4 million in back taxes,
interest, and penalties in a case that is ongoing.
Bal wrote a letter to the Senate president last week, expressing concern
over the changes and citing the Wal-Mart example to illustrate how
Massachusetts could lose tax revenue.
"These changes primarily benefit a limited group of very large,
sophisticated, multinational businesses," reads the letter, which was
obtained by the Globe. "If left unchanged, these changes will materially
reduce the additional revenue anticipated from the governor's combined
reporting bill by at least $100 million to $200 million annually."
Burlington Northern did not respond to a request for comment yesterday.
Public relations officials at McDonald's declined to comment. Wal-Mart
said it is paying attention to the Massachusetts legislation.
"Anytime there's a lawful way to reduce our expenses and save money for
our customers, we're aware of it," said Daphne Moore, a Wal-Mart
spokeswoman.
Proponents say they do not want to tax businesses unfairly on profits,
even if they originated in Massachusetts and then shifted to offshore
subsidiaries.
"At what point do we break the backs of these businesses and
corporations and force them to expand beyond our boundaries?" said
Representative John J. Binienda, House chairman of the Joint Committee
on Revenue. "If you did every single loophole in the world all at the
same time, you'd be having layoffs by these companies. And without these
corporations and having these people working we'd be a lot worse off."
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