Sunday, October 31, 2010

Vote For Milton

On Tuesday we’ll be voting on a Governor’s race and ballot questions. Each of these votes has implications for Milton.

The 2010 mid-term election is being waged against the backdrop of an economy struggling to recover from the worst recession since the Great Depression. Anxiety, frustration and anger abound. Having been turned out of power in 2008 in the wake of economic disaster, an amnesic Republican party seeks a partial return to power touting the identical economic and fiscal philosophy that resulted in massive deficits and a lessening of proper government regulation of business.

Governor’s Race

Republican challenger Charlie Baker is running on lowering taxes. He wants to lower the income tax from 5.25% to 5%; the sales tax from 6.25% to 5%; and the corporate tax from 8.75% to 5% over four years. Much like the national Republican claims for “trickle down” economics, Baker believes this will spur business growth. He blames Governor Patrick for our unemployment rate, even implying that jobs are leaving the state because of the tax situation. He characterizes Patrick as a tax and spender who should have cut the budget rather than raise the sales tax.

Mr. Baker’s tax cuts would eliminate about $2.5 billion from state revenues. This would be added to the $3.24 billion loss in revenue that occurred when the country sank into a near depression in 2008, an amount the Massachusetts Taxpayers Foundation called, “the most severe two-year decline in tax collections in the state’s history”. Needless to say, removing $7.24 billion from a $29.4 billion state budget, a significant portion of which is non-discretionary, cannot be accomplished by vague and cynical references to waste, welfare recipients and illegal immigrants.

It is simply not possible to accommodate this level of revenue loss without significant, painful, and unprecedented cuts to programs like Chapter 70 Funding for Education and Aid to Cities and Towns (potential consequences for Milton will be discussed under Question 3 commentary). Other than the “Baker’s Dozen” list of reforms and changes, representing a small fraction of the cuts that would have to be made, Mr. Baker has carefully avoided telling us how cutting the budget by this amount can be done without severe reductions in services at the state and local level.

But is Mr. Baker right in pinning our fiscal situation on Governor Patrick? Is he a “tax and spender”? Are businesses moving out of the state? Must we sacrifice adequate funding of our schools and other town services to fund tax cuts that will miraculously save a moribund economy?

Governor Patrick took office with many plans for moving this state forward. He wanted to encourage key industries that leverage our strengths as a state; increase funding for education to improve outcomes; provide property tax relief; among many others. Less than mid-way through his term he was faced with a national economic situation worse than any Massachusetts Governor has faced since the 1930’s. In spite of this he made significant progress in key areas.

While every state was impacted by the economic situation, not every state has been recovering at the same pace. In Massachusetts the unemployment rate has declined from 9.5% in January to 8.4% in September. The latest quarterly economic report shows our state continuing to grow at twice the national rate. And contrary to Mr. Baker’s claim that Massachusetts is inhospitable to business, the most recent annual study by CNBC places Massachusetts 5th in the nation in friendliness to business against a broad range of key factors.

On the education front the news is very good. Massachusetts ranks at the top nationally in mathematics and reading at both the 4th and 8th grade level according to the National Assessment of Educational Progress. Perhaps even more impressive was our students’ performance on the international TIMSS test of mathematics and science against students from around the world. In the 2007 test, Massachusetts 4th graders ranked 2nd in science and tied for 3rd in mathematics. Massachusetts 8th graders tied for 1st in science and finished 6th in mathematics. Despite the recession, Governor Patrick continues to fund Chapter 70 at historically high levels.

Property tax relief has been more difficult to deliver with revenue losses from the recession. Despite this, property taxes under Patrick have increased annually at 4.1%, 3.7%, 3.3% and 3.2%. Under the previous Governor Mitt Romney they increased 6%, 6%, 5%, and 5.6%. Imagine what the Governor could have done with even an average economy. And imagine what these rates will be if Baker’s tax cuts go into effect.

So despite a terrible national economy Governor Patrick made progress toward some important goals. Far from relying on taxing and spending, the average annual increase in state spending under Patrick was 1.7%. Mitt Romney’s budgets increased 6.6% annually and when Charlie Baker was in charge of the state budget in the 1990’s they increased by 5% annually. Patrick has managed a tough fiscal climate with budget cuts (approximately $1.4 billion according to the Massachusetts Tax Foundation) judicious use of the rainy day fund, Federal stimulus money, and an increase in the sales tax.

We have a stark choice on Tuesday. We can continue the progress we’ve seen in Governor Patrick’s first term and maintain as many core services as possible while the state economy continues to improve, or we can turn to Charlie Baker’s drastic remedy for a misdiagnosed economic situation, putting money in your pocket that you’ll then need to spend at the local level in increased property taxes to avoid devastation of services. One choice is progress, the other a cynical shell game to get elected.

Questions 3 and 1

Carla Howell, Massachusetts best known Libertarian is back trying to throw a monkey wrench into the government budget and state services. Question 3 proposes rolling back the sales tax, not from 6.25% to 5% where it was, but to 3%. This proposal is so extreme that even Charlie Baker is opposed to it. The revenue loss if this measure passes would be $2.5 billion, similar to the cost of Mr. Baker’s entire package of tax cuts. Proponents of this measure continue to maintain that we are a particularly tax burdened state, justifying draconian cuts in taxes. Of course Carla Howell also maintains we can cut this amount from the budget with no loss of core services. At one time Massachusetts deserved the title of “Taxachusetts”, but that was long ago. In 1978 our total state tax burden was 11.5% of income and we ranked 4th nationally. The latest figures from 2008 put our tax burden at 9.5% of income, ranking us 23rd in the country.

The Massachusetts Taxpayers Foundation, in a report called “Question 3, Heading Over the Cliff” has detailed the disaster this ballot question would cause, and demonstrates perhaps why businesses in Massachusetts oppose this measure. You can read the report here:

Simulations of the size of needed cuts to Chapter 70 Aid and General Aid to Cities and Towns have been run. Milton would stand to lose just under $1 million. You can see the simulation data by clicking on the link at the bottom of this page.

Question 1 would eliminate the sales tax on alcohol which was included in the bill increasing the sales tax. Funds from this component of the sales tax largely go to funding substance abuse treatment programs around the state. Massachusetts was one of only 6 states in the country that didn’t impose a sales tax on alcohol. Proponents of repeal, funded by $2 million from the liquor industry, complain that this represents double taxation on alcohol and is driving business to New Hampshire. But all of the states taxing alcohol also have an excise tax at the wholesale level, so Massachusetts is hardly doing anything unusual. As for alcohol sales, they are up in Massachusetts since the tax was imposed.

It’s over but for the voting folks. Those who show up, win. I urge you to vote for a second term for Governor Patrick and reject Questions 1 and 3. Otherwise, there will be severe repercussions on our own struggle with fiscal affairs right here in Milton.


Post a Comment

<< Home