Tomorrow: The Legislature’s Second Vote on the Fair Share Tax

The Legislature will vote again tomorrow on an amendment to the state constitution to impose an additional four percent tax on the income of persons that exceeds a million dollars annually.

This will be the second of two legislative votes the constitution requires for amendments that originate as initiative petitions.  The proposed amendment received 135 “yes” votes from the 200 members of the Legislature last year, far more than the 50 necessary to advance. Another 50 or more “yes” votes tomorrow will put keep the amendment on track to appear on the 2018 statewide ballot.

But the closer the amendment gets to a popular vote the more opposition it attracts.  For example, the Greater Boston Chamber of Commerce, which sat things out last year, is joining forces with other business groups in a legal challenge aimed at knocking it off the ballot.

And last year’s opponents are ratcheting up their efforts this year.  Associated Industries of Massachusetts is running a multi-episode series entitled “The Constitutional Amendment Tax Trap” to puncture what it regards as myths (sample myths: the state has a revenue problem, the state needs to invest more in transportation, high income earners are not paying their fair share).

Likewise, the Massachusetts Taxpayers Association is rushing to the aid of the 19,600 residents of the state who would be subject to the additional tax, warning the rest of us against penalizing talent (their word) in this way. They offer an ominous scenario in which some — or all — of the top 900 of these residents (that is, those whose annual earnings exceed $10 million, aka, the top one-one hundredth of one percent) just take their ball and go elsewhere, leaving the state with less revenue than before.  In other words, income inequality in Massachusetts has reached the point where it’s being suggested that our tax policy ought to beseech our biggest plutocrats not to leave.

Anyway, stay tuned – this battle isn’t over.

 

The Governor’s Power to Cut State Funding: You Haven’t Heard the Half of It

With the recent unwelcome news that state tax revenues are continuing to fall short of projections, Governor Baker is “reviewing all options” to balance the budget.

One of the most familiar of those options is for the Governor to cut funds that the Legislature appropriated at the beginning of the fiscal year last July (these reductions are known as “9C cuts,” named after the provision of the General Laws that gives the Governor this unilateral power).  Back in December, the Governor cut the budget by $98 million via 9C cuts, an unpopular move that lawmakers protested as unnecessary at the time, but which has since been proven to be insufficient.

A lesser known budget-cutting tactic, which the Governor also used in December, is known as a “trust sweep.”  Some state monies are deposited into trust funds to be used only for specific purposes.  One example is the Housing Preservation and Stabilization Trust Fund, which the Legislature established a couple years ago exclusively for grants to provide “affordable housing for low-income families and individuals in the commonwealth, particularly those most at risk of becoming homeless.”

But facing the pressure of the budget shortfall in December, the Governor not only cut $98 million in appropriated funds, he also used trust sweeps to close the gap, informing the Legislature that various trust fund balances were “unneeded” and were therefore available for budget-balancing purposes.  Surely the Governor did not mean that additional money for affordable housing was “not needed” — he simply regarded other needs as more pressing.

Included in the trust sweeps, apparently, was some or all of the $4 million in the housing trust fund.  I say “apparently” because the administration was not inclined to disclose many details. State House News learned that 12 trust funds were under consideration for sweeping, the largest being the Commonwealth Care Trust Fund, which is intended to be used to increase health care coverage and which had a balance of $53 million at the time it attracted the Governor’s attention. Another target was the $7 million in a fund dedicated to assisting persons with mental illness or developmental disabilities.  The trust funds eyed for sweeping in December had balances totaling $145 million, more than the $98 million in 9C budget cuts that received press coverage.

Of course, the Legislature could have stopped the trust fund sweeps by passing legislation prohibiting them, but that would not have solved the budget shortfall.

This is not a huge amount of money in the context of a $40 billion budget. But I’m sure that advocates for homeless people, people with mental illness and people with developmental disabilities would have suggestions that more closely follow the purposes for which the funds were established. And a reminder, when you’re contemplating our current budget hole, that various piggy banks the Legislature established for various important uses have already been raided.

Gambling vs. Marijuana: A Tale of Two “Vices”

It’s been nearly six months since the voters approved Question 4 to legalize and tax recreational marijuana. But we’re still at the starting line, because in December the Legislature pushed back by six months all the timelines that the ballot question had established. The regulatory commission that was supposed to be appointed by March won’t be appointed until September, the review of license applications that was supposed to begin in October won’t start until next April, and so on.

And now it’s possible that the finish line may be moved. There’s a brand new legislative committee that will review the 44 bills that were filed at the start of the new 2017-2018 session responding to the passage of the new law.  With only a few exceptions, the bills are far more wary than enthusiastic. They propose stricter local control over retail marijuana establishments, a reduction in the amount of marijuana that can be grown at home, restrictions on potency (the law, as approved by the voters, provided that such restrictions would be imposed by the regulatory commission), restrictions on advertising, etc., etc.

Which is at least a little odd considering that the Department of Revenue has estimated that marijuana sales could bring in $64 million in new revenue in the first year of the law’s operation, and once again this year the state is digging through the sofa cushions for loose change to fix the perennial hole in the budget.

But before we conclude that our lawmakers are skittish about any new enterprise that may strike some members of the citizenry as morally problematic even as it brings in new revenue, let’s review the launch of the casino law.

At a comparable time (six months after the law was passed), the members of the new Massachusetts Gaming Commission had been appointed and staked to a $15 million line of credit.  The buzz was all about the new jobs that were shortly to arrive and the new revenues that were shortly to replenish our recession-depleted treasury.  (The marijuana law has gotten only a measly $300,000 to cover costs to date.)

The Gaming Commission got the licensing process underway with an award to Penn National Gaming to operate a slots parlor in Plainville. They did so with the rosy understanding that it would bring in as much as $300 million in revenue annually. But whoops. After the first year of operation, the revenue number was $160 million, barely half of the original estimate. What happened?

According to the Commission’s account, which the Globe reported credulously, the initial revenue projections were “extravagant” guesses offered by casino industry consultants. Well, okay, but what about the Commission’s due diligence in investigating that guesstimate? “We thought there was a flaw in their methodology but we couldn’t find it,” Crosby said.

Indeed. The Commission could not find the flaw, even when aided by the research of their own consultants, who also predicted that Plainville’s annual revenues would yield far more than $160 million — and who were rewarded by the state for such prognostications to the tune of a million bucks.

Water under the bridge, apparently. Anyway, now all is well.  The Commission “could not be more pleased” with the Plainridge revenues, which are half of the original estimates and which is totally okay, because we now know the estimates were unrealistic to begin with. Construction has begun on two other casinos, with who knows how many more to follow, as Massachusetts duels Connecticut for supremacy in the gambling wars. Gambling is clearly the Legislature’s favored child, (as compared to marijuana), and even more cossetting may be on the way — the House of Representatives is proposing to let casinos continue to serve alcohol for hours after bars and restaurants must close. Meanwhile, marijuana legalization is in danger of being strangled in its crib.

Did the Legislature ever take note of the discrepancy between revenue expectations and revenue reality in Plainville? No evidence that they did, and if it’s brought to their attention, many seem prepared to laugh it off like Commissioner Crosby did: “we all seemed to be smoking something.”

 

Who’s Geoff Diehl? A Listicle

The Herald’s saying that State Representative Geoff Diehl will challenge Elizabeth Warren next year. So what do we know?

  • He’s a small business owner from Whitman who was first elected to the House in 2010.
  • In 2013, he filed an amendment to a House bill to benefit veterans through a property tax exemption and a “Support Our Veterans” license plate program. His amendment would have required that all persons seeking state housing assistance provide their social security numbers. When his amendment was ruled out of order because it did not pertain to the primary subject of the bill, he and allies requested a roll call vote on that parliamentary ruling. The result, a 126-29 vote upholding the ruling, created the scandalous (if entirely specious) impression that 126 members of the House had voted to give priority for state housing assistance to undocumented immigrants over veterans. That roll call vote became the centerpiece of a flyer distributed in 20 legislative districts by the Massachusetts Fiscal Alliance and its sister PAC, Jobs First Massachusetts, targeting Democratic incumbents in 2014. The campaign had little success.
  • Also in 2014, after the Legislature increased the gas tax from 21 to 24 cents per gallon and tied future increases to the consumer price index, he played a prominent role in the successful ballot campaign to repeal that indexing. The repeal has resulted in a (greater) shortfall in the state’s transportation funding.
  • In 2015, he and other conservative legislators joined with other, more progressive groups to oppose taxpayer funding for the Olympics. Later that year, he lost the election for an open State Senate seat (the incumbent, Thomas Kennedy, had passed away in June) to State Representative Michael Brady.
  • He was the first state lawmaker to endorse Donald Trump for President, in February of last year. And he stood by his candidate through every controversy, even Trump’s disparagement of federal judge Gonzalo Curiel, when others grew faint of heart.
  • His legislative priorities for this session include a bill to give taxpayers the option to direct the state not to use any of their income tax payments to pay for abortion services. It requires the Revenue Department to calculate the amount of state money used to pay for abortion services as a percentage of the state’s General Fund, to apply that percentage to the liability of each taxpayer electing the option and to set those amounts aside in a special fund.

The State Earned Income Tax Credit: R.I.P?

(How Trumpism might play out in Massachusetts. One of a probably lengthy series.) 

Governor Charlie Baker, back from a meeting of the Republican Governors Association, held a press conference yesterday to offer his first extended remarks after the presidential election.

If, like Attorney General Maura Healey, you were hoping for a forceful denunciation of the presence of a white nationalist in the West Wing, you were disappointed: Governor Baker is willing to hold the record open for more evidence against Steve Bannon before issuing a judgment.  On most other subjects Baker took refuge in the comforting words of Mike Pence (!), who called for a “very deliberate and significant dialogue,” yada-yada.

Baker’s strategy of not confronting the President-elect was, if not courageous, probably fiscally prudent. After all, more than one-quarter of revenue for the state’s annual budget ($39 billion this year) comes from federal reimbursements. Much of that federal funding supports our universal health care plan. That health care money was on a track to expire, but fortunately four days before the election, the Baker administration secured a commitment from the Obama administration to provide nearly $60 billion over the next five years. Good news for sure — although it’s alarming that the feds’ promise is now reliant on a president who in the past has considered defaulting on the nation’s debt as a nifty solution to budgetary problems.

Health care is not the only program under threat from Trump administration policies. Our state Earned Income Tax Credit Program, which helps more than 400,000 families in Massachusetts who earn $50,000 or less, is, as a practical matter, in jeopardy as well. Governor Baker is a big supporter of the state EITC, and an increase to that program (the first in 16 years) was one of his first year policy successes. The state EITC program is still a modest one even with the increase (the average benefit will rise to $500 per family this year), but it’s nevertheless a step toward reducing income inequality, a disorder that Massachusetts suffers from in the extreme.

The tax overhaul that Trump is proposing is especially generous to the wealthy and especially hard on lower-income families, including those who receive the Earned Income Tax Credit. His plan would entirely eliminate the head of household filing status and the deduction for dependents, both of which help to reduce the tax burden owed by EITC families.

The Trump tax proposals, to take just one example from the Tax Policy Institute, would increase the federal tax bill of a couple with four children making $50,000 a year from $210 to $1090. That result would swallow the benefit of the family’s state EITC several times over.We’re looking, in other words, at the prospect of a state EITC program that in many cases no longer helps low-income families directly but instead simply goes to help to pay their (newly-increased) share of federal taxes. How many things are wrong with that picture?

Annals of Income Inequality: June, 2016, Edition

A couple items this week from the income inequality file.

First, as State House News reports (paywall), the Baker administration is about the business of reining in the overtime hours of the 39,000 people in the state who work as personal care attendants. PCA’s, as they are called, assist people who have severe disabilities with daily activities like getting dressed and bathing. This help enables many disabled people who might otherwise need to live in a nursing home to remain in their communities.

The cost of the PCA program is rising, and to cap that increase the Baker administration is restricting the number of overtime hours that PCA’s may work. As you may imagine (there being 24 hours in a day), many of the 26,000 people receiving PCA services require more than 40 hours a week of assistance. Nonetheless, the administration is targeting this program for savings by requiring advance approval by the state for any PCA working more than 40 hours per week, up to a maximum of 60 hours.  No word on whether the administration is anticipating that this restriction might result in more nursing home placements of persons now able to live outside that setting.

PCA’s now earn $13.68 per hour, which translates to an annual income of $28,454 for a forty-hour week. (If you’re curious, the income necessary to afford a studio apartment in the state is $36,142).

Second, as DigBoston reports, the Baker administration is asking the Legislature to increase the amount of economic development tax credits the state awards to corporations annually from $30 million to $50 million, and also to allow the administration complete discretion to decide which corporations receive these new incentives (aptly named Extraordinary Economic Development Opportunity Credits).

By “complete discretion” to award these credits, the Baker administration is proposing that, to quote from its bill:

The decision by the secretaries to designate or not to designate a proposed project as an extraordinary economic development opportunity shall be a decision that is within the sole discretion of each of the secretaries, and may include such conditions as the secretaries shall in their discretion impose. Such decisions shall be final and shall not be subject to administrative appeal or judicial review… or give rise to any other cause of action or legal or equitable claim or remedy.

Wow – so much for the separation of powers. It’s not clear (to me at least) that this “extraordinary” delegation of authority to the executive branch to award tax credits, which expressly precludes any sort of court review to control abuses of discretion, would be constitutional.  The Supreme Judicial Court has in the past approved laws in which the Legislature delegates its power to tax — but on the condition that certain safeguards have been met, including that some means of judicial review is available for parties aggrieved by the resulting decisions.

In any event, interested persons are invited to suggest to their Legislators that funding overtime hours for PCA’s to provide assistance to persons with disabilities is a higher priority, especially in this time of severe budget austerity, than funding extraordinary tax credits for favored corporations.

 

Tomorrow at the State House: First Vote on Millionaires’ Tax

[Update: May 18: The amendment to impose a four percent surcharge on taxable incomes over one million dollars was approved by a vote of 135-57 (50 yes were needed to advance the amendment to another vote in 2017 or 2018).

House members voted in favor, 102-50 (the roll call is here). Senate members voted in favor, 33-7. The no votes in the Senate were: DeMacedo, Fattman, Flanagan, Gobi, Humason, Ross, Tarr. Everyone else (including newly-sworn GOP Senator O’Connor and newly-sworm Democratic Senator Boncore) was a yes. A list of the 40 Senators is here.

One of the 17 House Democrats voting no was David Nangle of Lowell, who denounced the amendment as “the introduction of class warfare.” “It’s stealing from the rich to give to the poor,” he added. “We are legislators. We are not Robin Hood.”]

The proposed state constitutional amendment to impose an additional four percent tax on taxable incomes over one million dollars will receive its first vote in the Constitutional Convention that’s being held tomorrow.  This vote will be one step in deciding whether we in the Commonwealth think the cause of our perennial state budget shortfalls is a spending problem or a revenue problem.

Advocates of the proposed amendment collected 155,000 signatures last year (way more than twice the number required) to submit the proposal to the legislature. The Joint Committee on Revenue held a hearing in January and gave the proposal a favorable report in February.

At tomorrow’s Constitutional Convention, the amendment needs a yes vote from 1/4 of the 200 legislators in order to advance. If that happens, another yes vote of 1/4 of legislators in 2017 or 2018 will put the amendment on the ballot in November 2018. Under the constitution, these votes are roll call votes (or, in the quaint constitutional language, votes “taken by call of the yeas and nays”), so it will be possible to see which lawmakers vote which way.

Here’s some advocacy in favor of the amendment by Raise Up Massachusetts and in opposition by Associated Industries of Massachusetts.  In legislative offices, operators are standing by to hear what you think — it’s your civic duty.