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From
the Executive Director
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from NewsLink, Vol. 6, No. 2, Winter 2002
The state's largest newspaper is for it. So is the head of the largest bank in New England. And, so are the chief executive officers of one of the largest insurance companies and one of the largest advertising agencies. The state's leading taxpayer watchdog group is emphatic about it — as are a couple of Democratic candidates for governor. The former president of the Federal Reserve Bank of Boston, an economist who perhaps should know better, is also for it. The idea floating around the halls of power is to delay the voter approved income tax so that the Commonwealth can recover from the dramatic drop-off in state revenues. The growing consensus among at least one element of the state's business elite appears to be that the only way to stop the state's slide into fiscal calamity is to postpone the tax cut. No consideration is given to cutting spending which has grown over the rate of inflation for the last decade. Everybody's favorite scapegoat is tax cuts.
One can't put down a newspaper these days without feeling overwhelmed about the rollback-the-tax cut juggernaut. So much so, that you have to feel sympathy for Acting Governor Jane Swift, who finds herself standing alone in the path of the unimaginative group-think of Chicken Littles. To be in the Governor's shoes is to be an object of scorn and ridicule.
Thus, we are treated to Steve Bailey of the Boston Globe who belittles the Acting Governor for having a painfully tin ear to the no-tax-cut ensemble. The Acting Governor, he suggests, should listen to Richard Syron, the former Fed chief and now CEO of Thermo Electron, who told the Globe: “I would be willing to forgo some of the proposed tax cuts...Postponing the tax cuts will not be a fiscal retardant. I don't think state taxes act much on the state economy... We have some substantial experience with that here in Massachusetts.”
According to the dominant political philosophy, there is a broad swath of humanity ––“working families,” women, the poor, minorities”– that must be protected. This protection must naturally come from government, which needs a lot of money to do its protecting.
The problem is that sometimes the people who are being protected forget themselves and act like they don't want protection at all. Take for example, in 2000, when 59% of voters approved a reduction in tax rates that, along with the economic slowdown, is making it necessary to slow down state spending.
Several years ago, the state legislature also cut the state capital gains tax in exchange for a pay raise. Now we are told to rethink that tax cut as well. Then there's the charitable tax cut deduction, also approved by the voters in 2000, and also on the list of tax cuts that are making it tough for the protectors to do their job.
So we have a phalanx of businesses and their spokespeople aligning themselves with the worst anti-business forces in the state. Where, we might ask, were these self-appointed guardians of fiscal integrity when the legislature and past governors were cranking up state spending? How do they know that the voters didn't really mean it when they said that the state should learn to get along without the billion dollars in revenue that the income tax cut could be expected to'“cost”?
If these heads of business really cared about the people, as well as fiscal integrity, they would forge a campaign for the state to level fund the budget for a few years, while the economy recovered and the state had a chance to adjust to recent tax cuts. They might even look for places to cut the budget.
It does not take an economist to explain that the state's troubles aren't the result of tax cuts. The legislature refused to uphold a promise to scale back a temporary tax cut well into the late 1990s. It was only when voters pushed the issue that tax cuts become a reality. Meanwhile, the legislature spent the revenues as quickly as it could.
In fact, the Commonwealth has increased spending by nearly six percent a year. Medicaid, local aid, and education reform all received substantial increases. As did another voter approved measure – anti smoking programs. The so-called guardians of fiscal virtue remained silent when Medicaid expenditures grew at a rate of 6.3% from 1996 to 2001. They looked the other way, when the state committed itself to education reform knowing that it would be political suicide to cut such spending once it was marbleized into the body politic. The mavens of the financial community who now clamor for a delay in tax cuts were nowhere to be found when courageous voices questioned police details and the nefariously expensive Quinn Bill which pays police officers a 25% increase if they earn a master's degree. Nor did the same business groups raise a voice when previous administrations attempted to reduce health insurance costs by bringing state employee contributions in line with those in the private sector. Ironically, these same firms are probably the same firms that marshaled their workforces into managed care plans.
In January when the Acting Governor released House 1, the hue and cry was immediate. Yet Governor Swift's budget blueprint calls for a spending increase of 2.7 percent. Bay State arithmetic construes this as a budget cut. In fact, what is needed is a few years of zero percent increases, in deference to the stated will of Massachusetts voters and the undeniably important goal of budget balance.
NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-2002. All rights reserved.
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