It’s honeymoon time in Boston. The transition from Governor Deval Patrick to Governor Charlie Baker couldn’t have been much smoother. Baker has talking, and even seems to walking, the bipartisan line. Referring to talks to close the gaping budget hole of FY ’15, House Speaker Bob DeLeo said they were off to a “superb start.” Senate President Stan Rosenberg characterized Baker and as “very substantive” and said they “spent the entire time digging deep in the weeds of policy.”
Baker is not going to govern as a Democrat, but I think it’s safe to say that he will not be Scott Walker or Sam Brownback or Rick Perry or Rick Scott. Management, and to some degree, leadership can be non-partisan. But it is worth noting that Baker is both a Republican and an avowed “fiscal conservative” who has he has pledged not to raise taxes. This ideological stance explains Baker’s recent statement that, “If we’re honest with ourselves, we can’t blame this deficit on a lack of revenue. We have to recognize that this is a spending problem.” At best, this statement is disingenuous.
The word “spending” has a discretionary connotation that rings untrue. The fact is, much of budgetary problems stem from changes to Massachusetts tax code were implemented that caused a $51 billion loss of revenue over the last 17 years. The Massachusetts Budget and Policy Center describes the changes and the cost:
Three of these income tax cuts were particularly costly to the Commonwealth: 1) a cut from 5.95 percent to 5.3 percent in the tax rate applied to wage and salary income, 2) a cut from 12 percent to 5.3 percent in the tax rate applied to dividend and interest income, and 3) a doubling of the value of the personal exemption from $2,200 to $4,400 for single filers and from $4,400 to $8,800 for married couples. The combined effect of these three cuts is now a loss of some $3.0 billion in annual revenue.
Expenditures have increased in some areas, but primarily because costs have increased. Most of these costs are due to spending on healthcare. Medicaid & health reform costs and state-employee health insurance, 98% and 56% respectively since 2001. During this same period, the next highest increase in costs was 9.5%, primarily due to housing and transportation. These increased costs certainly present a problem. But as Paul Krugman likes to say the federal government is basically an insurance company with an army. Massachusetts doesn’t have the army, but we do have the insurance company. Charlie Baker says we have a revenue problem.
Local aid has dropped more than 35% since 2008. That’s unadjusted for inflation. Adjusted for inflation, local aid has dropped 43.8%. That’s huge. Billions of dollars. Is that a spending problem?
Our roads, bridges, and dams are crumbling. Two years ago, the libertarianish Pioneer Institute estimated that we needed $2.6 billion in new investment over six years to deal with them. That doesn’t sound like a revenue problem.
Adjusted for inflation, spending on Massachusetts schools has risen 1.3%. That’s better than most states; overall, state revenues still are 2 percent below the pre-recession peak, according to NASBO Executive Director Scott Pattison. But costs are rising, and municipalities can’t cover them. In my Town of Granby, a 1% tax increase brings in $100,000 dollars. An outside placement for a single student can easily cost that much. I know of one placement that runs $300,000 a year. The Commonwealth reimburses some of these funds, but it’s shouldn’t be hard to see that it’s impossible for my town to raise taxes to pay for the these children. In percentages, the spending increase on special education went from 18.6% of school budgets to 20.9%. The problem is, that increase doesn’t cut it. In many school systems, the job of special education directors has less to do with providing appropriate services for kids and more to do with keeping students out of special education to hold down costs. There’s no question kids need the services.
Governor Baker has the virtue of experience in both the business and government sector, but experience aside, he may not see the differences clearly. Almost no one does. The differences are so fundamental that they go unnoticed. The major difference boils down to objectives. Businesses provide goods and services for profit. Profit provides a limit on what a business does. If a business offers something that is unprofitable, they stop offering it. Government delivers services, but it has no such limiting factor. While not infinite, the need for services could theoretically grow exponentially. But government is not allowed to make a profit, diversify, or make investments to improve the delivery of services. Instead of profits, government has to make due on fees and taxes, which ebb and flow with the business cycle. That lack of profit guarantees that there will be no way to hedge against economic downturns. Business doesn’t have an influential segment of the public telling them they can and should make due with less. There certainly have never been ballot measures forcing business to arbitrarily cut their revenue. Business has two ways to manage its balance sheet: cutting costs and increasing profits. If they fail in this regard, they go eventually go bankrupt. Government is expected to deliver the product, independent of its income, and when it fails to do so, it is called a spending problem.
At best, calling our fiscal deficit a spending problem is oversimplification. We may have spending problems, but if we’re honest with ourselves, we have to recognize that we have a revenue problem. We also have a cost containment problem. Many of our some serious fiscal problems are legacies, decisions and promises that some people would prefer to ignore. I suspect these costs are what Baker means when he says we have a spending problem. It would be, perhaps, more honest to say that as a Commonwealth we have a problem honestly considering what we want and what we are willing to pay for. That’s a conversation we’ve never had. The 1998 tax cuts occurred during the dot.com bubble and obscured the effect of the loss revenue would eventually have when the economy recessed.
The honeymoon on Beacon Hill, like all honeymoons, will eventually end and the marriage of the executive and legislative branches will begin in earnest. And that will be when the real test of their relationship begins. Let’s hope, whatever happens, that like all good partners, they talk openly and honestly about the future.
How do we change the perception that we are Taxachusetts? How do we overcome clear and consistent voter opposition to tax increases? Even bland and mild proposals like the gas indexing (backed by Baker and many prominent business elites) and the bottle bill (an extra nickel a bottle? that’s really too much?) got soundly defeated, while a tax on the poor and giveaway to big business via casinos was overwhelmingly approved.
How do we change the political discussion?
On the plane home from Chicago there were two knuckleheads with thick Boston accents from the burbs agreeing with each other on two fallacies that are far too common in New England. The first that Brady is past his prime, statistics show this is false. The second that MA is the most taxed in the country, even though statistics show this to be false, and they were just in freakin Chicago which is the highest taxed municipality in the country.
How do we change this perception? It’s an open question.
The (cut the) gas tax initiative passed 53% to 47%. That’s not a “sound” defeat. To be sure, the bottle bill got absolutely crushed — but the gas tax initiative, not so much.
I’d attribute the defeat less to pure anti-tax sentiment and more to Question 1’s proponents’ success in selling the idea that the legislature should pass increases one at a time, through legislation, rather than index the tax. People who didn’t want any gas tax increase exist in decent numbers but I think the second group pushed Question 1 over the top.
It’s too bad. History shows us that gas tax increases on an annual basis, or even once every five years, are not likely to pass the legislature due to time and political constraints. Everyone comes out of the woodwork to fight tooth and nail against every increase. That’s why it was indexed prior to 1991 and, once they took the indexing away, it took 22 years to raise the gas tax. Meanwhile, the roads and public transit stink.
But I think jconway’s right on the big picture issue that many people still consider Massachusetts a high-tax state.
And seven ahead of Coakley. We can quibble on what the definition of ‘soundly’ is, or we can acknowledge a clear majority of voters don’t want to raise additional revenue via that method, and that we have to earn a lot more buy in from them to get more.
Again, it’s not a policy question. If I could waive a policy wand around the state we would have a progressive income tax, single payer, and a host of great ideas. The thing is, a Democratic supermajority killed Patrick’s revenue plan. A Republican governor got elected on an anti-tax mandate, and all the proposals for new revenue were defeated at the polls, save for the most regressive of them all (casinos).
This is the environment our legislators will be going into, we already know DeLeo was ideologically there to begin with, and what he does the rest of the House does. Getting Rosenberg to find innovative revenue streams he can take to Baker and DeLeo seems to be the key here.
season too. There was a sort of reaction that the ballot questions excited that I’m still not sure how interpret. To call it conservative, I think is an oversimplification. I think people are pissed and they’ve yet to settle on a target, but that’s only conjecture.
No gas tax means more for them.
No bottle bill means not shilling out for deposits.
Casinos means jobs and possibly a big pay day.
Earned sick time means they don’t have to sacrifice their wages.
A GOP Governor is more likely to hold the line on taxes.
Mind you I’m just trying to analyze here – not saying I agree with either the logic or the merits.
For basically my entire life income and sales taxes were 5% and not much more now and we’ve had the infamous proposition 2.5. Sounds like a bargain to me. Are there other taxes I’m missing because they have never applied to me?
What if voters reflexively ditch these efforts because the state squanders what you give it?
You have to fix a lot of problems caused by the dominance of ward heelers and their complex patronage schemes.
The yuppie progressives have been spineless for decades and will grovel if the ward heeler caucus tosses em a few identity politics trinkets to show off to the like minded.
This is a vile spectacle for the vast unwashed who have nothing to gain from it.
They just see leeches and ditzes as far as the horizon stretches.
But if the Democrats can purge ward heelers and deliver value, without turning it into a foaming feeding frenzy for attorneys and consultants, for the long haul, then they might find a more receptive constituency with a shot at growth.
The party has blown trust to pieces, lives in a like minded echo chamber marked by narcissism and neurosis in equal measure and rarely shows much interest in engaging the vast unwashed.
The only thing keeping it this viable is that the GOP sucks so much more.
How do we change the perception that we are taxachusetts? Challenge it!
http://www.massbudget.org/report_window.php?loc=FactsTaxachusetts.html
It’s just not reality anymore. Anyone who says this has not compared the taxes between states.
a boston globe article also puts an end to the myth in an even better way, by comparing it to new hampshire. excerpt below
The financial website WalletHub just released its ranking of the best and worst states to be a taxpayer. On top was Wyoming (with average annual taxes of $2,365) while Massachusetts ($6,884) came in at 21. Some states with greater tax burdens defy stereotypes. South Carolina, for example, was 23rd, Georgia 26th, and the aforementioned Granite State was 28th ($7,419). That seems a puzzle. With no sales or income taxes, how can New Hampshire be worse off than Massachusetts?
Because politicians are crafty people. New Hampshire crows about the taxes it doesn’t have even as it finds other ways to reach into pocketbooks; its property taxes, for example, are among the highest in the nation.
full article
http://www.bostonglobe.com/opinion/2014/03/28/taxachussetts-misnomer-least-for-now/JwFnatLJTZ2eoGxDYzT82J/story.html
Just one of many issues that frustrate liberals by not being able to overturn conventional wisdom.
But I think simply telling the next person who you hear say taxachusetts that new hampshire pays more in taxes per person and then emailing them the boston globe article is at least a start. They might not read it but they might, depending on how much they trust the source (whether it’s you or the original source). I think we need to abandon the labels like liberal and conservative democrat and republican and just start talking to people.
I think the real issue is not that people think their taxes are too high, it’s that they do not trust the government with the money, so taxes being too high is their first go to line to avoid a longer conversation. A lot of people who are anti-tax will tell you if there was a guarantee on where the money was going and if they knew it was going toward public benefit then they would support higher taxation.
Many people believe in the idea that if you reduce taxes the government will be forced to eliminate wasteful spending. It doesn’t really work that way but people believe that anyway. And I think people are right to be skeptical of the way the state spends money.
Not to say we don’t have a revenue problem, but saying we have either a revenue or a spending problem is.. well …just not accurate. We do have a revenue problem, but we also have a spending problem, we also have an accountability problem and we also have the problem of some government spending not matching the original intent or unjustified spending like some economic tax expenditures. We have some corruption, some fraud and also some redundancy in spending. We also have disproportionate tax burdens relative to income and wealth. We also have some abuse of entitlement programs by the people that benefit from them. And of course certain people have a disproportionate amount of power and access over government resources.
People are going to point to what they don’t like about the government and use that to justify tax cuts as long as ordinary people have limited control or input concerning government appropriations at the state level.
Without addressing at least some of these things, people are not going to come together to vote for revenue increases and will vote out politicians who are supporting new or additional taxation.
by talking about it. I’ve started talking about it in my town where people don’t realize much of our budget comes from state aid in one form or another. Based on my reading about the inherent close-mindedness of most people (that includes many of us), I think we need to break the public discourse into two parts: 1) establishing the fact we have a revenue problem 2) then talking about solutions. Talking about new revenue sources right off the bat may activate too many inherent biases (and interest groups).
In an ideal world, we would have intelligent discussions about what the electorate wants and how to pay for it. I think we have to start by looking at revenue and expenditures.
We have a budget shortfall that is a direct result of a tax cut.
But it’s got nothin’ to do with revenue, no sirree.
Honestly this idiocy does not bode well for the next 4 years, predictable as it may be.
I would quibble with a few of your points, but I agree with the overall point that it is far too easy for politicians to say we have a “spending problem” without acknowledging that much of that spending is mandated and not discretionary. Going back 25 years to the budget crisis of 1990, then state Rep. John McDonough identified a handful of “budget busters” that were putting the state in the red, and there was little anyone could do about them. Those budget busters are still the case today and include Medicaid, state employee pensions, state employee health insurance, state debt service costs, and public transit costs.
That said, it’s right for government to cut costs that are unnecessary and to identify and eliminate waste and fraud to the extent possible. But perennial promises to solve all budget problems by cutting state workers, in particular, never work.
…all ignored the single largest line item in the state budget. Health Care.
If only we had one candidate who had an actual nuts & bolts plan, already proven, to tackle this problem.
I liked Don too, but if he couldn’t beat Coakley he wasn’t going to beat Baker. And he’d be dealing with the same climate I described above. One where opposing new taxes and fees ran better than the Democratic ticket or winning Republican ticket. One where a Democratic supermajority killed the most progressive revenue reform proposed by an incumbent Governor in decades. One where the leadership troika on Beacon Hill is committed to ensuring MA remains “competitive and fiscal responsible”.
We had right years of a progressive Governor broadly elected on a mandate for progressive change running into these very headwinds and having his initiatives capsize.
We have to fundamentally change the political dynamic around taxation in MA and study what the other side has done to effectively win this issue.
Because of the poor implementation of the state health exchange, health care was not easy for the Dems to run on. Although, from what I heard, the cost of insurance did seem to be a big issue on the minds of voters.
Having watched first-hand the sprint from the September primary to the November general, it would not have been a good opportunity for a wonky conversation on different visions of health-system organization (hypothetically featuring the two wonks Baker vs. Berwick). But I believe it is a conversation that will still need to occur after Baker experiments with his version of cost-saving measures. I’m glad Berwick and his colleagues had the opportunity to learn so much about the political process, and that he seems willing to stay involved.
Jim Douglas’s sister Judy. Douglas was the governor of Vermont. At a social gathering, my dad was talking to Jim and asked him about single-payer. Douglas told him the state couldn’t pay for it. Shumlin just said the same thing.
I supported Berwick, but single payer isn’t going to happen any time soon.
Over the summer and was roundly excoriated by some folks here for asking for something approximating a plan on how to pay for it.
…that has come the closest to state-level single-payer?
One of many links.