The House Ways & Means Committee has released its budget. Here’s the early take from the indispensable Mass. Budget & Policy Center (emphasis mine):
The budget proposal released by the House Ways and Means Committee increases unrestricted local aid for education and aid for higher education by more than was proposed by the Governor. In other areas, however, the budget provides less funding than the amounts proposed in House One: it does not adopt the Governor’s public health initiatives to increase the state’s investment in smoking prevention and to provide new vaccines to protect children from rotavirus, meningococcal conjugate and human papilloma virus.
Perhaps the most significant manner in which the House Ways and Means Committee budget proposal differs from the Governor’s is that it does not include the Governor’s initiatives to reform the corporate tax code to reduce tax avoidance. The cost of continuing to allow these forms of tax avoidance would be approximately $300 million in FY 2008, and more in future years. The House Ways and Means budget does not make up for this forgone revenue with new taxes or spending cuts. As a result, the budget contains a structural budget gap of over $300 million that is filled by the use of reserve funds. The risk of this strategy is that when a budget is structurally out of balance in one year, then balancing the budget in future years generally requires significant spending cuts or new revenue.
So far, my prediction that monsoon season is upon us is looking pretty good. You can read MBPC’s full report here (pdf).
Bob Oakes interviewed Sal DiMasi on WBUR this morning. It was a very weird interview for this reason: DiMasi talked about how much more chapter 70 money was in the House budget than was in Governor Patrick’s budget, and he talked at length about what a bad idea closing the corporate tax loopholes was. He also noted that he opposes casino gambling. But Oakes never asked the painfully obvious question: Hey Sal, where’s all that money going to come from?
Weak.
The funny thing is I remember lots of people complaining Deval was going to take the interest out of the rainy day fund… I wonder if we’ll hear the same people complain about the House planning to rob it of $300 million?
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Well, I think we can have an understanding of just who’s budget the public is going to prefer. My prediction: come a month from now, Patrick’s favorability rating is going to be back up around 55%.
there’s a cities and towns will say that they need the aid now and that we’ll fix the budget next time around (consequences be damned)? I dunno, but the leg may think so…
By all reports both budgets remain in structral defecit for the next fiscal year at a minimum of $240M in both budgets. The argument that the House raids reserve funds By all reports both the Administration and House budgets remain in structural deficit for the next fiscal year, at a minimum of $240M. The argument that the House raids reserve funds to make up the gap is not totally accurate and is actually misleading considering that the Governor uses one time revenue also.
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Yes, the HWM Budget relies on $150M from the rainy day fund that the Governor does not, but that is down significantly from past withdrawals which reached in the billions several years ago.
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The House also relies on $100M more than the Governor did from the Health Care Trust Fund, the Governor uses $50M, the House $150M.
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Those are the two differences on “one time” revenue uses between the Admin and the House. Both budgets utilize the interest from the two trust funds and both suspend the transfer of surplus to the Rainy Day.
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The House relies on modest cuts to programs and level funding to agencies to make up the difference of $300M where the Administration would rely on additional tax revenue from businesses.
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The State budget has still not recovered from the last recession and stagnant economic growth and lack of job creation have not helped. At this time the Legislature is right not to add burdens to the business community (through what ever you want to call them loophole or tax hikes)
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So, it is a little disingenuous to suggest that the House is going down the path of structural deficits and the Governor is not.
they had to stop getting a deduction on rent money they pay to their subsidiary.
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I was not impressed with Bob Oakes’ questions–he served up predictable Q’s and Speaker DiMasi handed back predictable A’s. When DiMasi said “loophole” was the wrong term, Oakes should have asked him directly about Wal-Mart.
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How is it fair that Wal-Mart pays rent to itself and takes the deduction for that? How was that the intention of the legislature in offering that deduction? I’m sure the store owners around the corner from me take that deduction on their business taxes but they don’t get to keep their rent money.
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If Massachusetts makes Wal-Mart stop getting that deduction, Wal-Mart will not shut down stores in our state. They won’t lay people off. They’ll suck it up and keep selling what they always sell.
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The burden on the business community is a tax-code that doesn’t make sense–like this deduction that favors Wal-Mart over other businesses that can’t buy their own real estate.
Do you have any idea how COMMON real estate trusts are for small businesses? That’s part of what makes Wal-Mart stick out – big companies usually WANT the value of real estate on their corporate books to enhance their bottom line assets. A trust is far more often used by little businesses, usually for liability rather than tax purposes.
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Case in point – years ago, I insured a beauty salon. Owner/operater was properly licesed, carried appropriate ($500,000) standard BOP liability. Gave a perm, woman had a bad reaction, hair turned green and fell out. Woman was furious. As agent, got involed with claim, learned that woman was suing. Not happy with $500,000 award, wanted to bankrupt beauty operator by placing damage claim on premises as well. BECAUSE it was in a trust, and the owner treated herself as a tenant, she did not lose her business to one fluke. Angry bald woman rode off into sunset with 2/3 of max. liability coverage, as her lawyer had taken his 1/3 of flesh.
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THESE are the people you will be placing an additional tax burden on because you saw a movie about Wal-Mart and want to punish them. Once again, you’re aiming for the head and will shoot the middle class right in the gut.
In addition to excluding the proposals to close the corporate tax loopholes – and filling the gap with reserve fund transfers – the House budget also differs from the Governor’s budget on consolidation. House 1 proposed consolidating the many court line-items into a few judiciary line items. It also proposed a similar consolidation of state and community colleges into a few Higher Education line-items. The House Ways and Means budget keeps the old system.
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Here’s what I said about the consolidations in February and about the budget tonight.