To find out what I mean by “reverse the curse” you will have to read to the end. No shortcuts, please!
What “9C” describes is a law that Massachusetts must have a balanced budget at all times. Unlike the Federal Government, Massachusetts is NOT allowed deficit spending. Here is a link to the law itself: http://www.mass.gov/legis/laws…
Thus, whatever our state government spends, or plans to spend, payment must be in place for that spending, whether through bonds, fees, tax revenue of some variety, or a fund such as “the rainy day fund.”
When the actual revenue from personal taxes, capital gains taxes, sales taxes [etc.] turns out to be less than the estimated revenue on which a year’s budget was based, section “9C” requires the current governor, like all governors since the 9C law was enacted, to balance the budget by either raising revenue, or cutting line items. No governor has any choice about this – Section 9C requires that the budget be cut to match real and actual revenue.
No one has had the intestinal fortitude to look at how regressive our state system of taxation is in Massachusetts, so when the actual revenue is less than the revenue estimates upon which a budget was based, what happens is the executive [Governor] orders the executive agencies [about 2/3 of our government structure] to cut their budgets by a percentage – in this case I believe it was about 9%.
The executive does not micromanage WHAT each agency cuts. The Commissioners and Deputies who run executive agencies actually decide what to cut to make their quota of cuts. Most Commissioners, deputies, and upper managers are inherited and recycled from administration to administration. There are few new faces. Practically speaking, most of those deciding what DCF, or DMR, or DMH will cut got their jobs under Romney, a few under Swift, and some even under Weld. There is tremendous institutional inertia.
I don’t feel like Governor Patrick “fooled” me – I do feel like the economy he got as opposed to the economy he thought he was about to manage are very different – and personally, I support restructuring how revenue is raised and spent not shrinking government services. I assure you, no one asked me nor have I been consulted or received a written response to any letters or columns I have written.
What I had hoped for, and so far, have not seen, was the intestinal fortitude to not cut, but instead radically restructure how revenue is raised.
Unfortunately, the word “tax” is treated like a curse in this state. That “curse” needs to be reversed.
What is needed is not cuts. I do not think gambling revenue is the answer, either. In the current economy, the idea that folks will throw an endless stream of money into a black hole [whether by gambling or using credit cards] is no longer valid.
What is needed is progressive taxation to fund progressive programs and which supports economic activity such as education and manufacturing that actually generates goods and services and meaningful employment.
I would love to find out that there are elected and appointed officials with the courage to pursue a real solution by revamping revenue to not depend so much on capitol gains, and regressive taxation like the sales tax and the property tax.
I have not seen that kind of courage, and that is what disappoints me.
Cutting the programs that serve the most defenseless, substituting prisons for schools and hospitals as repositories of the mentally ill and the offspring of drug addicted families is a cowardly solution.
The fact that surrogates are allowed or perhaps forced to do the actual cutting doesn’t change the reality that no one is doing – or even standing up and talking about doing – the hard work of changing the paradigm itself.
When is enough enough? I will not accept the cuts being made to necessary programs (yours) as proof that we have no other place to cut money. And no I don’t have the budget in front of me, line by line, to make cuts. You are a lawyer and recently talked about lawyer’s salaries in MA. Do you think a starting Assistant District Attorney should make $38K/year while toll collectors are making $54K to make change for a $10 bill? Flagmen being paid $38 due to prevailing wge laws. Did the Gov have to hire his neighbor making $120K/year for managing Real Estate Services? Did you read about the well known “double your retirement” law being used by ex-politicians? How much is Billy Bulger’s retirement? How much was the legislature’s raise this year? How much is the State’s Washington office budget? We spend too much money for shit we don’t even need and too much money per hour for minimum wage jobs (cutting grass, flagmen, toll collectors, laborers at the Convention Center…).
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p>We have a government, at many levels, which has thousands of people making too much money and unfortunately we have so many of those government workers that their votes make a huge difference in how government is run (and who gets elected).
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p>I know I only speak for myself but until I feel that the government is using every single penny of my money properly then no more taxes, especially in this climate. I’m sorry that the money used to support this issue is being cut and you have properly blamed the administrators of our money for the fault. But the solution is to fix the problem not give them more money. Shame on the voters of MA for continuing to elect these donkeys and I apologize to all the donkey lovers out there for the metaphor.
They benefit the most from our laws and the order that our government provides, and they need to start taking up more of the burden of taxation.
and people act in their economic self-interest. Besides the sun and fun of FL, ever wonder why these people have two houses (and hang out here for less than 6 months)? Besides, after the last few months, trying to tax the rich is the proverbial shutting the barn door after the horse is gone.
That’s a novel argument against progressive taxation.
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p>I wonder (though I don’t know) if, since aiming the stimulus/tax benefit at the lower incomes seems to have a greater stimulus effect than the opposite (the last 8 years QED), that increasing taxes on the wealthiest would have a relatively minor anti-stimulus effect. Any economists out there have an idea?
but a voice of reason that the panacea for our problems is to “eat the rich” on a state level.
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p>For the most part, rich folks have accountants and attorneys to guide them to minimize tax bite (and believe me, thy do just that at a very handsome fee). This reminds me of some comment on the Globe site last week from some self-professed MBA graduate having trouble making $50k bitching about those Wall Street mavens making $150k. He only missed about 3 or 4 decimal places in his diatribe about the real abuse.
The feds took the route of “coddle the rich”. We don’t say “eat the rich”, which is why we don’t have progressive taxation, the point of the thread. But even if Massachusetts is more willing to ask the rich to pay their fair share than the feds as a whole, I think a cursory look at how well MA is doing compared to its neighbors illustrates which approach is more tenable in the long run.
but if you spend one more day a year in FL/TX et al than MA, you’re out of state. And come on folks, taxing the “rich” isn’t income if you haven’t quite figured that out, it’s capital gains/dividends/interest.
Taxing the “rich” isn’t focusing on imcome; that’s only going after those who actually earn their money…
When you spend half your diatribe deciding who should be making minimum wage and who is overpaid?
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p>And, why is it that you aim this diatribe at people who are, after all, getting up every day and going to work for a living, to support families, and who aren’t spending those days thinking up ways to the destroy the economy?
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p>Methinks your anger should not be aimed at people who, for the most part, make considerably less than $100,000 a year. There are lots of people making lots of money in the private sector who have done their best screw up their companies and screw up the economy.
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p>Whenever I see this type of diatribe, I think the author doth protest too much.
WHy is it a “diatribe” because I think people should get paid at the “going rate” and comment that others are overpaid. Are you condemning me simply because I am being critical of something?
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p>I like people going to work everyday, it’s very American. In my “diatribe” I am critical of people using the system and I critical of other donkeys of creating this abusive system. Supporting families is a great thing, why would I not want it? And who exactly is destroying the economy… me?
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p>So, in your opinion… I should not critique anyone making less than $100K. And people making more than $100K in the private sector have screwed up the economy. Got it. Thanks for the contribution.
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p>Methinks you make less than $100K?
For an explanation of “The Dead Goose Award” see my post giving Charly his requested mini-lesson in economics.
So I have some questions… You are saying tax cuts are bad and tax increases are good (if the moeny is psent wisely which is quite the caveat).
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p>So are you also telling me that I am wrong and you support…
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p>- Assistant District Attorney only making $38K/year while toll collectors are making $54K?
– Flagmen being paid $38 due to prevailing wage laws?
– Gov hiring his neighbor for $120K/year for managing Real Estate Services?
– The “double your retirement” law being used by ex-politicians?
– Billy Bulger’s retirement at $208,000 (That’s a lot of Mental Health budget)?
– The legislature’s 5.5% raise this year?
– Funding the State’s Washington office budget (more $$ for education…)?
– Prebvailing wage paying $44/hour for cutting grass?
– State Authority paying laborers at the Convention Center $66/hour?
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p>I think the government could shut people like me right up by making sure they use what we give them efficiently and prudently and I tried to say this.
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p>I do not want to kill the Golden Goose and based on my tax payment to the state I would consider myself a big egg layer for government.
If you had followed my columns over the years you would know where I stand on ADA payment & wages – as well as that of the public defenders and bar advocates. So as to that, go to AmberPaw’s page and just keep scrolling down.
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p>And, if you want to get your “egg layer” rage up, go to the Boston Herald “your tax dollars at work” site and check out the wages and titles at the Commonwealth Connector. It is poised to be the new Massport as a retirement poaching ground for the well-connected [what some call “Hacks” or a “Hackarama”.
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p>Tax money well spent builds roads, properly maintains schools including colleges and universities [no condemned parking structures – please that is shameful] reasearch and development, and of course, wages that are in line and benefits that are similar to those doing the same work privately. That should be a no-brainer – that is when there IS a private equivalent – and proper support for the vulnerable which in part, salvages as many lives as possible.
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p>As Frederick Douglas said, [I paraphrase] it is easier and more cost-effective to raise a child to be a healthy adult then to fix a broken man].
both on this site and probably about so many more subjects beyond. But maybe we can agree that our state bureaucracy is over bloated with fat cats making large salaries until they retire to enjoy their large pensions. When I moan about cutting the budget vs. raising taxes, the typical response here is “there is nothing left to cut…” but clearly the Herald shows many public employees draining the tax coffers dry. We have plenty of places to cut. You want more money for the programs you support so doesn’t this waste drive you crazy?
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p>And while I am a “hard on crime” person and believe many social programs are huge wastes of time, I cannot argue with your sentiment expressed thru FD’s quote about essentially an ounce of prevention being better than a pound of cure. Only a moron would think differently but clearly the “how” is debatable. And lastly I will state that I do agree with you completely about the cuts in mental health being unacceptable (although my reasons may vary with yours) and have told my State Rep and senator exactly that.
Thank you again Deborah for your thorough explanation of 9C cuts.
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p>I do have one counterpoint, made in reply to your argument that the Governor himself has been somehow removed from the process of the unconscionable cuts that have been made at the Department of Mental Health (DMH).
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p>(Note to BMGers: AmberPaw’s intial post was a detailed and heart rendering explanation of 9C cuts made to programs at DMH: http://vps28478.inmotionhosting.com/~bluema24/s…
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p>In order to advance my argument, an argument that is essentially a criticism of Governor Patrick’s intolerable priorities seen in cuts he has made to some of the most vulnerable citizens of the Commonwealth, I give you the statements of one Governor Deval Patrick.
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p>In the puff piece in today’s Globe written by the erstwhile incisive journalists Matt Viser and Frank Phillips, the Governor talks about the detailed and hard work he himself has been involved with:
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p>
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p>So, if we are to believe this touching vignette of a governor working late into the night in the corner office, going through the budget “…line by line..”, we then need to believe that your construction of how the cuts were made, and who made them, is wrong. From the Governor’s own quotes, we see that he was directly involved in the decision making of the 9C cuts, including those cuts to the foster kids protective programs at DMH which you so eloquently documented.
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p>The picture of an involved governor put out by Administration flacks in the run-up to this week’s State of the State address therefore argues against your statements that
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p>The 9C statute itself clearly and solely vests with “..the governor..” the duty to “reduce allotments..” http://www.mass.gov/legis/laws…
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p>For hopeless Progressives like me, this is an important point. In 2006 we elected a new governor to lead, to roll up his sleeves and work the details of state government that had been ignored by a succession of Republican governors that did not believe in government itself. We need to hold the Governor accountable for the cuts made in his name. We expect him to set priorities. We expect those priorities to be framed by the commitment to the most vulnerable in society which the Democratic Party has always stood for.
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p>I agree with your point that a more progressive tax structure should be on the table, which makes my basic point yet again.
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p>As one reads with sorrow the nature of the cuts made to date at DMH, one sees that Governor Patrick has neither the compassion nor political will to protect the most vulnerable citizens of the Commonwealth. If he can’t properly manage the 9C process, how do we expect him to build a political coalition to legislate a more equitable tax structure?
The “quota” is given to an agency, not sub line items. If I am wrong, I hope Leslie Kirwan or Doug Rubin correct me.
First – some links with short identifiers:
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p>http://www.ingentaconnect.com/…
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p>Increase in taxation has minimal impact on economic growth
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p>http://www.imf.org/external/pu…
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p>International Monetary Fund analysis of the impact of taxation of Capital Gains on economic growth. Decreasing Capital Gains tax may cause capital to move but appears to slow economic growth and when capital gains taxes are cut, income consolidation increases [i.e., the rich get richer].
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p>http://economics.about.com/cs/…
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p>Extensive analysis of taxation theory. My read is that increased taxation can lead to economic growth if done and spent correctly, and tax cuts will almost always lead to degradation of infrastructure and concentration of capital – the rich get richer
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p>Essentially, tax cutting appears to uniformly lead to slowed economic activity due to concentration of wealth; the pitch that cutting taxes means more money for working folk turns out to be basically a Medicine Man type shill.
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p>When the taxation structure supports infrastructure [and I include safe working conditions and educated workforce in infrastructure] and reasonable distribution of income, generally there is economic growth. Given that it is uncontested that 66% of economic activity comes from consumers, at least in the USA this makes clean sense.
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p>Basically, when consumers are secure and have enough income to take care of themselves and/or their families they spend money, which means economic activity increases.
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p>In a way, it is like the Aesops fable of the Golden Goose. As you may recall, the Goose laid one golden egg a day. A rich man manipulated the poor owner into giving it up, and cut the Goose open expecting to find a cache of eggs. Instead, the new owner got a dead goose and no more eggs.
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p>Similarly, greedy credit card companies found more and more reasons to jack interest rates up to 29% or so – assuming that more and more credit would result. Instead, people defaulted, stopped using credit cards, and economic activity declined. A lot like the rich guy and the dead goose. I can apply the Goose Theory of Economics to the behavior of Wall Street with regard to devivatives, auction rate securities, and a whole lot more.
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p>The more people who make money and keep some of it, the more economic activity, and the more prosperity for everyone.
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p>The fewer people with the greater share of resources/money the more dead geese.
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p>Deb the Street Economist
The two question I have are…
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p>What should be the highest rate?
What should be the income which gets one into that highest rate?
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p>At a federal level, we’ve been all over the map on this one. Details at Income tax in the United States, but a recap of the highest rate:
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p>1913 7%
1920 73%
1930 25%
1940 81.1%
1950 84.36%
1960 91%
1970 71.75%
1980 70%
1990 28%
2000 39.6%
2008 35% (at roughly $350,000 of income)
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p>So here’s what I think. Let’s add some brackets. How about a marginal tax rate of 50% on everything over $1M? How about a rate of 70% on everything over $10M?
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p>The argument that people will work less hard with a higher tax rate at that level seems specious. At that levels of income, people aren’t in it for a rational money making decision. They value the process that they’re in, be it hitting baseballs or running a bank or whatever. And, they’re benefiting from the structure of society the most, so I don’t have a problem with them paying at a higher rate.
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p>How much money would it bring in? I have no idea. I do know that roughly 1% of the income earners make $500,000+ / yr. I also know that roughly fifteen percent of all income is earned by Americans earning $250,000+ / yr, a total income of a bit more than $600 billion dollars [2004 data according to US Census]. So loosely speaking, taxing at 50% instead of 35% is an additional $100 billion in tax revenue each year. Yes, this is back of the envelope for a variety of reasons, but it gives a scope of the dollar amount.
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p>Given a federal deficit of roughly $450 billion, that’d take a big chunk out of it.
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p>Is that the right amount? I don’t know. I do know we’ve got about 80 years of historical precedence for a much much higher top tax bracket. I also know that if you’ve got to be earning one million dollars a year to trigger that bracket that your standard of living will be just fine if you pay an extra 15%.
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p>How does this relate to state? I don’t know. People find it easier to move from MA to NH over taxes then move from USA to Mexico. I have no idea how many mega-earners in MA have to live in MA [center fielders, corporate attorneys: probably. Gajillionbucks lottery winners, trust fund babies, probably not]. So, what would happen if we had a graduated income tax that was 5.3% [$0-$1,000,000] and 5.5% [$1,000,000+]? How much money would it generate? How much would it lose because mega-earners would move out of state? I have no idea… but it would be interesting to play with that idea.