08/05/2020
Stealth Tax Hikes Pop Up Like Whack-A-Mole
"Taxpayers beware: The tax-and-spend caucus on Beacon Hill has broken its leash.”
That's how I summed up yet another stealth tax that was attempted to be inserted into the House's major economic development bill. Stealth tax amendments buried in huge, unrelated bills seems to be the new modus operandi on Beacon Hill. No warnings, no hearings, no notice — just slip them in and hope nobody catches them, or objects if they do.
This one blindsided us completely — I wasn't aware of it until contacted by Beacon Hill Roll Call after the fact for a comment. Fortunately for taxpayers this shady amendment amazingly was defeated. It was too much for even a majority of Democrat representatives to swallow.
Beacon Hill Roll Call reported ("Allow Local Tax on Real Estate Purchases [H-4879]"):
House 29-130, rejected an amendment giving cities and towns the option to impose on the buyers a tax between .5 percent and 2 percent on the purchase of real estate to be used by the city or town’s Municipal Affordable Housing Trust Fund. Purchases by government entities or charitable organizations would be exempt. Cities and towns would have the power to exempt certain sales including sales to any state or local government or charitable organization; to seniors over 62 years; to low income buyers and to a purchase by a family member.
“This would provide cities and towns with the option of creating their own real estate transfer fees to fund local affordable housing projects,” said Rep. Mike Connolly (D-Cambridge), the amendment’s sponsor. “All of the proceeds raised by the fee would remain with the municipality to fund its own affordable housing programs. I filed this amendment because it could help cities and towns capture some of the value that is created by luxury or high-end commercial real estate transfers for the purpose of funding local affordable housing programs.” . . .
“The China Pandemic has unleashed a spreading virus of stealth tax increases while few are looking,” said Chip Ford, Executive Director of Citizens for Limited Taxation. “Like whack-a-mole they are a challenge to keep up with even for those paying close attention.
"A sudden sneak attack on Proposition 2½ buried deeply within the Senate transportation bond bill; a quiet invitation for Gov. Baker’s Transportation Climate Initiative to be disguised, its 26 cents-per-gallon gas tax hike and other tax increases commingled into a separate climate mitigation bill; an attempt to add another deeds excise tax on top of the state’s, this one payable to municipalities,” Ford added. “Fortunately, this stealth deeds excise tax amendment was soundly defeated in the House’s ‘affordable housing’ bill, which ironically would have made housing even less affordable. We hope the other stealth taxes suffer the same fate. Taxpayers beware: The tax-and-spend caucus on Beacon Hill has broken its leash.”
Will Proposition 2½ be called "racist" next? That's what was attempted in Maryland, according to a report published Tuesday in Forbes Magazine ("Decades-Old Laws Keeping Property Taxes In Check Are Under Attack"):
Laws limiting property tax payments and their rates of growth are not racist, despite what a local official in Maryland recently tried to claim as part of a failed attempt to weaken a long-standing property tax cap.
“To me, it’s not about raising taxes,” Prince George’s County Councilman Mel Franklin (D-At Large) said of his proposal to weaken a property tax cap with a ballot measure that could double the permitted annual increase in property tax assessments from 5% to 10%. Yet the property tax cap that Franklin and some of his colleagues wanted to weaken has saved county taxpayers more than $55 million over the four years comprising fiscal years 2015 - 2018, according to a report commissioned by the county council.
Councilman Franklin claims that property tax cap was put in place in the 1970s for racist reasons. Councilman Franklin’s office was contacted for evidence or documentation of the asserted racist origins of the county property tax cap, but has not responded.
The author of the Forbes report, Patrick Gleason of Americans for Tax Reform, in listing other states' property tax limitations under threat also noted:
Massachusetts Lawmakers Seek To Neutralize 40 Year Old Tax Cap
Thanks to Prop. 2½, municipal property tax revenue raised in Massachusetts is capped at 2.5% of the assessed value of all taxable property. Prop. 2½ also limits annual growth in property tax collections to 2.5%. There are politicians in Massachusetts who would like to see Prop. 2½ repealed, and sitting state legislators recently made an end-run around it.
In mid-July the Massachusetts Senate approved a transportation spending bill that permits a number of local option tax hikes, allowing municipal governments to increase tax collections outside of the Prop. 2½ voter-approved constraints. Chip Ford, executive director of Citizens for Limited Taxation (CLT), the organization responsible for Prop. 2½’s enactment, explained in a recent letter to state lawmakers why this maneuver, which he describes as an attack on Prop. 2½, is both misguided and unnecessary:
“If more revenue is necessary for additional transportation projects or any other specific municipal need, Proposition 2½ intentionally provides a mechanism: operational overrides and debt exclusions,” writes Ford in a July 13 memo sent to Massachusetts senators. “This mechanism has worked well for going on four decades, with debt exclusions having been proposed and adopted for a multitude of unbudgeted projects such as underground sewer system replacement; schools, public safety and other municipal buildings and their repair; purchases of fire trucks, ambulances, snow plows, and other municipal equipment; purchasing open space, etc.”
The Massachusetts Senate passed that transportation spending bill and the legislation is now in conference committee, where differences with the House version are being worked out.
“If this bill passes, Prop 2½ as we know it will be neutralized,” notes the Massachusetts Fiscal Alliance, who has issued a call to action with CLT urging taxpayers to contact their elected officials on Beacon Hill and urge House and Senate conferees to drop the transportation spending bill’s problematic section authorizing the Prop. 2½-gutting local option tax hikes.
“With the legislative session set to expire on July 31, taxpayers have the advantage of time running out,” explains Massachusetts Fiscal Alliance’s call to action. “But as we’ve seen with the creation of the AirBnB tax which was passed without a recorded vote only a few days before Christmas, no tax is ever off the table.”
No matter what happens with this latest effort to circumvent Prop. 2½ in Massachusetts, opponents of this property tax limitation law will continue seeking its repeal in 2021 and beyond. Likewise, expect future attacks on other state laws that effectively prevent government from growing as large as some politicians and interest groups desire.
On Tuesday a coalition of mayors from across the state delivered a letter to the six members of the House-Senate transportation bond bill conference committee — surprise! — supporting the assault on Proposition 2½. The State House News Service reported on Wednesday ("Mayors Appeal for Value Capture, Regional Ballot Questions"):
Forty-one other states allow cities and towns to impose their own fees or surtaxes to fund transportation projects, and Massachusetts should join that vast majority by supporting two components in House-Senate transportation bond bill negotiations, municipal leaders said Wednesday.
In a letter to the six conference committee members charged with quickly hashing out a final bill, coalitions representing dozens of cities and towns urged the panel to include both the House-approved value capture proposal and the Senate-approved regional ballot initiatives authorization in the final bill.
"Local and regional transportation investments will play an important role to foster economic revitalization and recovery," chairs of the Metro Mayors Coalition, the North Shore Coalition and the Commuter Rail Communities Coalition wrote. "Regional ballot initiatives and value capture tools give cities and towns the opportunity to control their own transportation destiny. These investments will help create jobs and promote greater access to Main Streets for employees and consumers alike."
The conference committee is negotiating bills authorizing $17 billion to $18 billion in borrowing and numerous transportation policy changes.
Municipal leaders stressed that value capture and regional ballot initiatives together are not enough to generate enough money for "transformative transportation improvements," but they called the two options a critical step to "act as a down payment" on more impactful local projects....
Four municipal leaders signed the letter: Somerville Mayor Joe Curtatone on behalf of the Metro Mayors Coalition, Salem Mayor Kimberly Driscoll on behalf of the North Shore Coalition, and both Lynn Mayor Thomas McGee and Bedford Town Manager Sarah Stanton for the Commuter Rail Communities Coalition.
In part the mayors wrote:
We are writing today to express our support for the Regional Ballot Initiatives proposal, included in S.2836, and the Value Capture proposal included in H.4547. These two provisions would give cities and towns the opportunity to invest local money in local and regional transportation priorities. For municipal governments to be empowered to contribute to sustainable, long-term improvements to our transportation system, all resources that would help us invest in our communities need to be on the table. Therefore, we are asking you to adopt both provisions in the final bill. . . .
Massachusetts is one of nine states in the country that does not allow cities and towns to raise money locally to invest in local projects. The two tools before you are predicated on different on-the-ground situations. Value Capture assumes that an investment is already being made by a developer, while Regional Ballot Initiatives work more like the Community Preservation Act, allowing a local option for cities and towns to raise local money for specific investments. By enabling cross-municipal collaboration, Regional Ballot Initiatives also offer the additional flexibility of allowing less affluent communities to partner with wealthier communities to unlock projects that otherwise would take much longer to construct, if they are advanced at all.
None of them called Proposition 2½ "racist" — yet.
State House News Service on Tuesday reported ("Legislature Accelerates Interim Approach to Budgeting; New Bill Raises Four-Month Tab to Nearly $22 Billion"):
The House and Senate on Tuesday quickly passed a $16.53 billion interim budget to keep the government funded through October, a plan that would give the Legislature and Gov. Charlie Baker more time to understand the state's fuzzy but dire financial picture in the middle of the ongoing pandemic. . . . Assuming Baker signs the bill, the Legislature and governor will have appropriated $21.78 billion to cover spending over the first four months of the fiscal year. At that rate of spending, the state's budget would balloon to over $65 billion, well above the $44.6 billion budget Baker filed in January.
Back on June 21 in my commentary for the CLT Update ("Another Beacon Hill Helter-Skelter Week") I observed:
Stop and think about this. A $5.25 billion "interim spending bill" to get the state through July, one month. Carried through the fiscal year that would create a $63 billion FY2021 budget for the coming 12 months. That exceeds even the $44.6 billion Baker proposed in January, which itself was $1.3 billion more than last year's $43.3 budget.
Seems like I wasn't too far off my prediction, short by just two billion bucks.
Meanwhile MassBenchmarks, the Boston Federal Reserve Bank in collaboration with some university economists, reported on Thursday:
In the second quarter of 2020, based on the best information available today, Massachusetts real gross domestic product (GDP) declined at an annualized rate of 43.8 percent according to MassBenchmarks, while U.S. real gross domestic product declined by 32.9 percent during the same period according to the U.S. Bureau of Economic Analysis (BEA). In the first quarter of 2020, the BEA estimates that the Massachusetts and U.S. economies declined by 5.1 percent and 5.0 percent respectively on an annualized basis. . . .
Massachusetts, along with several other states in the Northeast, was hit harder by COVID-19 before the country as a whole, was shut down earlier and more completely than most other states and began to reopen later and more slowly than most states. This makes it unsurprising that the pace of the economic decline in Massachusetts was greater than it was nationally in the second quarter of 2020.
Unemployment rates rose faster and remain higher in Massachusetts than for the U.S. From March to June, the unemployment rate rose from 2.8 percent to 17.4 percent in Massachusetts, and from 4.4 percent to 11.1 percent nationally. Based on the Bureau of Labor Statistics (BLS) Current Population Survey, MassBenchmarks estimates that the U-6 unemployment rate — which includes persons working part-time but who want full-time work and persons who want work but have not looked for work in the last four weeks — rose from 7.9 percent in March to 21.2 percent in June. The BLS reports that the national U-6 rate rose from 8.7 percent in March to 18.0 percent in June. . . .
In the second quarter, payroll employment fell by 16.5 percent in Massachusetts as compared to 12.0 percent nationally.
State revenue collections are expected fall short by $3-$8 Billion below the expectations upon which the FY 2020 budget was based. Massachusetts has the highest unemployment of any state in the nation. So what does the Legislature and Governor do? Spend tens of billions more than even they initially proposed before the Wuhan Chinese Pandemic and Baker's magisterial lockdowns crippled the state's economy.
"No man's life, liberty, or property is safe while the Legislature is in session."
— Gideon J. Tucker, 1866; often attributed to Mark Twain
"The notorious July 31 date will not loom over state lawmakers in the same way as usual this year," the State House News Service reported on Thursday ("Historic Legislative Session To Continue Beyond Traditional Deadline"):
Both branches of the Massachusetts Legislature reached a final agreement Thursday to scrap the end-of-July deadline that the House and Senate for decades have imposed on themselves to complete formal business in the second year of their two-year sessions.
Virtually every legislative session ends after a rush to wrap up work on complex -- and, often, procrastinated -- bills, and after experiencing an unprecedented disruption due to the COVID-19 outbreak that hit Massachusetts in March, legislative leaders opted to give themselves more time and flexibility to complete critical work.
Now, they will have about five more months in which they can call the full House and Senate rosters into session for roll call votes on pandemic-related bills, a spending plan and other business that may arise.
Formal sessions can now run effectively until the next makeup of the Legislature is inaugurated.
Other major proposals are still being hashed out privately through the conference committee process, such as police reform, multibillion-dollar borrowing bills for both transportation and IT infrastructure, and an economic development bill authorizing Baker's long-sought zoning reforms for housing.
Several more bills are on the verge of reaching closed-door talks, including health care legislation and bills dealing with climate change.
Baker, at a press conference in Andover on Thursday, said the Legislature would figure out what it should do on its own, but signaled that he supports the idea of remaining in session as long as there are major outstanding priorities left unfinished.
In its Weekly Roundup ("Deadline? What Deadline?") the News Service added:
On Beacon Hill, rules are made to be broken, and deadlines set to be missed.
But even by the Legislature's loose standards, the decision this week to suspend a 25-year-old edict that otherwise would have required the House and Senate to finish their business by Friday at midnight was notable.
Facing backlash in 1995 for voting themselves a raise and passing a capital gains tax cut during a lame-duck session the year before, the Legislature adopted a rule requiring it to wrap up formal legislative business by July 31 in election years.
And the bright line has been relatively sacrosanct ever since. . . .
So what does it mean to extend the session?
Well, for starters, it means that there won't be a repeat of two years ago when talks between the House and Senate over health care legislation collapsed at the eleventh hour on July 31. That could still happen, for any bill, but not until January.
It also means the Legislature has seized back a modicum of power from Gov. Charlie Baker and opened the door to the possibility of back-and-forth with the administration. A veto from the governor would no longer doom a bill because the Legislature couldn't vote to override. And similarly, if Baker had ideas to amend, for example, the policing bill, there is now time to work through those issues.
But it also means no issue is truly dead for the year, including possible tax hikes that could surface before the election, or even after the Nov. 3 election during a lame-duck session.
It also means that taxpayers and taxpayers' advocates can't take a breather this year. It means that stealth tax assaults will continue relentlessly through the end of 2020 before beginning anew in January of 2021. It means you, taxpayer, and CLT must remain on full alert, obsessively vigilant without blinking for the foreseeable future and beyond.
The News Service's Advances for next week further adds:
By suspending the joint rule requiring major legislative work to be completed by July 31, legislators have removed one of the most important motivating factors to close deals: a deadline.
Now, House and Senate members need to push ahead on the legislative front while simultaneously campaigning, and the blending of the two has unknowable by potentially significant impacts for both electoral prospects and public policy and budgeting outcomes. For example, by pushing consideration of a fiscal 2021 budget out until potentially after the Nov. 3 elections, lawmakers may be able to push off until after the elections some the "tough votes" that are likely to surface, on topics like raising taxes, draining reserves, slashing spending and programs, or deficit financing.
More bad news for taxpayers arrived on Friday night when the House passed (142-17 with the votes to pass of 16 Republicans, including minority leader Brad Jones) H-4912, "An Act Creating a 2050 Roadmap to a Clean and Thriving Commonwealth." It gave the green light to adoption of the Transportation Climate Initiative (TCI) that Gov. Baker has craved, and vowed to implement with or without legislative approval. He implicitly got that Friday night.
On Wednesday the State House News Service reported ("House Drops Major Climate Bill Into Busy Week"):
Both branches have already passed major climate-related legislation this session. The House last July unanimously approved a roughly $1.3 billion bill -- the so-called GreenWorks bill -- centered around grants spread out over 10 years to help communities adapt to climate change impacts, and at the end of January the Senate overwhelmingly passed a package of climate bills that called for net-zero carbon emissions by 2050, and set deadlines for the state to impose carbon-pricing mechanisms for transportation, commercial buildings and homes....
That course would give Massachusetts a more aggressive timeline for emissions reductions than larger states like California and New York, both of which require emissions to be at least 40 percent lower than 1990 levels by 2030, according to the National Conference of State Legislatures
On Wednesday the News Service also reported ("Poll Measures Attitudes on Transportation, Taxes, Work From Home"):
Respondents were split on whether transportation taxes and fees should be on the table as possible solutions "if Massachusetts ends up with a state budget deficit as a result of the COVID-19" -- 37 percent said yes, 30 percent said no, and 33 percent were unsure.
Two days later, on Friday night, the News Service reported ("House Approves Climate Action Bill 142-17"):
The House on Friday night approved a climate change bill that addresses a 2050 emissions reduction roadmap, solar energy net metering, grid modernization, and workforce development, setting up likely talks with the Senate on a compromise bill.
The 142-17 vote to pass the bill came just before 9:30 p.m. and following deliberations on amendments over two days.
Mass Fiscal Alliance, CLT's ally in opposition to TCI, immediately responded with its news release ("Environmental Policy has Huge Economic Cost & Negligible Environmental Impact"), in part noting:
“This is arguably one of the largest tax increase votes that any of these lawmakers will ever take. The impact of this vote will be felt for decades and implement future tax increases on autopilot. The sheer amount of new and higher taxes, along with the increased layers of regulations will position Massachusetts as the most expensive and highly taxed state in the country. There isn’t a single state in the country that has a carbon tax, and today’s vote just permitted carbon taxes to be implemented without an explicit legislative vote in the future,” stated Paul D. Craney, spokesperson for Massachusetts Fiscal Alliance.
“The burden today’s vote is placing on working families is on par with the vote to establish a state income tax or sales tax. It’s that significant. It’s an entirely new way of taxing people and businesses.
Next, this "climate mitigation" bill that incorporates this new taxing power also must now go to another House-Senate conference committee to reconcile the two versions. Given that the Legislature just extended its formal session through the end of the year it has an extended opportunity now in one form or another to become law.
Another proposed law has now been granted a new lease on life, after being withdrawn on Monday from the economic development bill the House passed. The State House News Service reported on Tuesday ("Immigrant Driver’s License Plan Stalls in House"):
Fifty-nine of Rep. Christine Barber's colleagues in the House co-sponsored her idea to use an economic development bill as a vehicle to authorize driver's license access for undocumented immigrants.
It was apparently not enough.
Barber pulled the proposed amendment, which would have spliced the text of her standalone legislation into a wide-reaching jobs and housing bill (H 4879), as debate got underway on the package Monday.
The decision sparked Tuesday morning protests outside the homes of both House Speaker Robert DeLeo and Senate President Karen Spilka, where activists demanded the legislative leaders take action before formal lawmaking sessions end on Friday.
"We've done everything that we can these last two years, from a pilgrimage, from two encampments to a sit-in and a hunger strike," said Amelia Pinal, a member of the Movimiento Cosecha group that led the Tuesday protests. "We've literally sacrificed our bodies in the heat, in the rain and with hunger so that we can express to this community, to the legislators, to the public, how truly necessary licenses are."
While Barber and supporters said they are hopeful a similar amendment or the standalone bill could succeed in the Senate, the withdrawal in the House likely means the proposal will be unable to overcome opposition in that branch this session, with only three days left for formal sessions this year.
At the time it was withdrawn by Rep. Barber most observers expected that the Legislature would abide by its rule to end its formal session on July 31. Legislators' subsequent decision to continue legislating through the rest of the year now provides open-ended opportunities for mischief and disasters.
With way too many moving parts spinning around on Beacon Hill, keeping up with them is becoming an extreme challenge. With five months of continued opportunity on Beacon Hill the challenges for us will continue — especially after the November election is over and behind everyone, when "lame-duck" legislators assured of keeping their seats no longer need be concerned with the wrath of their constituents for another two years.
I doubt I need to remind you of what happened in January of 2017, immediately following the 2016 election once re-elected legislators were liberated from risk: Enter "The Obscene Legislative Pay Grab."
Chip Ford's CLT Commentary
