Friday, January 25, 2013

Massachusetts – Patrick Revenue Plan - Taxes! – Budget at 38.4 Billion to with Investments in Education and Transportation – Hopes hinge on Casino Revenues.

The State of Taxachusetts - nifty graphic from Jonathan Melle on Politics - New Hamphisre

The Governor of Massachusetts, Democrat, Deval Patrick has introduced his 2014 budget to the public. The budget includes new streams of Revenue for the Bay State. The Boston Business Journal notes

“Patrick's tax plan, unveiled fully for the first time Wednesday, includes new or higher taxes on candy, soda and cigarettes, in addition to a 1 percentage point increase to the income tax that would raise the state income tax rate to 6.25 percent. Patrick has also proposed cutting the sales tax to 4.5 percent, doubling the personal income tax exemption and eliminating deductions, including T passes, scholarships and dependents under 12.

Patrick has also suggested periodic increases in the gas tax, MBTA fares, highway tolls and Registry of Motor Vehicles fees.

The taxes on candy, soda and cigarettes, the loss of deductions for the T-pass, scholarships and dependents under 12, will, of course, affect those in the lower income brackets, as well as the increase in state Gas Tax and Public Transportation fees. These types of increases marginally affect those with a higher income, however, in this economic climate, the increase may be devastating for those living on fixed incomes as well as those earning less than $50,000 annually, given the high cost of living in the Bay State. The move to cut the state sales tax, 2 points in comparison to the 1 point increase in the income tax, at first appears to help those on the lower income sale, however, in reality it is a shell game.

The budget with a 38.4 Billion dollar price tag is available at the State’s budget dashboard , in a line item format. The majority of spending is in Health and Human Services (which covers State Entitlements and the Massive Massachusetts health care system (precursor to Obama-Care), followed by Education, and Administration with other line items, being a tad disproportionate in the handy “pie chart” provided on the site.

According to the Boston Globe there are monies in the budget for both the State and Federal Health Care Programs.

In addition to increases in the Bay States Taxes, Patrick is counting on Casino Gaming that was recently approved in Massachusetts. The budget includes projected fees for Casino Licensing. The Boston Herald reports that the Governor is “anticipating" 83 Million in licensing fees” from the proposed casino’s – however, as to actual revenue that would support the education, transportation and local aid the State is counting on, they may have to wait – in reality it will be several years before any of the proposed casinos are operational.

What happens when this plan falls short? More taxes.

To pay for the new education package with a $550 million dollar price-tag. In other words enough to fund additional jobs in education for a short period of time. The plan, according to the Berkshire Eagle, includes funding for “Birth – High School” – specifically designed for the low achievement of minorities in the State’s school system. That could be an easy fix, if one could possibly remove low performing teachers and replace those with teachers that are higher performing, instead of hiring additional teachers. Of course, Massachusetts in not a “right to work” state, so that option is off the table.

He is also proposing additional aid to make higher education “more affordable” to those with lower incomes- the Governor suggested that this might help those with a 2 year degree compete for the 146,000 available jobs in the Bay State. There will be a boom of employment, of course, once the casinos’ have been built and are operational – sometime in the future.

One would think that in a state that has seen four consecutive quarters with a loss in revenue (meaning fewer taxes are being paid due to both individual works and employers leaving the state, or additional individuals on unemployment or other forms of assistance and not paying into the system), that increasing spending makes no sense, whether it is an “investment” or not. In addition, one might think that a cut in income taxes, and business taxes would aid both the economy as well draw new businesses to the State. One can bet the house that there will be “interim tax increase proposals” as well as a new and increased line item budget for 2015 which will include a round of new taxes to pay for these “investments” in transportation and education. Both of which, to date, have not proven to be particularly good investments for the taxpayers (See low performing schools, and the Big Dig for starters).

Obviously, any budget is based on ideology, and the ideology of the progressive Patrick, is one of tax and then spend, in the hopes that this will someday work to the State’s advantage. However, the other side of the coin, in a fiscally conservative ideology, would attempt to make the state more attractive to business and working residents in order to fund education initiatives, and transportation. Prediction: Additional taxpayers will flee the state and move elsewhere, as will the employers, producing additional quarters of loss in revenue. It’s a vicious cycle.

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