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.

Union Membership Falls to 70 Year Low – Factors Including Economics and Federal Legislation Has Nullified Original Purpose of Organized Labor

The ILGWU fought for Workers Safety rights following the Triangle Shirtwaist Factory Fire - Image Time.com

According to the the Bureau of Labor Statistics, 2012 saw Union Membership fall to a 70 year low – or an 11.3% share of the American Workforce.(The Detroit Free Press). There are several factors that are mentioned in the comments section of the article that would point to a decline in union membership, such as a slow economy with loss of jobs, however not mentioned are other factors that have contributed to this decline.

The overzealous approach of unions and contract negotiations have cost unions job – the most recent example would be the Hostess Bakers Union fiasco. The Union pushed a strike at the company, which was experiencing financial difficulties, the company in turn closed its doors, as a direct result of the union demands and subsequent strike. (Huffington Post). The estimated jobs lost when Hostess closed: over 18,000.(KMOV) Hostess is not an isolated incident, but rather a practice of union demands in tough economic times, forcing plant closures and company bankruptcy filings.

The once great Northeast manufacturing hub is all but non-existent – as are the Unions that represented the workforce. One shining example is the now defunct International Ladies Garment Workers Unions, which found its beginnings in 1900 in New York City – and its strength in the wake of the Triangle Shirtwaist Fire in 1909 (Cornell) (See Dissertation by Dr. Frances Jensen The Triangle Fire and the limits of Progressivism”)(UMASS) This union initially fought for shorter workdays , child labor laws, and safety for workers, however, as time passed and the Federal Government enacted national laws preventing the aforementioned, the Union became obsolete. The ILGWU merged with a Food Association Union, whose sum total membership now stands at a little over 233,000 (uinonfacts.com).

The Private sector unions, have, at this juncture, gone the way of the Model T. There are the public sector unions that have the bulk of the membership. Those left, along with the public sector unions, are now at the brink due to economic factors.

Unions now exist as Lobbyists. Federal Safety and Fair Wage Laws made unions obsolete, they began to exist as a lobbying organization – collecting dues from employees to further political careers, where politicians supported by the unions, would be expected to further the unions interest. One may look at the bankrupt city of SanBernadino,CA (See Reuter’s article here), and the cycle of political payback to unions in the forms of pensions, etc., resulted in the City’s bankruptcy. What happens, therefore, in an economy where half of the nation’s workforce is on some form of government assistance and tax revenues to both Federal, State and city governments dwindles? There will doubtless be more bankruptcies and lost pensions and jobs as a result.

One might suggest that unions purpose to protect the factory worker was indeed noble in purpose, however, factory workers were generally under educated, new immigrants and in need of protection. No laws existed at that time to protect the American worker. One might also suggest that in cases where there workers lives are in danger, such as fire or public safety workers, and meat packing industries, unions may still have a place, however, those who work in safe environments, and are holding a four year or better degree, should, in reality, not be forced to join a union. Union membership should, then be an option, similar to any “Association”. This is evident in the States where “right to work” legislation has passed. It is not that the union is not allowed - it is that employees in these states have the option to join or not join a union. In today’s economy and division of political ideology within any given workforce, if given a choice, those who may want to keep the modest dues, fees, and other charges unions levy on members, to themselves. In addition, some may feel it a priority not to pay union dues, knowing that those dues will be used to support candidates that are contrary to their political ideology. The writing is on the wall, so to speak, for many unions, although still a powerful force in dealing with and supported by the Federal Government (see Grants by Federal Government to Unions in article at NILRR. Org), in the end the economic and political priorities of the individual worker, along with the loss of viability, will see this membership decline further.

Massachusetts set to Raise Taxes – New Hampshire Rejoices!

While Massachusetts Governor, Deval Patrick is set to draw up a new budget that will include a substantial hike in the state income tax(Mass Live), New Hampshire is anticipating an increase in new businesses moving to the Granite State.

From New England Cable News:

Granite State watchdog groups said that goes for businesses, too. Deval Patrick's proposal to raise his state's income tax by a full percentage point will likely revive New Hampshire's efforts to get companies to move north, in spite of oft-criticized business taxes.

Arlinghaus said companies will turn to tax attorneys and ask, “What are things really like north of the border?”

“It doesn’t guarantee people come here,” he said, “but it guarantees they take a look at coming here.”

Especially as New Hampshire's legislature considers a bill that would double the limit on the research and development tax credit from $1 million to $2 million.

“They understand that as businesses need to increase their profitability and spend more money in research and development, [it] will allow them to hire more people,” Lewandowski said.

Even Democratic New Hampshire Governor Maggie Hassan coyly told the New Hampshire Union Leader that if Patrick's "approach leads to an economic boost for us, then I welcome it."

For decades the State of New Hampshire has been the number one destination for those Massachusetts residents and businesses that are seeking fewer taxes and less government interference in their daily lives (although many of those that immigrated north, brought along their Massachusetts values, much to the chagrin of certain residents). However, the fact that the new Democrat Governor is pleased that Patrick is pushing Massachusetts towards yet another loss of income to the Commonwealth, speaks volumes. The fact that the Bay State has already lost population resulting in a loss in one Congressional District, and at least four consecutive revenue losses, one might think the idea of attracting new taxpayers would be foremost in Deval Patrick’s mind. No so, he is intent on “Government helping people help themselves, by taking more from those working in order to try and support those who are in need. One novel approach would be to cut taxes, which would allow those who have extra income to spend, and keep businesses in the state, along with attracting new business. Building a train is fine, as long as one can guarantee that the train will run more than once a day at a cost equal to that of a bus, and have enough of a population to use the system in the first place. “Investing in education” is fine as well, as long as one has the tax base to support the “investment”. Adding an additional burden to those already maxed out with taxes is akin to pushing them onto a train – north to New Hampshire or west or south to more tax friendly states. A tax-cut from Patrick is highly unlikely in any scenario – more tax increases in the two remaining years, to continue to try to “increase state revenue”, are more likely.

Interesting Links from the Tax Foundation: Tax Foundation study on migration out of Massachusetts

Tax Foundation 2013 Business Tax Climate – See New Hampshire in top 10 friendly states – Massachusetts at 22nd out of 50 in business climate, study concluded in 2013 - prior to Govenor Patrick’s decision to increase taxes.

Note: Loss of Business results in fewer jobs, and possible lost jobs, which is a double whammy to the Bay State’s revenue – (The only income Massachusetts has are the taxpayers) – this may result in loss of services (police, fire, teachers) as well as a cut in state entitlement programs.