Question on 'Another Agenda' Made Senate Debate on Tax Credit Crackle

“What else is going on here?”

That’s what Bruce Tarr of Gloucester kept asking his Massachusetts Senate colleagues on the afternoon of Tuesday, May 19.

He was arguing against an amendment to the new FY 2016 state budget that would, one, increase the Earned Income Tax Credit (“tax credit”) for low-income working families, and, two, pay for that increase by delaying a voter-mandated reduction in the state income tax rate. 

(On January 1, 2016, the income tax rate is scheduled to decrease from 5.15% to 5.1%, one more step in a series of cuts that will ultimately bring the rate to 5%.  Fifteen years ago, voters approved a statewide ballot question calling for the rate to drop from 5.95%, where it was in the year 2000, to 5%.  In implementing the cut, the legislature opted to do it in small increments, which are tied to the overall performance of the Massachusetts economy.)

Tarr, Minority Republican Leader of the Senate, is a big believer in increasing the tax credit.  He just hated the idea of linking that action to a delay in cutting the income tax.

“Can we do this (hike the tax credit) without contravening the will of the voters?” he asked.  “The answer is yes.  So you have to ask yourself: What else is going on here?  If we have the available funds and we want to respect the will of the voters, then why do we need the current proposal?”

Answering his own question, Tarr said, “This choice isn’t about low-wage earners.  It’s about trying to re-allocate things.”  [Note: All quotations in this post are taken from the State House News Service account of the May 19 Senate proceedings.]

The budget amendment in contention at that point was sponsored by Michael Rodrigues of Westport, Senate co-chair of the Joint Committee on Revenue, and it consisted of two parts.  The first would increase the tax credit immediately by 50%, putting approximately $500 into the pockets of the average Massachusetts resident who qualifies for the credit; the second would increase the personal exemption, household exemption, and married couples’ exemption available to Massachusetts taxpayers when they file their state income taxes.

Defending the amendment, Rodrigues emphasized that “we are providing the whole tax cut,” meaning the equivalent of the cut via higher income tax exemptions.  Rodrigues said, “No taxpayer will pay more (under the proposed amendment).  In fact, every taxpayer will pay less even if they don’t qualify for the EITC (tax credit)…This isn’t a welfare supplement.  These are hardworking people.”

Tarr responded, in part, “We all want to help low-wage earners.  This is not a subject of dispute.  The EITC is one of the best ways to do that.  There must be something else going on here, and we’ve just begun to hear what that is…If we lower the income tax rate, it will lower what we collect going forward, but the exemption is a fixed-dollar amount.  This means every year we collect 5.15% and we have a fixed personal exemption.  Many want to continue to reap the benefit of a higher (income tax) rate.  People say no one will pay more in 2015.  That’s probably true.  But everyone will continue to pay at the higher rate into perpetuity.   There’s more to what’s going on here than trying to help low-wage earners.  This is about protecting a revenue source.”

Just before the debate on the Rodrigues amendment, the Senate had rejected an alternative amendment sponsored by Tarr, which would have increased the tax credit by 100% over a three-year period.  The Tarr amendment did not offer a specific budget source for making up for the shortfall that would result from a 100% increase.  The assumption was the money would have to come from the state’s general fund. 

Senator Ben Downing of Pittsfield considered that aspect of the amendment a fatal weakness.  Said Downing, “…in this chamber, members of both the minority party and the majority party have extolled the financial acumen of the current resident of the corner office and have said for good reason that Governor Baker has a deserved reputation as a financial manager.  As someone with that reputation, he didn’t propose doubling the EITC without paying for it.  The principle of having something paid for is something he recognized.  His record is worth considering and noting before dismissing the need for connecting the (reduction in the) EITC to a revenue stream.” (Baker came out early in favor of an increase in the Earned Income Tax Credit and proposed paying for it by repealing the tax credit given to movie and TV show producers who film projects in Massachusetts.)

Downing continued, “There may be strong disagreement about that, but I don’t think we ought to shy away from discussions and debates about fairness.  The status quo is making a decision, and what it (the status quo) has been doing is widening the gap in our economy.  Fairness matters.  This (the Rodrigues amendment) gets us closer to fairness.  It (tax credit hike) ought to be paid for.”

The best part of the discussion on increasing and on paying for the tax credit was the strong feelings it stirred in senators over wages and economic fairness.

For example, Marc Pacheco of Taunton said that, since the reduction of the income tax rate was ordered by voters in 2000 and implemented in stages during the intervening years, “We have seen income inequality, the gap (between rich and poor) that was out there 15 years ago, increase exponentially…The top 1% receive 25% of the benefit (of reducing the income tax rate).  And the top 20% receive 67% of the benefit…Talk about fairness!  Talk about equity!  That’s what this proposal tries to do: start heading us in the right direction through a tax policy that is fair, (and) fairer than we have now.”

Dan Wolf of Harwich said, “This economy has become out of balance.  I consider this amendment as the beginning of a dialogue on how we change that trend.  This (increasing the tax credit) is one small step to reverse that direction.”

The Senate chair of Ways and Means, Karen Spilka of Ashland, said, “I feel compelled to repeat the quotation that I started with at the beginning of the budget debate: ‘It is a glory to speak for those who have no voice, to remember those who are forgotten.’  That was stated by Senator Edward M. Kennedy in August of 1980.  I believe that, in passing this amendment, we are fulfilling the words of Senator Kennedy.  The EITC is the most effective anti-poverty measure.  This will help working families across our Commonwealth.”

Vinny deMacedo, a longtime Republican member of the House from Plymouth who just moved up to the Senate, taking the seat of recently retired Senate President Therese Murray, said, “We talk about speaking for people without a voice, but we can’t take the individuals who voted (for reducing the income tax in 2000) and say, ‘You don’t have a voice now.’  Our (Republicans’) intent is not to violate the will of the voters.  I get what you (Democrats) are trying to do.  It’s commendable and it’s creative, but I also think it sends the wrong message.”

James Eldridge of Acton said, “…this is a moment for the Senate to reverse a 25-year trend where we’ve paid for things with a regressive tax policy…This is a reverse of about 25 years of tax votes by the legislature…There is no more successful anti-poverty tool than the Earned Income Tax Credit.”

John Keenan of Quincy, who said he wasn’t planning to speak on the amendment but felt he had to as the debate wore on, went straight for the Bruce Tarr question: What else is going on here?  His answer was anything but coy.

“Another agenda?” said Keenan.  “I think there is another agenda here.  It is about revenue preservation.  We’ve given up over $3 billion since we started the downward track on our income tax rates (in 2000).  I think that’s something we should focus on. 

“Since 2008, you’ve seen what’s happened to every one of our (state) budgets: any increase in revenue has gone to health care costs.  So is there another agenda?...Let’s not be ashamed to say there is.”

On May 19, Tarr did not succeed in blocking the Rodrigues amendment.  The final Senate version of the state budget for Fiscal Year 2016 (July 1, 2015-June 30, 2016) contained a 50% increase in the Earned Income Tax Credit funded by a delay in the January 1 income tax rate reduction. 

Tarr’s position, however, ultimately carried the day: there will be no delay in cutting the income tax. 

A House-Senate budget conference committee, assigned to work out the differences between the budgets passed by each branch, produced a unified budget earlier this month that contains a provision increasing the Earned Income Tax Credit by 50% and paying for the increase by repealing a tax deduction for corporations.  That unified budget was quickly adopted by both branches and is now before the governor.  Worth noting is that it did not include the increase in income tax exemptions favored by a majority of the Senate.

Tales such as this, most of which never lodge in the memories of voters -- if ever they even catch the attention of voters for a passing moment or two -- constitute vindication in a legislative body. 

Senate Minority Leader Bruce Tarr can take a bow. 

So, too, can House leaders, more conservative than their Senate counterparts, who dug their heels in against a delay in lowering the income tax rate during an unusually long and trying budget conference process.