Tax Hike in Massachusetts?

Like other states that have been spending too much, Massachusetts faces a major budget gap during the current economic mess.

Are tax increases an option? According to an October 17 Boston Globe story, a tax hike might be on the way … but not just yet. The Globe reported:

Thus far, [Governor] Patrick and legislative leaders have avoided any talk of imposing fees or new taxes, such as an increase in the gas tax, to help balance the budget.

Observers say this is because the governor and lawmakers don't want to risk angering voters who will be asked in a Nov. 4 ballot question whether they want to eliminate the state income tax - which generated $12.5 billion last year.

"With that on the ballot, any talk about raising taxes will take place after the election," predicted Senate Republican leader Richard R. Tisei. "But I am sure they are looking at ways to raise revenues."

"That's the elephant in the room that no body wants to talk about," said former state senator and 2002 gubernatorial candidate Warren Tolman.

Fees and taxes have been part of the equation in the major budget crises of the last 30 years. House Speaker Thomas M. Finneran used taxes as part of his budget balancing plan in 2002. Romney raised hundreds of million of dollars in fees to deal with the fiscal downturn he faced in his first year in office. Governor Michael S. Dukakis signed tax bills to deal with two of the state's worse fiscal crises in modern times, in 1975 and in 1989-90.

Asked yesterday about raising taxes, Patrick said during a press conference that it was not on the table.

"The time to go to the public for broad-based taxes is just not now," Patrick told a press conference Wednesday. "I don't think taxes are evil. . . . But I think people are squeezed right now."

Will there be a tax increase after Election Day in Massachusetts or not? That’s obviously the last thing the economy needs in that state. Ideally, the people of Massachusetts will send a strong message about just how evil taxes can be by voting to boot the state’s income tax.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

SBE Council Reacts to Final Presidential Debate

Today, the Small Business & Entrepreneurship Council (SBE Council) reacted to the final presidential debate between Democrat Barack Obama and Republican John McCain held at Hofstra University on October 15.

SBE Council President & CEO Karen Kerrigan said: "We were very pleased to hear small business discussed so much during the debate. However, we were very disappointed that Senator Obama still stands willing to hike personal income and capital gains taxes on so many entrepreneurs, like Joe the plumber, and investors. Senator Obama presented the idea that it somehow makes sense to increase taxes on some small businesses, while offering sometimes rather vague tax cuts for other small businesses."

Kerrigan continued: "What entrepreneurs and our economy need right now is across-the-board tax relief. Senator McCain was correct in pointing out that we should not be raising taxes on anyone, especially now. He also was correct to highlight how non-competitive our corporate tax is, and that it needs to be reduced. If we are serious about getting this economy moving again, then we need to make the U.S. an attractive place to invest and set up business."

SBE Council chief economist Raymond J. Keating said: "International trade is critical to our economy. Keep in mind that total trade - that is, exports plus imports - equaled eight percent of GDP in 1960. Last year, it stood at 29 percent. Knocking down international trade barriers means expanded opportunity for U.S. businesses, enhanced economic growth, higher incomes and greater choices for consumers."

Keating added: "Listening to the debate and looking at their voting records, it is clear that Senator McCain is a free trader. However, Senator Obama raises real concerns, such as with his vote against CAFTA, his desire to re-work NAFTA, and his opposition to pending trade deals with Colombia, Panama and South Korea. He did nothing during the debate to indicate that he has seen the light on free trade."

The SBE Council is a nonpartisan, nonprofit small business advocacy group that works to protect small business and promote entrepreneurship. For more information, please visit: www.sbecouncil.org.

Small Business Owner vs. Obama

You can usually count on the New York Post for a good front-page headline.

As I grabbed the newspaper from the end of my driveway on Wednesday (October 15) morning, the headline screamed: “Bam’s Leak! ‘Spread wealth,’ he tells plumber.”

The article is well worth reading, as it tells the story of a small business owner who challenged presidential candidate Barack Obama on his proposal to jack up taxes on those earning more than $250,000 a year.

Here’s the intriguing exchange as reported by the Post:

The fracas over Obama's tax plan broke out Sunday outside Toledo when Joe Wurzelbacher approached the candidate. Wurzelbacher said he planned to become the owner of a small plumbing business that will take in more than the $250,000 amount at which Obama plans to begin raising tax rates.

"Your new tax plan is going to tax me more, isn't it?" the blue-collar worker asked.
After Obama responded that it would, Wurzelbacher continued: "I've worked hard . . . I work 10 to 12 hours a day and I'm buying this company and I'm going to continue working that way. I'm getting taxed more and more while fulfilling the American Dream."

"It's not that I want to punish your success," Obama told him. "I want to make sure that everybody who is behind you, that they've got a chance for success, too.”

Then, Obama explained his trickle-up theory of economics. "My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. I think when you spread the wealth around, it's good for everybody."

Well, there it is – classic wealth redistribution. Unfortunately, what Barack Obama is missing is that wealth redistribution equals wealth destruction, and nobody benefits from that. It’s certainly the last thing we need in the current economy.

Here’s a thought: How about pro-growth tax and regulatory relief that spurs wealth creation for all?

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council