E-Mail This Article to a Friend A crisis of politics The state budget deficit could be solved if elected officials would only act. Plus, John Kerry must be bold, and Howard Dean must come clean.

AS THE NEW YORK Times reported this week, budget deficits have become a fact of life for governors and state legislators across the country.

In Massachusetts, though, the financial crisis pales in comparison to the political crisis. Because the truth is that the state’s budget deficit — estimated at $1 billion to $2 billion for the fiscal year that begins on July 1 — could be eliminated with relative ease if elected officials were willing to take a few common-sense steps.

First, some background. Between 1994 and 2002, state taxes in Massachusetts were cut by about $3 billion a year. Thus it is no mystery why state officials have had to reduce spending by $3 billion over the past three years, wreaking havoc on education, local aid, and programs that serve the poor and disabled. State funding for the arts, meanwhile, has been decimated. In fact, despite the "Taxachusetts" label, this has not been a high-tax state for many years. According to an analysis by the Massachusetts Budget and Policy Center (MBPC), a nonpartisan advocacy group, Massachusetts ranks 30th of the 50 states when state and local taxes are calculated as a percentage of personal income. (That said, this year many residents around the Commonwealth have seen their property taxes skyrocket to make up for falling commercial tax revenues due to low vacancy rates and the ongoing recession. The state legislature is considering a bill that would ease this imbalance; until recently, it’s been blocked by House Speaker Tom Finneran. But last month, Finneran finally said he would support it. No tax reform can take place until this legislation passes.)

The MBPC recommends three steps to restore tax equity. These measures would not reverse the cuts of the past several years. They would, though, all but eliminate the need to cut the fiscal 2005 budget, which Governor Mitt Romney and the legislature will soon begin drafting.

• Restore the state income tax. Several years ago, officials began the process of reducing the tax from 5.95 percent to five percent, its level during the 1980s, before the last budget crisis. The tax is currently 5.3 percent. Returning it to 5.95 percent would bring in an additional $1 billion a year. And though 1980s-era politicians did promise eventually to cut the income tax to five percent, that was before the massive state tax cuts of the 1990s made such a promise untenable. Nobody likes tax increases. But the cuts of years previous were unrealistic, as — sadly — we now know.

• Close corporate tax loopholes. Corporate income taxes today account for just four percent of state tax revenue. That follows a steady decline since 1970, when the share was about 16 percent. One way to close part of that gap would be to adopt a method of tax accounting called "combined reporting." Such a system pertains to corporations that do business in more than one state. Combined reporting — currently used in 16 states, including California, Maine, and the low-tax haven of New Hampshire — more accurately assesses a corporation’s economic activity in a particular state, and makes it more difficult to shift income from a high-tax state to a low- or no-tax state. Such a system in Massachusetts could increase tax revenues by as much as $200 million a year.

Bear in mind that we’re not saying that corporate taxes should be deemed confiscatory and discourage corporations from making Massachusetts their home. We’re also mindful that falling corporate tax revenues are due to the recession. But falling revenues are not the reason why corporations now pay just four percent of state revenues rather than 16 percent; that is due primarily to the tax cuts enacted in the mid 1990s. There is concern that it will become harder for Massachusetts to keep or attract companies to the state if corporate taxes are increased, but, as MBPC executive director Noah Berger points out, when corporations make decisions to relocate, taxes are not the first consideration: lifestyle issues for employees are. And the Bay State’s extremely expensive non-tax items, such as cost of housing and heating oil, are much more significant considerations for a company than the Bay State’s aggregate corporate tax burden.

• Extend the sales tax to the Internet. It’s going to happen someday. Why not now? As commerce shifts increasingly to online transactions and mail-order catalogue sales, the sales-tax exemption these businesses enjoy is increasingly indefensible. On equity alone it can’t be justified. For example, the exemption allows Amazon.com to fatten its bottom line at the expense of the few remaining independent brick-and-mortar bookstores. Meanwhile, other brick-and-mortar stores, like Costco, which sell nearly every conceivable product, have huge online sales that aren’t taxed. This is a federal matter, and thus there is little Massachusetts officials can do other than speak up. One thing they can do is urge passage of a bill filed by Massachusetts congressman Bill Delahunt to eliminate the exemption and allow for a simplified collection system. "This is not a proposal to impose a new tax," says Delahunt spokesman Steve Schwadron. "It is a proposal to allow states to efficiently collect a tax they are already owed." The Delahunt proposal could increase Massachusetts’s take by about $600 million a year.

The first two proposals, which state officials could adopt on their own, would bring in $1.2 billion a year, possibly closing the projected deficit. Ending the Internet exemption would bring the total to $1.8 billion, providing a bit of breathing room.

"It was believable for a while that the good times would last forever," says Berger. But those days are obviously long gone.

As for whether voters would support increased taxes, Berger has a simple answer. "Political leaders are responsive to their constituents," he says. Now that the public has seen the draconian nature of the cuts that have been needed to maintain the no-new-taxes status quo, he says, perhaps they would be willing to "return to the tax rates of four years ago if that could restore funding for basic services."

Contact your elected officials and let them know what you think. Governor Romney’s office can be reached at (617) 725-4005, or GOffice@state.ma.us. Contact information for House Speaker Tom Finneran, Senate president Bob Travaglini, and your local legislators can be found at www.state.ma.us/legis.

JOHN KERRY is a man of immense talent. He has a creative understanding of what government should and should not do to make our lives better and the world safer. So it is with regret that we note, as Dan Kennedy’s cover story points out in detail, that Kerry’s chances of becoming the Democratic presidential nominee are fading. Just a few nights ago on WBUR, Kerry himself reminded pundits that the only opinions that matter in the coming weeks are those of the voters in Iowa and New Hampshire. It’s obvious, but he’s right. As a long-time supporter of Kerry, the Phoenix urges him to be bold. Do something out of character. Rip off that Hermès tie — figuratively as well as literally. At this point in the campaign, only television and radio can deliver a potent message to the mass of voters. Bare your soul. Explain why your position on Iraq can’t be reduced to a seven-second sound bite. Make clear your vision of economic justice. Don’t hedge. Don’t qualify. Show the voters in Iowa and New Hampshire that your passion and commitment are not only in your head, but that they are rooted in your heart. Be human. The Democratic primaries will be the richer for it, and so will the nation. Be bold, John Kerry, be bold.

TO TRY TO understand Howard Dean’s attempts to seal his gubernatorial papers for 10 years, a little context is in order. In 1990, the Vermont Supreme Court ruled that gubernatorial papers fall under the purview of executive privilege. The three former governors affected by the ruling — Madeleine Kunin and the late Richard Snelling (neither of whom ran for president), and, of course, Dean — have all sealed their papers. In Kunin’s and Snelling’s cases, these papers have been sealed for six years; Dean originally asked that his be sealed for 24 years, but settled for 10.

Contrast that with what George W. Bush tried to pull when he was running for office in 2000: the then–Texas governor attempted to get all of his official papers moved to his father’s presidential library — an unprecedented move that would have sealed them from public view for 50 years. The Texas attorney general ruled that the papers had to stay under state control. Today, Bush’s gubernatorial papers can be viewed by filing a Freedom of Information Act request with the state of Texas.

All that said, if Dean is to run a successful campaign against a president who is running a secret government, he must avoid even the appearance of having something to hide. His decision to seal his papers until 2013 has prompted Judicial Watch, a conservative governmental watchdog group, to sue the state of Vermont for access to the papers. And Newsweek has covered the story with the headline WHAT’S IN HOWARD DEAN’S SECRET VERMONT FILES? And frankly, it has us wondering as well.

Shortly before leaving office in 2002, Dean told Vermont Public Radio that there was a political component to his decision to seek the 10-year seal: "We didn’t want anything embarrassing appearing in the papers at a critical time in any future endeavor." Translation: like any politician, he wants to keep his ass covered.

If Dean is the Democratic nominee and goes head-to-head against Bush next year, we, quite frankly, understand why he wouldn’t want White House operative Karl Rove and his band of lying liars poring through his papers. But when Dean claims, as he did in last weekend’s presidential debate in Iowa, that he is trying to protect the privacy of gay people who wrote to him during the Green Mountain State’s public debate over civil unions, it’s impossible to take him seriously. He made a similar claim last month when he appeared on Hardball and said that he didn’t want to inadvertently reveal someone’s HIV status. Please. From a practical point of view, privacy concerns such as these would be handled by redacting the names of private citizens from correspondence. (Besides, it’s hard to believe that someone who’s written to the governor in the first place believes that that correspondence is going to remain private.)

In the end, the real question won’t be what’s in Dean’s gubernatorial files, it will be whether quick lies and facile half-truths like these are going to catch up with him as the campaign continues. Dean, come clean.

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