E-Mail This Article to a Friend Mind the gap (continued)

At least as far as Massachusetts is concerned, anyway. In terms of his own political ambitions, Romney’s refusal to be cowed by disagreeable numbers is very practical indeed. In the broader spectrum of contemporary American Republicanism, Romney is hardly a conservative: he has supported civil unions as an alternative to gay marriage and, while not a vocal defender of abortion rights, hasn’t established himself as an anti-abortion crusader either. True, Romney has moved right on gay rights (see "Schiz Romney," News and Features, May 14), and one Democratic consultant suggests he’ll soon embrace an overtly pro-life position to pave the way for a 2008 presidential run. But while the Republican Party can still accommodate moderates who hold or used to hold middle-of-the-road views on social issues, an unwillingness to cut taxes would be much graver heresy. So even if budget forecasts for FY ’06 get even grimmer, it’s a safe bet Romney will press on with his drive to cut the income tax to five percent.

Then there’s the legislature. With the memory of the electoral humiliation of Romney’s Republican legislative slate still fresh, this could be an ideal time for Democrats to consider a tax increase. "If there was ever a time politically when the legislature could successfully enact new taxes, it would be now, given that the election is behind us and every single incumbent in the general election was re-elected," says Paul Demakis, the recently retired liberal state representative from Beacon Hill. "If a modest package that helps to address the fiscal crisis on a more-permanent basis can be put together, and it doesn’t include anything that really arouses the ire of the voters, then that’s something that should be considered."

The problem is, Massachusetts Democrats were able to pick up three legislative seats partly because their leaders studiously avoided any talk of raised taxes. Robert Travaglini hinted at the possibility of a tax increase when he became Senate president, in 2002. But since then, a pledge not to hike taxes (along with a vow to preserve core services) has become part of his budgetary mantra. When Salvatore DiMasi became House Speaker this summer, he said, not unreasonably, that "everything will be on the table" in the upcoming budget cycle. The state GOP pounced, immediately issuing a press release warning that DiMasi was already mulling a tax increase. The new House Speaker promptly backed away from his statement. State Democrats may still be savoring their legislative victories, but many of them privately acknowledge the Mass GOP still poses a threat. If there’s any kind of tax hike in the upcoming legislative cycle, state Republicans will have their first direct-mail line of 2008: two years ago, Massachusetts voters sent Democrats back to the legislature. They raised your taxes. Don’t make the same mistake again.

THE POLITICAL risks of a tax hike would be great, but other factors might give pause as well. The classic, supply-side argument for tax cuts is that they free up extra cash; this cash, in turn, is spent by consumers and helps drives new economic growth. But while Romney’s proposed cut would cost the state about $500 million in FY ’06, it’s uncertain that consumers would pump that money back into the economy rather than saving it or using it to pay off debts.

The entrenched nature of the state’s budget problems might also lead legislators to dismiss new taxes as the equivalent of a financial Band-Aid. In Massachusetts, as in many other states, the spiraling cost of health care is a major factor in recurring shortfalls. "Medicaid costs are continuing to grow at close to double-digit rates," says Cam Huff, of the Massachusetts Taxpayers Foundation. "That’s symptomatic of the larger problem of health-care costs, and as long as that problem is driving the state budget, you’re going to have gaps." As Huff sees it, this problem demands massive structural reform. Dropping people from Medicaid rolls isn’t the answer, he says — and neither is a tax hike.

Maybe not in the long run. Still, a tax increase could help Beacon Hill get a handle on health care while a longer-term solution is hammered out. Last week, after the nonpartisan Urban Institute released a report on the cost of treating the Bay State’s uninsured residents, Travaglini, DiMasi, and Ronald Preston, Romney’s health-and-human-services secretary, all spoke of collaborating to reduce the ranks of the state’s half-million-plus uninsured. (The Urban Institute report put the cost of covering all the uninsured at between $374 million and $539 million; however, it also predicted such coverage would bring "economic and social benefits due to improved health" of well over a billion dollars.) Then, over the weekend, Romney unveiled a proposal to cover all the uninsured without spending any new taxpayer money. It's an enticing idea, but deserves skepticism until all the details are made public. In the meantime, this much is certain: hiking taxes by $100 per person per year, instead of following Romney’s call to cut them by the same amount, would give the state almost $500 million in new revenues and make the goal of covering the state’s uninsured much easier to achieve.

Because the governor, the House, and the Senate are all currently formulating their FY ’06 budgets, there’s a general reticence to discuss specific proposals. But earlier this week, Ann Dufresne, Travaglini’s spokesperson, said the Senate president would approach the upcoming budget process as he has the previous two. "The principles we’ve used in the last two years have served us very well, and we don’t see any reason to alter them at this juncture," Dufresne said. "We plan to deliver an honest, balanced budget, on time, that preserves core services and does not raise taxes." This optimism is reassuring. Still, given the gravity of the state’s fiscal situation, more legislative openness to new taxes — and, on the governor’s part, some moderation of his anti-tax crusade — might not be a bad idea.

Adam Reilly can be reached at areilly[a]phx.com.