Sunday Night Links

We had a house full of company this weekend, and so this is the first chance I've gotten to post anything since Friday, and I apologize for the light content this week. Of course, every time I go a few days without posting, I have to clear off my desktop with another link dump.

• State Senator Jarrett Barrios (D-Cambridge) has submitted his resignation letter and the dates for the special election have been set. The primary will be on Sept. 11th and the general election will be Oct. 9th. So no one has officially announced their candidacy, but many people have expressed interest. Look for more on this race as the summer progresses.
• If you still think that opponents of marriage equality have nothing in common with those that were against interracial marriage last century, please read this and see if it changes your mind.
• Last week Boston Mayor Tom Menino delivered a letter signed by 260 restauranteurs in support of the proposal to allow cities and towns to raise their own meals tax. The mayor has been getting unlikely support from the Boston restaurant owners, telling them that the money the city gets from the meals tax would go toward helping reduce the property tax.
• Governor Deval Patrick told a tourism group this past week that, if they want to encourage tourism, they should make sure the state promotes a welcoming attitude. With a house full of vistors this weekend, I say the easiest way to do this is to put up street signs at intersections that show the names of both streets. I've always thought that our failure to do this in Massachusetts was our way of saying, "if you don't know where you are, you don't belong here."
• David Bernstein has an interesting article in this week's Boston Phoenix on the fight to keep the anti-marriage ballot question off the ballot. What does it say, he asks, if the most powerful people on Beacon Hill -- the Governor, the Senate President, the Speaker of the House, and the Attorney General -- all want something, but can't get it accomplished? Why don't they "have the juice?" The article also gives as much detail as anyone outside Beacon Hill has on the efforts to sway legislators into voting against the ban, and concludes wondering where former Governor Mitt Romney has been.
• In Mississippi, almost every 4th grader can read, but in Massachusetts only half can. Why? Because some states are gaming the No Child Left Behind tests, a study found last week. Massachusetts, it turns out, is not one of them. We have one of the smallest gaps between state assessments and national tests.
• Last week, lawmakers held a hearing to have the state bail the MBTA out of $2.9 billion of it's $5.1 billion debt. That of course, led to cries that we shouldn't be giving state money to the T until it gets its own fiscal house in order and we can be sure that that money wouldn't be wasted. The problem is that even if you eliminated all of the T's mismanagement and waste, of which there is apparently no shortage, the T would still be in debt -- the T pays as much in debt service as it actually collects in fares. You could shut down all the trains completely, but the T would still have to find some way to pay off its obligations. Is the best way to handle the situation to let the state give the agency a fresh start? I'm not sure, but it's clear that the way we fund the T is broken, and that's one big reason why we're stuck with the system that seemingly keeps getting worse and more expensive every year.

Telecoms Want to Change "Outdated" Laws

I saw a web-ad today for the Massachusetts Consumers for Technology and Cable Choice, a nonprofit set up by Verizon and rest of the telecom industry to shill for their "Massachusetts Cable Choice and Competition Act", a bill that would take cable permitting power away from cities and towns and hand it to the state. The ad asks:

How come 21st century Massachusetts is stuck with cable tv franchise laws from the 1970s?

That's a good question. Also a good question is: why is Massachusetts stuck with telecommunications property tax exemptions from 1915? If old regulations for new technologies are bad just because they're old, then let's get rid of that outdated exemption. For some reason, I'm not so sure that Verizon would agree.

I'm neutral on the Cable bill -- I'm lucky enough to live someplace where I can choose between two Cable companies. I've said it before, though, if they want this expedited permitting so bad, let's see if they'll give up their exemption for it. They're taking the power to regulate cable away from cities and towns, the least they can do is start paying their property taxes.

MBPC: Mass. is 32nd in Local Tax Burden

Yesterday, the Massachusetts Budget and Policy Center issued a release that showed their analysis of fiscal year 2005 tax collections for each of the fifty states, as recorded by the US Census. What they found is that Massachusetts' state and local tax level is among the lowest 40% (PDF). Here in Massachusetts we pay, according to the MBPC's figures, about 10.5% of our income to state and local taxes, compared with 11% nationally and a whopping 15% in New York. That figure puts us at 32nd in the nation, meaning that only 18 states send a lower share of income to their state and local governments. Once again, the "Taxachusetts" myth crumbles when exposed to any kind of scrutiny.

Last year, around this time, The MBPC put out a similar statement (PDF) comparing the tax rates of all fifty states for fiscal year 2002. For that year, Massachusetts ranked 38th out of fifty with a rate of 9.6%, well below the national average of 10.3%. So, from FY2002 to FY2005, the share of income in Massachusetts paid in state and local taxes went up faster than the national share (from 9.6% to 10.5% for MA vs. 10.3% to 11%).

So here's my question -- how does this information jive with then-governor Mitt Romney's claim that he "kept taxes down" in Massachusetts?

DiMasi Demands his Due

MetroWest Daily News opinion editor Rick Holmes quotes Governor Deval Patrick speaking about his recent dinner with House Speaker Sal DiMasi in his column yesterday:

"I told the speaker I would be calling on some of his members to talk about the Municipal Partnership Act," Patrick told the editors Wednesday. "He said 'you should be talking to me instead."'

This is pretty much the statehouse in a nutshell -- the majority of state legislators are largely irrelevant to the way laws are made. I'm not sure what bothers me more about this, the fact that DiMasi is brazenly saying that he controls the votes of House members, so don't bother talking to them, or the fact that it's true. DiMasi is clearly upset with the way the Governor is trying to circumvent him on this issue by appealing to the public, to individual legislators, to municipal leaders, and so on.

The larger point of the column, though, was to advocate for the passage for the Municipal Partnership Act, and particularly the ability for cities and towns to levy their own meals taxes. Holmes notes that since DiMasi represents the restaurant-rich North End, he's unlikely to allow that to pass. Even so, that's not a battle DiMasi should be having with the Governor. He should, Holmes argues, allow other municipalities to control their own revenue streams and fight out the particulars of Boston's restaurant tax with Mayor Tom Menino. I agree. Why should the Speaker stop Framingham, for example, from enacting a meals tax simply to ensure that his North End constituents never have to be subject to one?

Meals Tax -- Towns Should Decide

On Saturday, there was an article in the Sun Chronicle on local officials in Seekonk pushing for the local-option meals tax. Lieutenant Governor Tim Murray, State Senator James Timilty (D-Walpole) and State Rep Steve D'Amico (D-Seekonk) were among the participants calling for support for Governor Deval Patrick's Municipal Partnership" platform for providing property tax relief. One piece of the article bothered me:

[Opponents] say letting cities and towns adopt a meals tax would put those communities at a competitive disadvantage against places that do not impose the tax.

Here's my question -- shouldn't that be up to the cities and towns to decide and not for Beacon Hill to mandate from on high? Clearly, a place like Seekonk is not going to be at a competitive disadvantage to neighboring communities in Rhode Island. Furthermore, it seems to me that the driving factor in the decision to go out to eat is more often the quality of the restaurant than the tax rate of the town it's in; with the price of gas as it is, it makes no sense to drive to another town just to save a dollar or two on an evening out. Each community has a different situation and it seems to me that they should be the ones deciding whether or not levying an additional nickel tax on cheeseburgers is going to put them at a disadvantage.

The bottom line for me is that this is a battle not over taxes, but over who decides what taxes are appropriate. I believe that municipalities are better positioned to know how their communities will be affected by local option taxes.

Potential for a Telecom Deal?

They want something.

We want something.

Is statewide permitting worth enough to Verizon that they'll agree to pay the property taxes on telephone poles and switches? Is the increased property tax revenue worth the reduction in barganing power that cities and towns have with their cable companies? Has anyone asked?

Pipe dream bonus question: What if the state allowed utility companies to use flaggers instead of police details when doing work? Sure, it probably won't happen, but perhaps we can make the bitter pill of removing the telecom property tax loophole easier to swallow by giving these companies what they want in other areas. The state has bargaining chips. Is anyone at the bargaining table?

Telecom Tax Exemption's Time is Up

The regional president of Verizon in Massachusetts and Rhode Island, Donna Cupelo has an opinion piece in today's Boston Globe arguing against closing the tax loopholes for telecommunications companies. The way it works now is telephone companies are exempt from paying property taxes on machinery they own and telephone polls, even though cable, electric and other utilities have to pay taxes on their machinery. The exemptions were set up in 1915 to encourage widespread adoption of the telephone and now lawmakers have recently been looking at whether they make sense. In her defense of the exemption, Cupelo does not mention some of the absurdities of the current law. For example, electric companies are paying taxes on their half of the very same poles that they share with the exempt telecoms. Wires that run over private ways are taxable, while wires that run over public ways are not.

All of this comes after a June 2005 report that said Massachusetts telecommunications companies removed $1.3 billion worth of property off of the tax rolls between 2003 and 2005. That added a total of $31 million onto the burden of other local taxpayers during that time. Overall, the telecom industry was found to be avoiding $140 million worth of property taxes annually. That's money that falls not only on homeowners to pay, but also other local businesses, including other utility companies. That $140 million matches closely with the $180 million that Cupelo claims that telcom companies have "generated" for state and local economies (she declines to state exactly how). In any case, that number is much more modest once you net out the amount that telcoms are avoiding.

In Cupelo's piece, she details all the recent investment that Verizon has done and implies that closing the loopholes will but a halt to expansion. When meeting with telecom representatives, however, Governor Deval Patrick asked them about their plans to expand broadband service in Western Massachusetts. He indicated that he would be willing to make allowances in the tax code for that sort of thing. The telecom executives were then forced to admit that they had no specific plans to expand.

Cupelo also suggests that removing the telecom exemption would only help Boston at the expense of the rest of Massachusetts. The fact is, companies like Verizon have been working in recent years to get as much property off the tax rolls as possible in every community. Here are other examples from a 2005 Globe article:

In suburban Westborough, $67.6 million worth of telecom property went off the tax rolls in the last year, representing potentially $2 million in annual tax revenue, and more than $50 million in Billerica and Taunton was removed from the tax rolls.

Cupelo is also being disingenuous when she asks "where's the incentive to stay and grow in Massachusetts?" Is she honestly suggesting that telephone companies will give up and leave Massachusetts if this loophole is closed? Electric companies already pay taxes on their equipment and that has not seemed to stop them from continuing to bringing electricity to all of Massachusetts. As long as there are people in Massachusetts, there will be demand for telecommunication services. As long as there's enough demand, some company will step up to supply it. That's the magic of capitalism.

Leaving that aside, telecoms drastically reduced their taxes over the past five years with no corresponding reduction in consumer rates. They were paying much of these taxes no less than five years ago. Are we to believe that taxes they were paying as recently as 2002 are going to drive them from the state? Here's what that 2005 report said about Verizon, in particular:

Verizon Wireless, for example, shifted legal ownership of assets to a Bermuda-based corporation to get more favorable tax treatment and cut its Boston tax bill by 99 percent, to $9,307 this year [2005] from over $3 million two years ago, according to city figures.

That explains why Verizon is so upset. They can't offshore a telephone poll to Bermuda.

Cupelo also tries to scare consumers with promises of higher rates. Let's leave aside the fact that other states that have removed this loophole have not experienced a subsequent jump in rates and just note again that while the law that exempts telecom equipment from property taxes is nearly 100 years old, the exploitation of these loopholes is a relatively new phenomenon. Have you experienced a reduction in rates as phone companies saved millions in taxes over the past five years? I have not. Were telecoms suffering terribly under their tax burden before they started saving all this money? No, they were not. What we're witnessing is that telecoms have overplayed their hand. If they had not started to aggressively avoid taxes in the last five years, no one would have even heard about the telecom exemption. Instead, they have begun to exploit it at the cost to taxpayers. It's time to take it away.

Update: Mass. Liberal has more.

Update 2: I found 50 State telecom excise tax data from 2004. While this is different than property taxes, the chart shows that we are 36th out of 51 in combined state and local excise taxes on telecom. Our local excise taxes are a big fat 0%, whereas almost every other state levies some sort of local excise tax -- North Carolina's, for example is 12.36%.

Also, Blue Mass Group has the text of an ad that Verizon took out today. It largely echos the sentiments put forth in the op/ed, but the discussion that follows is worth reading.

The Taxachusetts Myth

Last week, there was an article in the Globe that reported on a study showing that Massachusetts has one of the lightest corporate tax burdens in the nation, despite having a reputation for being a bad place to do business. From the article:

A report released last month by the Washington-based Council on State Taxation, which represents 575 multistate corporations, found that Massachusetts businesses paid 36 percent of all local and state taxes in the Bay State, a percentage that was 47th among the states and the District of Columbia and lower than the national average of 43 percent. As a share of all economic activity, the tax burden borne by Bay State firms ranked 42d.

In my opinion, there is no bigger obstacle to bringing businesses to Massachusetts than the old "Taxachusetts" label. Whether based in reality or not, Massachusetts is still fighting the image of a bad place to do business. Again, from the Globe article:

Surveys last year by CFO Magazine and Chief Executive Magazine both pegged Massachusetts as one of the worst five states in which to do business. The first survey was based entirely on taxes, while the second also considered regulations and overall quality of life.

Fifteen years of Republican governors have done nothing to remedy the Commonwealth's image problem. Romney, in particular not only failed to defend Massachusetts against the attacks of his fellow Republicans in the 2004 campaign, but is now joining in the chorus as he prepares for 2008. While they have managed to make some headway in lowering the state taxes, this has been offset by increases in fees and property taxes, but just as seriously an increase in the cost of living and doing business in Massachusetts.

It's the cost of living, and in particular the high cost of housing that I think is causing the state to hemhorrage jobs and population. In fact there was another recent study by salary.com which showed Boston as the tenth most expensive US city to live in, and the third highest among those outside of California (where at least the weather's nice). Companies have stopped considering Massachusetts because there's no affordable place to build their facilities or house their employees.

The state Republicans want the 2006 election (and heck, all elections) to be about taxes. They need the Taxachusetts Myth because telling voters that Democrats will raise their taxes or waste their money is the only thing they have to run on in a state where Democrats hold the advantage on almost all other issues. They want people to think that our state's taxes are too high and lowering will bring jobs back to the Commonwealth. The reality, though, is that taxes are way down the list of reasons companies leave. If we want to be serious about fixing the state's economy in any lasting way, we've got to be willing to address the housing crisis.

For a good discussion with Massachusetts CEOs on this and other topics, check out this article from Commonwealth Magazine.

[UPDATE]: This morning's Herald has an article along these lines also. Apparently, consumer and business confidence is down in Massachusetts, even as the governor's various mouthpieces claim the economy is getting better. Tip for the powers that be: a recovery doesn't exist unless people feel like the economy is getting better. What good are a couple thousand new jobs if they don't pay enough to allow the new employees to buy a house, or heck, even buy gas to get there and you're constantly looking over your shoulder to see if the company is going to get bought out or ship your job to china?