07/24/2008
State revenues and the sales tax holiday
Massachusetts ended FY 08 with revenue up $1.15 billion above FY 07 -- a 5.8 percent increase. Revenues from the state income tax -- the repeal of which is the subject of a ballot question this fall -- were up 9.6 percent and $455 million above expectations. Overall, the state took in $20.9 billion which was $1.06 billion above expectations.
But policymakers remain concerned about FY 09. The FY 09 budget is built on a revenue estimate of $21.0 billion, less than 1 percent above last year's income. But, during the last two months of FY 08 (May, June), revenues were actually less than comparable months in 2007, with revenue from the sales tax declining 1 percent in June and revenue from the income tax increasing but falling short of projections. Gov. Deval Patrick has asked the Legislature for wide ranging authority to make unilateral budget cuts if revenues and/or spending make them necessary to balance the just passed FY 09 budget.
Despite fiscal concerns and because the state ended FY 08 with a surplus, the governor and the Legislature decided to approve a sales tax holiday again this year for the weekend of Aug. 16-17. Some would contend that the sales tax holiday weekends actually have had a net positive impact on state revenues.
Health insurance
Gov. Patrick proposed increasing fees on business owners to pay for a possible shortfall in the state's new health insurance law. The state has failed to implement affordable small business health plans as required by Chapter 58 by Jan. 1, 2007 -- a pilot program is promised by Jan. 1, 2009 -- and has by regulation consistently increased the cost of health insurance instead of giving employers and their employees choice and flexibility in developing health care plans. Nevertheless, the governor suggested increasing revenue by raiding $35 million from the Medical Security Trust Fund (which is 100 percent funded by $16.80 per employee per year assessments on employers to pay for health insurance for unemployed workers and their families), requiring employers to complete the 'Fair Share Contribution Forms quarterly instead of annually, requiring employers who are liable for a 'fair share contribution' to make double payments in FY 2009, and decoupling the $295 fee from the cost of free care and set it at an amount required to give the state $38 million annually (only $7 million was raised from employers' fair share contributions this year). In other words, the governor has proposed diverting payroll taxes paid by employers, increasing paperwork load on employers, accelerating payments to the state from employers, and increasing the fees from employers before lowering costs.
The employer community united in opposition to the proposed changes which were attached to a supplemental budget bill that must be acted upon before the Legislature ends formal sessions on July 31.
CORI
The Judiciary Committee approved and sent to the House floor legislation (House Bill No. 5004) to further restrict employers' access to criminal records of prospective employees. The bill would prohibit employers from asking on a job application whether a prospective employee had a criminal record, unless the question was time limited. The bill fails to protect employers from law suit for an employee's actions or for wrongful hiring despite restricting employer access to information about the employee. The bill would increase the penalty for improper dissemination of criminal record information from a $500 to a $5,000 fine and the lower the standard for violation from willful to knowing. We believe that employers are best equipped to make judgments about job applicants when given full and accurate information about prospective employees.
And in D.C.
We are supporting several significant tax bills that have been introduced in the 110th Congress, including: H.R. 1797 making the small business expensing limit permanent, increasing it to $200,000, and indexing it to inflation (the current limit of $250,000 will expire at the end of 2008 and eventually fall to $25,000 in 2011 without congressional action); S. 2896 reducing the federal diesel tax from 24.3 cents to 18.3 cents per gallon --the same as the federal tax on gasoline; S. 3063/H.R. 4840 increasing access to capital by reducing S Corp. ownership restrictions and modernizing rules; S. 2170/H.R. 3622 making the 15-year depreciation schedule for investments in restaurant property permanent; S. 296 increasing the gross receipts test to $10 million (from $5 million) and indexing it to inflation to qualify for simplified cash accounting method; H.R. 6214 establishing a standard home office deduction of $1500; H.R. 5450/S. 2668 simplifying the tax deduction for business related cell phone use; S.3121/H.R. 6266 reducing tax penalties and regulatory burdens for small business owners who do not willfully fail to accurately report to the IRS.
