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July 23, 2015

Years ago the political scientist E.E. Schattschneider wrote of access to government “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent.” That’s a pretty good explanation for how Governor Charlie Baker’s Earned Income Tax Credit increase got halved in a budget deal involving the governor, Senate President Stan Rosenberg, and Speaker Robert DeLeo.The Big Three wound up harmonizing with the heavenly chorus.

According to a sharp and detailed column by the Boston Globe’s Shirley Leung, Tax Credit Deal Is Just Not Enough, “Baker’s original plan called for a 100 percent increase of the benefit; the compromise funds a 50 percent boost.” The payment method settled upon by the Big Three was the elimination of FAS 109, an accounting rule passed in 2008 but never implemented. Still, the rule is a big deal to “a handful of firms.” Please read Ms. Leung’s column for an explanation of how a never implemented seven year old accounting rule is important. In any case, “the four major business groups in town — Associated Industries of Massachusetts, the Massachusetts Taxpayers Foundation, the Greater Boston Chamber of Commerce, and the Massachusetts Business Roundtable” swung into action.

What Professor Schattschneider meant was that those who praise pluralist politics must confront the reality that business and money have the loudest voice. With that in mind, let me try to re-write some lines from Ms. Leung’s column, fancifully pretending that EITC beneficiaries – “nearly a half-million working families who make less than about $50,000 a year” – have the same clout as business.

“Four companies in particular — Verizon, Eversource, National Grid, and BNY Mellon — pressed the administration to preserve FAS 109. Executives from a couple of these firms even met with Administration and Finance Secretary Kristen Lepore and economic development Secretary Jay Ash to make their case.

Their arguments: Keep the law a little longer so they can make adjustments. Not doing so would cement Massachusetts’ reputation as an unpredictable place to do business.”

Four families in particular – the Smiths, the Kims, the Johnsons, and the Riveras – pressed the administration to preserve the 100 percent increase of the benefit. The Smiths and the Riveras even met with Administration and Finance Secretary Kristen Lepore and economic development Secretary Jay Ash to make their case.

Their arguments: Provide the 100 percent EITC increase right away so they can have some financial breathing room. Delay would mark Massachusetts as a place with a good idea to help working families but without the will to do it.

“Soon after the Legislature approved the budget, Rick Lord, who runs AIM, button-holed Baker at an event to bend the governor’s ear on FAS 109.”

Soon after the Legislature approved the budget, the Johnsons, who are active on working family issues, button-holed Baker at an event to bend the governor’s ear on EITC.

“Don’t ask me to explain why a postponement seemingly matters as much as taking the deduction, but the upshot is that the accounting works in their favor. If the deduction were repealed, then publicly traded companies would need to recognize immediately the tax obligations created by out-of-state assets without any offsetting expenses. That, in turn, could hurt their bottom lines.”

Don’t ask me to explain why a 100 percent benefit increase is more useful to the families than a 50 percent benefit increase, because it’s so obvious. Halving the benefit increase would hurt their bottom lines.

“But while everyone got what they wanted, we shouldn’t forget what didn’t get done: an even bigger expansion of the earned income tax credit program. Baker’s original plan called for a 100 percent increase of the benefit; the compromise funds a 50 percent boost.”

But while everyone got what they wanted (except the Smiths, the Kims, the Johnsons, and the Riveras) we shouldn’t forget a 50 percent increase in benefits is a pretty good thing. It just isn’t the best thing - "Baker’s original plan called for a 100 percent increase of the benefit; the compromise funds a 50 percent boost."

I'll confess that while I’ve had some fun with this, I’ve also been unfair. Though it is not part of Ms. Leung’s column, I’d suppose that Governor Baker, Senate President Rosenberg, and Speaker DeLeo have all met with EITC beneficiaries and that the Big Three all care about those families (and Secretaries Lepore and Ash do, too).  Still, the heavenly chorus hit its notes.

The proof is in the percentages.

Stan Rosenberg, Robert DeLeo, Charlie Baker

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