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Globe Editorial

What state government needs

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December 20, 2007

GOVERNOR PATRICK tried to persuade the Legislature Tuesday to approve casino gambling in Massachusetts - on the same day that a special commission recommended changes in the state corporate tax code. These were not unrelated events; both were driven by the state's need to raise more money to finance essential government activities.

Patrick bills his gambling plan as one of his economic development initiatives, but it would also be a revenue producer for the state. The notion of ending the longstanding ban on casinos enjoys significant public support, not least because millions of dollars in tax revenue are heading down the highway to Connecticut and Rhode Island. Why not keep it in Massachusetts to help finance the education, transportation, healthcare, and public safety services that residents expect from their state and local governments?

Meanwhile, the tax commission was right to recommend closing loopholes that allowed companies to shift profits to out-of-state subsidiaries and to claim a different tax status on federal and state returns. The governor pointed to these flaws in the tax code earlier this year and proposed to correct them in the interest of generating revenue.

Voters have signaled no desire to do without services and, indeed, have elected a governor and Legislature committed to an active government. Yet voters have declined to support a sufficient level of sales or income tax revenue, the two main sources of tax money, to pay for it. So the governor and the Legislature have to nibble around the edges every budget cycle to cut programs and find new money to balance the budget. They'll begin this annual fandango again next month.

Revenue from casino gambling ought to be part of those calculations. The Legislature should also embrace the recommendations of the tax commission, including its call for a modest cut in the corporate income-tax rate to compensate companies partially for the impact of the loophole closings.

The costs of government will overwhelm these limited sources of money unless the Legislature makes government, both state and local, more efficient. Lawmakers took two steps forward this year: They mandated that cities and towns join the state pension system if their own plans are doing poorly, and they encouraged communities to offer their employees health coverage through the cost-saving Group Insurance Commission.

Next year, the governor and legislators need to go beyond these limited efficiencies. Could, for instance, more services be privatized? Could state and local workers' benefits be more closely aligned with those in the private sector? Voters will be more receptive to increases in broad-based taxes if they know the money that goes to the state - from casinos, the closing of loopholes, or wherever - is spent in the most cost-effective way.

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