Saturday October 13, 2012

LENOX -- One of the state’s most influential lawmakers on tax policy warned a group of South Berkshire town leaders on Friday that there’s an urgent need to explore new ways of eliminating tax credits that drain $26 billion a year of potential revenue from the state and towns.

The state collects about $22 billion in revenue annually, primarily from personal income, corporate, business and sales taxes.

"I think we’ve got a lot of work to do to have a tax system we can all be proud of and stand on," said state Rep. Jay Kaufman, D-Lexington, the co-chairman of the Joint Committee on Revenue. "There’s got to be a better way to tax ourselves."

He also voiced deep concern over a recent $95 million shortfall in state tax revenue from July through September.

"If we have to make up that difference, it’s going to be cutting into already seriously compromised budgets across the board," he said in an interview with The Eagle prior to a workshop discussion arranged by 4th Berkshire District state Rep. William "Smitty" Pig natelli, D-Lenox.

"We’re already made serious program cuts and local aid is not what it should be," Kaufman said, "so I’m nervous about making any further cuts at all."

"It’s also unnerving," he added, "because it reflects the fragility of the so-called economic recovery. I don’t think we’re past the recession, so it’s not time to chill the champagne and pop the corks."

The impending fiscal cliff -- a combination of in creased federal taxes and sharply reduced spending -- is "very real," Kaufman pointed out, "and there’s not the slightest question that it’s going to have a very significant impact on every state.

"How well or how poorly our Congress is going to be able to deal with that, and how respectful they are of the impact on the states, is going to be very important.

"We’re in trouble if they’re going to try to balance the budget on the backs of local officials," Kaufman said. Massachusetts could take a hit of 3 to 5 percent in federal aid, he added.

Kaufman’s presentation to the local officials focused on the revenue squeeze afflicting local government.

He suggested a "disconnect" between the responsibility local officials have to maintain services and their ability to raise the necessary funds.

If local government is unable to identify new sources of revenue, Kaufman outlined a worst-case scenario -- a state takeover of public education, for example.

Fighting for comprehensive tax reform is the solution advocated by the committee chairman. "We’re trolling for ideas," said Kaufman.

Town government leaders from Lenox, Becket, Shef field, Monterey and Otis attended the Lenox Town Hall session.

Introducing Kaufman as the "revenue guru" in the Statehouse, Pignatelli ac knowledged that "it’s always difficult to have the revenue or tax discussion during tough times."

He cited a Friday meeting of the Massachusetts Muni cipal Association in Wil liams town that explored the fiscal challenges facing local officials.

The state’s $32.5 billion budget signed by Gov. Deval Patrick in January was based on a tax revenue forecast of $22 billion. If collections continue to fall short, state officials might have to review spending priorities.

The state experienced three consecutive months of slow or negative job growth, including a preliminary estimate of 4,800 jobs lost in August.

The editorial board of MassBenchmarks, a journal of the Massachusetts economy published by the Uni versity of Massachusetts Donahue Institute, observed recently that the state appeared to be slipping into a "lower gear." The board cited deteriorating global economic conditions that were taking a toll on the state’s innovation and technology sector.

To reach Clarence Fanto:
cfanto@berkshireeagle.com,
or (413) 496-6247.
On Twitter: @BE_cfanto.