Senate Expects Tax Haul To Fall By $1 Billion More

From the Associated Press.com:

An already bad Massachusetts budget forecast is getting even worse.

Senate Ways and Means Chairman Steven Panagiotakos (pan-ah-gee-oh-TAH'-kos) says he expects tax collections to be $18.5 billion next year - $1 billion less than previous estimates.

The Lowell Democrat says that will require massive program cuts and employee layoffs. He's called a hearing with economists Tuesday to discuss the situation. The Senate unveils its 2010 budget plan later this month.

Meanwhile, the Retailers Association of Massachusetts is airing radio ads complaining about the 25-percent sales tax increase approved by the House to offset sagging tax collections.

Retailers fear hiking the tax from 5 percent to 6.25 percent will send customers to New Hampshire.

MA Rejects Elimination of State Income Tax

From the Boston Herald:

Massachusetts’s voters rejected a call to eliminate the state’s income tax after critics said it would have wreaked fiscal havoc at a time when the state is already grappling with a financial downturn.

The measure would have cut the 5.3 percent tax rate in half in January, and then killed it completely in January 2010.

Supporters, led by the Committee for Small Government, had argued the best way to cut government waste and overspending was to eliminate the tax, which would have reduced annual state revenues by 40 percent or about $12.5 billion.

Backers also said the question would have saved the average taxpayer about $3,700.

Committee Chairwoman Carla Howell blamed the defeat on the massive advertising campaign by opponents of the measure, saying both sides were initially in a dead heat in the polls and that voters were ultimately swayed by "scare tactics." Opponents spent more than $5 million while supporters raised only about $500,000.

"We knew this was a David vs. Goliath battle," Howell said. "All we needed was a bigger stone."

States to Zero-in on Tax Cheats as Economy Sags

From the Associated Press:

The U.S. financial meltdown is creating brighter job prospects for at least one occupation: tax collector.

Several states — including New York, Massachusetts, California and Illinois — are beefing up tax enforcement and collection efforts as they face widening budget deficits.

"As their budgets quickly hit the skids and the pressure is on, they're going to be looking to see where those dollars are," said Verenda Smith of the Federation of Tax Administrators, an association of tax agencies from all 50 states.

Their targets range from major corporations to small businesses and individuals.

State governments are always seeking ways to narrow their "tax gaps" — the sometimes billion-dollar chasms between what they believe they're owed and what tax cheats and delinquents actually pay. The sliding economy is forcing states to intensify efforts to close the gaps.

In New York, tax collectors have been trumpeting their crackdown, aiming to persuade tax cheats to change their ways.

"At the end of the day, I'm not interested in a lot of arrests. I'm interested in increasing the number of voluntary taxpayers," said William Comiskey, the state tax department's deputy commissioner for enforcement.

New York tax collectors recently sent letters to thousands of small businesses advising them of the consequences of not collecting or remitting state sales taxes. They'll soon send letters to thousands of taxpayers whose returns were done by preparers who are under investigation for fraud, Comiskey said.

The warning letters are part of a broader campaign to publicize the crackdown and steer tax cheats to a new program that will allow them to come clean and avoid criminal prosecution.

Officials expect the program to yield $30 million a year, a pittance compared to New York's projected $8 billion budget deficit for next year.

Massachusetts Likely to Implement Sales Tax Holiday

Earlier in the day, the Massachusetts’ House of Representatives voted 139-15 to approve a sales tax holiday August 16^th and 17^th. Supporters of the bill expect that it will boost retail sales during a historically slow month. However, critics claim that it will not likely increase overall sales but encourage taxpayers to do all of their shopping for the month at one time.

If the bill is passed by the Senate, during the two days in August consumers will not have to pay the state's 5 percent sales tax on any item worth less then $2,500.