June 2005

June 2005

Council Priorities Take Center Stage as Debate on Health Care, Capital Gains Tax, Local Permitting Reform Intensifies on Beacon Hill

On June 10, Governor Mitt Romney filed legislation that would designate January 1, 2003 as the effective date of the capital gains tax increase approved by the state Legislature in 2002.  A legislative compromise had set the effective date of the tax increase for May 1, 2002, but the Massachusetts Supreme Judicial Court, which objected to different taxpayers operating under different tax rates for the same tax year, ruled it unconstitutional.  The High Tech Council was among the few in 2002 who objected to the permanent increase in a competitive tax advantage as part of a solution to a temporary state budget deficit.

Romney: Prevent Retroactive Tax Hike

Romney’s bill is intended to prevent a retroactive tax increase on Massachusetts taxpayers who experienced gains in the first four months of 2002.  In addition he proposes providing tax rebates for all capital gains taxes already incurred under the new tax structure.  The Council strongly supports the Governor’s bill.  By contrast, on June 14, the Legislature’s Joint Committee on Revenue released a $85 million tax hike bill with a provision that allows the state Revenue Commissioner to provide refunds to taxpayers who had capital gains tax bills of less than $100 in the first four months of 2002.  This arbitrary and poorly drawn public policy scheme will not provide relief to taxpayers of all income levels who will be hit with significant – sometimes devastating – retroactive tax bills.

2002 Capital Gains Tax Hike Hurt Competitiveness

In 2002, the Council was the only business association to publicly oppose what was the largest single tax increase in the Commonwealth’s history – a burden that fell primarily on individual taxpayers.  In particular, the Council objected to eliminating the capital gains tax phase down structure, which did not impose a capital gains tax on any asset held for more than six years.  “Raising the capital gains tax would eliminate the state incentive designed to encourage patient capital investment and take away from employers an important tool for attracting and retaining skilled workers,” wrote Council President Christopher Anderson in a June 5, 2002 memo to the Legislature.  Anderson also called the Legislature’s decision to make the tax retroactive for the first five months of 2002 “punitive” and a blow to the public trust.

Capital Gains Tax Structure Still a Priority

In 2005, the Council CEO members have once again made the restoration of the beneficial capital gains structure a top public policy priority.  The Council will be working in upcoming months to advance a more favorable capital gains tax rate structure that rewards entrepreneurs and patient investors.

Travaglini, Romney Make Push for Health Care Reform

On June 9, the Joint Committee on Health Care Finance held a hearing on legislation designed to increase access to health care for the nearly 500,000 Massachusetts residents currently without medical coverage.  At an animated and energetic hearing, the Committee heard from Governor Mitt Romney and Senate President Robert Travaglini, both of whom seem committed to tackle the Herculean task of reforming the state’s costly health care system.

Council Lays Out Health Care Priorities

At that hearing and in subsequent discussions with political and health care leaders, the Council identified a series of related health care policy changes that will improve access and quality of the system and  support an industry that employs nearly 10 percent of the state’s workforce.  Some guiding principles of a sensible health care reform plan include:

o No employer mandates, new taxes to pay for access.  In addressing the nearly 500,000 uninsured residents of the state, we must not impose new taxes and costs on businesses or on the residents of the Commonwealth.  The state should instead embrace a carrot approach that encourages employers to offer health care coverage to their employees through tax credits or other methods.  While we are pleased that Senate President Travaglini’s bill stops short of imposing an employer mandate, the so-called “free rider” charge to the Uncompensated Care Pool (which covers partial costs of uninsured hospital patients) creates a slippery slope and could result in a back-door future tax on employers who already provide adequate health coverage.  Instead the state should further tighten its eligibility regulations for the pool and reimburse community health centers at an appropriate level below that of acute care hospitals.

• Create a system for cost and quality transparency.  Transparency in the state’s health care delivery system is vital so that patients, employers, insurers and providers understand the cost-drivers and quality of services being provided at health care centers throughout the state.  In every other area of business, consumers can have access to pricing and quality differentials that exist throughout the marketplace, and then make decisions accordingly.  Providing the proper level of information to payers and patients will allow for proper investment and efficient allocation of health care resources across the system.
• Support the expansion of health care technology.  The use of technology in health care delivery rated in the top 10 priorities for technology CEOs this year.  While technology CEOs view the recent e-health initiative from the Mass. Technology Collaborative as a way to create a safer, more efficient and cost effective health care delivery system, they also see it as an important business opportunity for technology firms.  Worldwide leaders with a strong presence in Massachusetts like Philips Medical Systems, Siemens and Millipore are creating innovations that improve lives and the quality of care for people across the globe.  
• Reform the state’s medical malpractice system.  The high cost of professional liability insurance for doctors is creating a shortage in many medical specialties in Massachusetts and is a looming crisis for the state’s health care system.  True reform of the state’s medical malpractice system, including a hard cap on non-economic damages, is needed immediately.
• Base nurse staffing ratios on medical need.  Legislation mandating nurse staffing ratios as proposed by the Mass. Nurses Association is a bad idea and will hurt hospitals that already have serious financial issues.  Decisions based on staffing should be flexible and evolving and made on the best medical judgments of hospital administrators and nurse executives.
• Assure hospitals and doctors proper levels of Medicaid reimbursement.  Hospitals currently receive 80 cents on the dollar for services rendered for Medicaid patients.  Boosting the reimbursement rate closer to 95 cents on the dollar (as was the case in 1995) would give hospitals the financial flexibility to invest in capital upgrades and keep costs down for its payers.  Under funding Medicaid or the Uncompensated Care Pool results in added costs passed along to health plans and employers, and is a threat to the future of our local health care industry.

Health Care Reform Law Expected this Fall

The Council has been working with numerous companies and groups to craft a health care compromise plan that would address many of the goals stated above.  Sen. President Travaglini has promised that the Senate will deliver a health care reform package by the fall and Romney has indicated he will be flexible in considering what the Legislature sends him, while continuing to push for his health care priorities.  It is critical that state government enact meaningful health care reform this year to head off a potential universal health ballot question for November 2006 that would have a significant detrimental effect on our state economy.

Sluggish Permitting System Put on Fast Track to Reform

On June 16, Governor Romney, Democratic and Republican legislators, business leaders and mayors from across Massachusetts joined together in support of reforming the state’s complex and costly system for permitting new or expanded business facilities in Massachusetts.  The need for permitting reform was articulated by Council Chairman Paul Gudonis at the Council’s Annual Meeting in March.  Gudonis noted that the arcane and sluggish state and local permitting process put Massachusetts at a competitive disadvantage to other technology states.

The proposed reforms to the commercial permitting process would create an opt-in provision for streamlined permitting at specific sites rather than for the whole community; provide $4.5 million in technical assistance grants to help communities update their local regulations and bylaws; and develop an online inventory of pre-permitted sites.

Hanscom Flies High in Audit of Technical Facilities

According to recently released Pentagon documents, Hanscom Air Force Base earned high marks on the evaluation of technical facilities as part of the Base Realignment and Closure process.  Hanscom earned the top ranking of all Air Force technical facilities and was ranked third among all of the military’s technology facilities nationwide.  The Pentagon recommended an expansion of Hanscom that would bring more than 1100 new direct jobs to Massachusetts.

The Council, through the Massachusetts Defense Technology Initiative (MassDTI), argued that Hanscom and the Natick Soldier Systems Center have strong ties to the nation’s premier defense technology cluster that exists right here in Boston’s backyard.  That proximity and the potential to accommodate new military mission as proven by the state funded Mission Capacity Expansion Plan were the key factors in the favorable May 13 decision for both technical facilities.  The independent BRAC Commission is currently reviewing the Pentagon’s recommendations and will make its own changes to the list by September 8. MassDTI is co-chaired by Governor Romney and Senator Edward Kennedy, and also includes leaders from the defense technology, academic and military communities.

Upcoming Council Events:

July 6 – BRAC Commission holds regional hearing in Boston, Massachusetts Convention Center

November 17 – 2nd Annual Council Chairman’s Dinner, The State Room, 60 State Street, Boston

Fiscal Year 2006 State Budget Update:

House Approved Budget: $25. 527 billion – up 2.8% from 05 spending

Senate Approved Budget: $25.931 billion – up 4.2%

Romney Recommendations: $25.097 billion – up 0.8%

Source: Mass Taxpayers Foundation

The budget is currently before the Joint Budget Conference Committee