Romney’s fiscal policies as governor (Fact Checker biography)
EDITOR’S NOTE: This column will be the first in a series of five columns this week examining how factual former Massachusetts governor Mitt Romney has been in describing his past achievements. Reporter Josh Hicks has spent weeks examining Romney’s statements and deciding which ones best represent how Romney talks about his past. After this week, he will turn to the other candidates. We welcome suggestions from readers for statements to vet. — Glenn Kessler
“We were able to balance our budget all four years without raising taxes. We were able to cut back on government spending and government employment, and so we were able to balance that budget and ultimately build a rainy-day fund much larger than when I took office.”
— Mitt Romney’s remarks during a July 5, 2011, campaign event in Iowa
Romney repeats these lines often on the campaign trail, and it’s easy to see why. He needs to convince the Republican base of his fiscal-conservative credentials.
These remarks obviously suggest that Romney reduced spending and balanced the budget without raising taxes. We researched his record in Massachusetts to find out how well his policies match his claims.
Romney increased the Massachusetts rainy-day fund from $640 million to $2 billion, so he did indeed build a larger reserve for the state.
The former governor also balanced the state’s budget each year of his term, but he did so in ways that won’t sit well with tea party advocates who say they’re “Taxed Enough Already.”
True to his literal words, Romney didn’t increase taxes, but he admits to raising fees by at least $240 million during his term. Here’s what he had to say about the issue during a 2008 debate in Simi Valley, Calif.:
“We audited our fee increase because, of course, we cared. Now, why did we raise fees $240 million? We had a $3 billion budget shortfall. We decided we were not going to raise taxes. And we found that some fees hadn’t been raised in as many as 20 years.”
Some conservatives might argue there’s little difference between taxes and fees, since they both dip into taxpayers’ pockets to feed government coffers.
Romney gets away with this one on a technicality, but the staunchest conservatives may not differentiate as much as he does between fee hikes and tax increases. (As an example, see this Club for Growth analysis on Romney’s “mixed record” on taxes.)
(UPDATE: The Tax Foundation describes fees as targeted charges or payments for specific services, noting that “any assessment that raises money in excess of what is needed to defray costs is a tax.”
According to this standard, Romney definitely raised fees that were actually taxes. The New Republic pointed out in a March 2012 article that Romney quintupled the rate of a fee on wholesale fuel deliveries -- despite his Republican predecessor’s recommendation to only double it --and consolidated the dedicated account into the state’s general fund to help close a $3 billion budget gap.)
That’s not the only problem with Romney’s tax remarks. The $240 million figure he mentioned represents only one year of his term. FactCheck.org noted during his first presidential run that the former governor raised fees by that much in 2004 alone, not throughout his term.
Romney also raised new revenue with more than just fee hikes. He closed 22 tax loopholes worth between $850 million and $1.2 billion, according to the Massachusetts Taxpayers Foundation, an independent watchdog group. A recent New York Times article reported that the loophole closures generated $370 million per year by his last year as governor. (UPDATE: An earlier version of this column mischaracterized the Times report.)
Romney spokeswoman Andrea Saul contends that loophole closures are not tax increases.
“The ‘loopholes’ he closed ensured that businesses and other entities in the Commonwealth did not evade the spirit of the law,” she said. “Companies sometimes use aggressive accounting techniques to lower their tax liability in ways that were never intended by the law. When that happened, the state closed the loophole. That’s called tax enforcement. This effort was one of the actions taken by Governor Romney that led to a credit rating upgrade for Massachusetts.”
The Times report says Romney also asked for his state to be exempt from the 2004 jobs bill requiring states to lower their corporate tax rates.
Overall, the combined state and local tax burden in Massachusetts rose from 9.6 percent of total income to 9.9 percent during Romney’s term. The high mark during Romney’s era was 10.3 percent of income in 2005, and the state ranked 17th-highest in the nation by the time he left office.
Romney doesn’t deserve all the blame for raising the tax burden, since he didn’t have direct control over local taxes. But he can’t claim innocence, either. The Times article notes that he signed legislation encouraging municipalities to lower residential property tax rates while raising them for commercial properties. It’s not as if he didn’t influence local taxes at all.
As for Romney’s claims that he “cut back on government spending,” he’s right. We looked at the state’s total expenditures for 2002 through 2007 and found that they fell by at least $350 million with inflation-adjusted numbers. That’s despite a sizable 10 percent increase during his final year, when the economy was humming.
The Pinocchio Test
Romney paints only a partial picture of his Massachusetts fiscal policies when he says he didn’t raise taxes. He fails to mention that he created hundreds of millions of dollars worth of new fees and closed as much as $1.5 billion worth of corporate tax loopholes.
The former governor may have a point that his fee hikes and loophole closures were both fair and long overdue, but he should be more upfront about the fact that he boosted the treasury by digging deeper into taxpayers’ pockets. Instead, he talks selectively about the methods he used, talking only in terms that cuts-only conservatives like to hear.
The tax comment alone might warrant two Pinocchios, but Romney told the straight truth about the remaining issues: balancing the budget, increasing reserves and reducing government spending. Overall, he earns one Pinocchio.
Check out our candidate Pinocchio Tracker