GOV. DEVAL PATRICK UNVEILED a nearly $35 billion budget proposal for the coming fiscal year that relies on $1.2 billion in new tax revenues, including $400 million borrowed against future tax receipts.
Patrick has already spelled out his plan to raise the income tax rate from 5.25 percent to 6.25 percent and cut the sales tax from 6.25 percent to 4.5 percent. The proposal would also make the state’s income tax more progressive by doubling the personal exemption and eliminating many deductions taken by wealthier taxpayers.
The governor’s budget proposal calls for a host of other revenue-raising measures, including indexing the gas tax to inflation, raising MBTA fares 5 percent every two years, raising Registry of Motor Vehicle fees 10 percent every two years, and hiking tolls 5 percent every two years. The governor is also proposing to hike the cigarette excise tax by $1 to $3.51 as pack, to repeal the sales tax exemption for candy and soda, and to expand the state’s bottle deposit law to include water and other bottles not covered by the current law. He also expects to collect $83 million in revenues from gambling and $26 million in sales tax from the online retailer Amazon.com.
Because the governor’s tax plan would not take effect until next January, halfway through fiscal 2014, he is proposing to borrow $400 million at the start of the fiscal year using future tax receipts as collateral. Patrick is also counting on more than $800 million in new tax revenue growth.
The governor says the new revenue is badly needed to not only maintain state services but boost local aid for the first time in four years. Under the governor’s plan, much of the new money would be targeted at investments in transportation and education services that he says are needed to create economic growth in the future. He said $11 million would be directed to the state’s 24 Gateway Cities to support locally-designed initiatives.
“This is a plan to grow jobs,” he said at a State House press conference. “If we want growth, then we’re going to have to invest in it.”
Patrick said he was open to working with state lawmakers on modifying his budget and tax proposals, but he said he would fight against the “self-defeating strategy” of refusing to make investments for the future during a fragile economic period. He acknowledged it is difficult raising taxes during a recession, but added: “Doing nothing is also a choice.”
Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the steep tax hikes could discourage business investment in the Bay State in the short term. “That’s certainly the risk, with the size of this,” he said.
Patrick urged reporters to spend time studying his budget proposal and going over it carefully. He said the proposal has a lot of moving parts. “The whole budget depends on the pieces hanging together,” he said.
