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Massachusetts Governor Seeks Tax Increases to Fund Public Projects


 Massachusetts Governor Proposes Sweeping Changes to Tax System.

Last week, Massachusetts Governor Deval Patrick (D) announced ambitious plans to expand the state's transportation system. Like many other governors in these tight budgetary times, in order to fund these and other public infrastructure projects, he's going to have to raise taxes. Possible sources of revenue include changes in the gas tax, payroll tax, income tax, or sales tax.

In his State of the Commonwealth Address on January 16, the governor announced his proposal to "...restructure our tax system by placing a greater reliance on the income tax and less reliance on the sales tax." 

The governor's proposed budget will "cut the sales tax from the current rate of 6.25 percent to 4.5 percent." Education initiatives would be funded by increasing the income tax by one percent —from 5.25% to 6.25%. He explained that "[t]o make that increase fair to all according to their ability to pay, I will propose that we we double the personal exemptions for every taxpayer and eliminate a number of itemized deductions."

Simpler and Fairer

The governor says his proposed tax changes would "give us a tax code that is simpler and fairer." He added, "[W]ith these changes our sales, income and business taxes will be comparable to and competitive with other states in the region and beyond with which we compete."

Snapshot

Gov. Patrick says he will:

"… dedicate all of the proceeds [from the sales tax] to a public works fund. That fund will support the transportation plan I have laid out -- both our existing responsibilities and the necessary expansion projects -- as well as the school building fund and other public infrastructure."

Revenue generated by the state sales tax "would be off limits for any other purpose."

"There will be debate."

Governor Patrick said that he welcomes debate. That's good, since it has already begun. He asks only that "instead of sinking into the same old slogans, let's have a serious, respectful, fact-based debate."

The debate has begun. In New Hampshire, which has long referred to its neighbor to the south as Taxachusetts, the Union Leader says, "Bring it on." NH Governor Maggie Hassan (D) acknowledged that the proposed changes to Massachusetts' tax system could be "an economic boost for us." Her reaction? "I welcome it."

Boston Magazine calls the governor's plan clever, since "The bulk of the new burden" will fall on the shoulders of "higher-incomer earners" and the "tax burden of those on the lower end" will be lessened. The Boston Globe published figures that indicate lower income people will pay less under the governor's plan, while higher income people will pay more.

Perhaps Gov. Patrick's proposal is a way around the State's constitutional restriction on taxing higher income levels at a higher rate. The Massachusetts Constitution prohibits raising taxes at different rates for different income levels. Article XLIV reads that a tax on income must be levied "at a uniform rate throughout the commonwealth upon incomes derived from the same class of property." Although the governor proposes raising the income tax equally, "he's off-setting the tax hike with two measures that actually lesson the tax burden on most low-income earners, while placing most of the new burden on the wealthier ones." (Boston Magazine).

Governor Patrick is proposing a "sweeping reform of state government." His plan merits scrutiny, and it is sure to get it, from both sides of the aisle.

photo credit: pepsiline via photopin cc

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.