Last week Massachusetts Gov. Deval Patrick outlined his plans to improve education and rebuild our transportation network. To pay for this, the governor said in his State of the Commonwealth address that the state’s taxpayers need to “contribute” nearly $2 billion more in taxes.
We think there are parts of the governor’s plan that make sense, but the massive increase in taxes is just too much for our still idling economy to absorb.
To raise this money, Patrick wants to increase the state income tax by 19 percent from its current 5.25 percent to 6.25 percent. At the same time, he would double the personal exemption from $4,400 to $8,800 but eliminate many itemized deductions. The net to the state would be an additional $2.8 billion from taxpayers, shifting the tax burden more heavily on high income wage earners.
Patrick also proposed lowering the sales tax from its current 6.25 percent to 4.5 percent, a 28 percent cut. The state would lose $1.1 billion in revenue, according to administration projections.
Finally, changes to the corporate tax structure would add $194 million to state coffers. The net gain to the state from all of Patrick’s proposals would be $1.9 billion.
We like the governor’s plans to earmark more money for education and fixing the state’s transportation system, particularly if the increases in education are meant to make it less expensive for students to attend Massachusetts colleges and universities. And this region of the state could sorely use a reduction in the sales tax, if only to make it somewhat more competitive with tax-free New Hampshire.
But the income tax hike is simply too much in an economy that is not yielding solid growth. Already there are the signs that the business community will buck this increase.
“Clearly the changes make the state’s tax system more progressive, but it is a large increase to impose on those who make the decisions whether to invest in Massachusetts, especially in a fragile economic environment,” stated Michael Widmer, president of the business-backed Massachusetts Taxpayers Association.
State lawmakers on both sides of the aisle were skeptical of the proposals. They sat silently in the legislative chamber last week as Patrick presented his plans. Later, they were more vocal.
“This is about taxpayers funding the Deval Patrick legacy project and quite frankly I don’t think the taxpayers want to or can afford to,” said Rep. Brad Jones, R-North Reading, the House minority leader.
Senate President Therese Murray, D-Plymouth, said the governor “threw long” and held out the possibility of a meeting “somewhere down the road.”
Patrick acknowledged in his address that “there is no good time to raise taxes.” That’s true. But it is particularly bad timing to whack taxpayers with a $1.9 billion bill just as the state is struggling its way out of recession.
Patrick has indeed “thrown long,” but no doubt this is a strategy that will not result in the $1.9 billion tax hike that he seeks.