SalemNews.com, Salem, MA

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January 17, 2013

Governor calls for income tax hike

BOSTON — Gov. Deval Patrick asked the Legislature last night to support a net increase of $1.9 billion in state taxes to support major new spending on transportation and education.

Patrick used his annual state of the state address to propose hiking the state income tax from 5.25 percent to 6.25 percent, while doubling the personal exemption for all taxpayers and eliminating dozens of itemized deductions.

At the same time, he called for reducing the state sales tax from the current 6.25 percent to 4.5 percent.

The governor said the changes would make the state’s tax code fairer, because the sales tax is generally considered more regressive than the income tax. He also said the changes would keep Massachusetts competitive with most neighboring states.

“There is no good time to raise taxes. I know how tough times have been on the people and families of the Commonwealth,” Patrick said, as the House chamber fell silent.

“I would not ask if I did not believe in my heart that investing meaningfully today in education and transportation will significantly improve our economic tomorrows. But because we all have a stake in that future, we should all contribute to paying for it.”

Administration officials said the income tax changes would raise $2.8 billion in the next fiscal year starting July 1, while closing some business tax loopholes — also part of the plan — would bring in $194 million. The increases would be partially offset by the $1.1 billion reduction in the sales tax.

The meals tax, paid by restaurant diners, would also fall to 4.5 percent.

Under his plan, the income tax hike, Patrick said, would go to support education initiatives, while in the future all proceeds from the sales tax would go to a public works fund that will support transportation, school construction and other public infrastructure. Sales tax proceeds would be off limits to any other state programs.

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