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State of the Commonwealth

Patrick pushes for income tax hike

Shrugging off the fiscal caution of recent years, Governor Deval Patrick proposed a $1.9 billion tax increase tonight in his State of the Commonwealth address, saying it was necessary for the state to invest more in education and the state’s transportation network to “accelerate growth and expand opportunity.”

Patrick called for a 1 percentage point increase, from 5.25 percent to 6.25 percent, in the state income tax. At the same time, he called for a decrease in the sales tax from 6.25 percent to 4.5 percent.

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The net effect of his proposals, which included a number of other changes to the tax code, would be $1.9 billion in new revenue to fund an ambitious and expensive new agenda for 2013, according to a summary released by the Executive Office of Administration and Finance.

Patrick’s speech in the House chamber, which lasted only about 25 minutes, came as he begins the second half of his second and final term and is seeking to cement his legacy. It also came after the state government has grappled for years with lackluster revenues due to the lingering impact of the Great Recession.

While Patrick, a Democrat, was surrounded by the trappings of office and spoke to an overwhelmingly Democratic Legislature, there were voices of dissent. His plan was immediately slammed by House Minority Leader Bradley Jones, a North Reading Republican, who called the tax proposal “economically devastating” and “both reckless and irresponsible.”

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The proposal, “if passed, would represent one of the largest tax increases in the history of the Commonwealth, as well as the largest expansion of the state’s government we have seen,” Jones said in a statement.

Patrick began making the case earlier this week for the tax increase, laying out a vision of the future that includes major transportation projects from the Berkshires to Cape Cod and an ambitious investment in education from preschool to college.

“There is no good time to raise taxes. I know how tough the times have been on the people and families of the Commonwealth. And though the worst of the recession is over, many, many families still face tough decisions and have deep anxiety about the future. 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,” Patrick said in prepared remarks.

Patrick’s speech called for dedicating the sales tax to a public works fund that will support the transportation plan that he outlined on Monday. The income tax increase will be used to pay for the education intiatives he announced Tuesday.

To “make that increase fair,” Patrick also proposed doubling the personal exemptions for every taxpayer and eliminating a number of itemized deductions. Those changes are intended to make the tax code “simpler and fairer,” he said.

The personal exemptions, which reduce the amount of a person’s income that is subject to tax, range now from $4,400 for an individual taxpayer to $6,800 for a head of household to $8,800 for a married couple filing jointly. They would increase to $8,800, $13,600, and $17,600, respectively.

“There will be debate. I encourage it,” Patrick acknowledged in his speech. “Every one of us here has to think twice before asking people who already feel strapped to contribute a little more. But this time, instead of sinking into the same old slogans, let’s have a serious, respectful, and fact-based debate. The people we work for want the schools I have described; they want the rail and road services we have laid out; and above all they want the opportunity and growth these investments will bring us. We on their behalf have choices to make. I choose growth.”

Unleashed from the political constraints of a re-election campaign — Patrick has said he will not run for a third term — Patrick is proposing the kind of tax increases few politicians, including Democrats, have dared to push. Patrick has previously signed an increase in the state sales tax and has also closed corporate tax loopholes. But the plan he is now proposing dwarfs those in their scope.

Patrick is facing criticism from those who have pointed out that he said during his 2010 reelection campaign that he had no plans to propose a broad-based tax increase.

The tax proposal also could rally Republicans and anti-tax conservatives in the upcoming special Senate election to replace John F. Kerry and in the 2014 Massachusetts governor’s race.

Senator Bruce Tarr, the Gloucester Republican who leads the minority in the Senate, said tonight that the proposals came in the context of “an uncertain economic recovery, a state budget wrestling with a gap of $540 million, and too many people that are unemployed or underemployed.”

Tarr said changing tax rates isn’t the only way to increase revenue. “Building a stronger economy with more taxpayers is also important, and we need to fully understand the adverse impacts a nearly $2 billion tax increase will have on the economic growth we need,” he said in a statement.

Stephanie Ebbert can be reached at ebbert@globe.com. Follow her on Twitter @stephanieebbert.
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