Governor Deval Patrick, unleashed from the political constraints of a looming election, unveiled a bold plan Wednesday for his last two years in office, proposing to hike the state income tax while slashing the sales tax.
Patrick’s tax package, which also includes a corporate tax increase, would raise an additional $1.9 billion annually to pay for a sweeping expansion of the state’s transportation system and major new education programs.
In his seventh annual State of the Commonwealth speech, Patrick sought to move beyond the cost-cutting of his recession-plagued first term and achieve the vision he first presented when he burst onto the political scene as a liberal force in 2006.
The governor, acknowledging that he has an eye on his legacy, called on legislators to raise the state income tax from 5.25 percent to 6.25 percent while cutting the sales tax from 6.25 percent to 4.5 percent.
All sales-tax revenue would then be dedicated to a public works program that would broaden rail service from the Berkshires to Cape Cod, build schools, stabilize the beleaguered MBTA, and repair crumbling roads and bridges.
“There is no good time to raise taxes,” Patrick declared in a 24-minute speech in the House chamber that struck a confident tone. “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.”
The second-term governor is proposing the kind of tax increases few politicians, including Democrats, have dared to push. In 2009, the governor signed a $1 billion increase in the state sales tax. The plans he unveiled Wednesday nearly double that.
While average taxpayers who earn less than $37,523 would see a $100-to-$200 tax cut, everyone else would pay higher taxes. Those who earn more than $102,886 would bear the brunt, paying an additional $3,200 a year in combined income and sales taxes.
For those in between, the change would be less dramatic. Taxpayers who earn $37,523 to $60,414 a year would pay $100 more, while those who earn $60,414 to $102,886 would pay $400 more.
Patrick argued his plan will make the tax code simpler and fairer because he will double personal exemptions and eliminate 45 deductions. His plan also calls for changing the corporate tax code to raise $149 million annually. Those changes include ending a deduction for large companies and eliminating a special classification for security and utility firms.
The governor said his aggressive agenda would ensure the state maintains its lead in economic competitiveness and student achievement by extending the school day and making college more affordable, while delivering trains and late-night bus service to neglected corners of the state.
“The people we work for want the schools I have described,” he said. “They want the rail and road services we have laid out. And above all they want the opportunity and growth these investments will bring. We on their behalf have choices to make. I choose growth.”
In the House chamber, which was filled with administration officials and Democrats, there was applause when the governor called for more taxes and spending.
But House Speaker Robert A. DeLeo and Senate President Therese Murray, two fellow Democrats who will determine the fate of Patrick’s plans, both stopped well short of an endorsement.
“We have to take a look at it,” DeLeo told reporters. “This is a major proposal that the governor put forward with us today, and I think it is only fair that we give members the opportunity to talk about it, as the governor has stated, debate it, and then we will have an answer.”
Murray characterized the speech as just the first step in lengthy negotiations.
“He threw long, and maybe we’ll meet him somewhere down the road, but we don’t know yet,” Murray said.
Patrick acknowledged that his plans will touch off a political battle on Beacon Hill and could provoke Republicans and antitax activists heading into the special election to replace John F. Kerry in the US Senate and the 2014 governor’s race.
“There will be debate,” said Patrick. “I encourage it. 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, fact-based debate.”
In a sign of the political peril the governor’s plan poses, state Treasurer Steve Grossman, a Democrat and likely candidate for governor in 2014, declined to offer his opinion on the governor’s tax agenda, saying he needed to digest the details.
Republican lawmakers demanded that the governor seek further consolidations, restructuring, and reforms before they would consider any tax increases. While they did not rule out some new revenue to fund transportation, they accused Patrick of using state funds to burnish his political stature before he leaves office.
“I don’t see how the taxpayers can afford to pay for the governor’s legacy that he’s trying to announce,” said Bradley H. Jones Jr, the House Republican leader. “I don’t see how adding the third massive tax increase during his seven years in office is a good thing for the Commonwealth, the taxpayers, or the economy.”
Patrick had also raised taxes by closing some corporate loopholes in 2008. During his reelection campaign in 2010, he said, “I don't have any plans for broad-based tax increases,” a comment that Jones and other critics seized as evidence the governor misled voters.
Antitax activists pointed out that voters approved a ballot question in 2000 to gradually lower the income tax rate from 5.95 percent to 5 percent. But in 2002, the Legislature effectively froze the rate at 5.3 percent, while adding triggers that would lower rates only if revenue benchmarks were met.
“Didn’t the voters order the income tax rate rolled back to 5 percent in 2000?” Barbara Anderson, executive director of Citizens for Limited Taxation, said. “Don’t think that means they want the rate to be 6.25 percent. So no thanks, governor: don’t want to ‘invest’ more in a corrupt, wasteful, unaccountable, mismanaged Commonwealth. Fix it first.”
But Patrick said his plan will guide the state into the future.
“As I consider our work together over the last six years, I think most governors wonder ‘What will last?’” he said. “I submit to you that if we act in this bold way, if we recommit to support our schools and our highways and byways, and do it for every corner of our Commonwealth, not only will we have done something meaningful for today, but we will have affirmed our commitment to opportunity itself.”