Governor Deval Patrick is set to propose an increase in the state income tax as part of a multipronged plan to raise new revenue for transportation and education, said a person with direct knowledge of the governor’s plan.
Patrick is expected to unveil the plan, at least in part, in his annual State of the Commonwealth speech Wednesday night. Many in and around state government said he is targeting the income tax because it is the only tax that would bring in enough money to fund his ambitious transportation and education agendas.
Those proposals, which he began rolling out this week, call for $1.5 billion in additional spending next year and $2 billion in annual spending in future years to shore up the state’s transportation system and expand early education programs.
Boosting the income tax from the current rate of 5.25 percent to 5.66 percent would raise $1 billion annually, according to a menu of revenue options the Patrick administration released Monday. The remainder of Patrick’s proposals could be funded through other fees or taxes.
State budget specialists say that, besides the income tax, the sales tax would be the only other revenue source that could bring in enough money to finance Patrick’s expansive plans. But the governor signed an increase in the sales tax in 2009, pushing the rate from 5 percent to 6.25 percent, making another increase this year politically difficult.
“I do have a strong sense it’s going to be the income tax,” said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, a business-backed group that tracks state finances. “Fundamentally, the only way you can raise that kind of money is through a broad-based tax.”
Widmer said he had not been briefed on Patrick’s plan. But the person with direct knowledge of the proposal suggested that an income tax hike would feature prominently in the plan.
“It’s never an easy time to talk about raising taxes,” Jesse Mermell, a Patrick spokeswoman, said in a statement Tuesday. “The governor feels the realities of this economy and knows that families are making hard choices every day. He also knows the best long-term solution is more economic opportunity and easier access to education. He is committed to a solution that is dedicated, comprehensive, and competitive — and being competitive means being fair.”
The administration did not address the income tax issue in the statement.
Strong proponents and fierce opponents of tax hikes are girding for battle.
On Tuesday, a 120-member coalition of liberal groups and unions, calling themselves Campaign for Our Communities, rallied at the State House in support of raising the income tax to 5.95 percent, the rate it was in the late 1990s. That would bring an additional $2 billion annually into state coffers. The coalition includes teachers’ unions, service employees’ unions, and some state and local officials who are allies of the Patrick administration.
“It’s time for us to reinvest in ourselves,” Mayor Will Flanagan of Fall River said in a statement released by the Campaign for Our Communities. “We have an obligation to every family in the Commonwealth to be sure that the economic recovery is felt by everyone.”
Budget specialists say that raising the income tax could unleash a furious competition among many groups and causes — mental health providers, homeless shelters, cities, and towns — that depend on state funding. Many have seen their budgets cut or crimped over the last five years and have powerful advocates.
“The pressure will be enormous to spread out additional revenues across most of what state government does,” Widmer said.
House and Senate leaders have said they are not opposed to a tax increase this year, unlike past years when they called the idea a nonstarter. Still, House Speaker Robert A. DeLeo and Senate President Therese Murray have said that Patrick’s tax and spending plans will be carefully scrutinized, not rubber stamped.
Opponents of a higher income tax are sure to point out that Massachusetts 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 Democrat-controlled Legislature effectively froze the rate at 5.3 percent, while adding triggers that would lower the rates further only if certain revenue benchmarks were met.
Patrick has already ruled out or strongly downplayed several other possible tax increases. Last month, he said he was not prepared to support a levy on vehicle miles traveled, declaring “I don’t have a mileage tax on deck.” This week, he said a gas tax increase is “not my first choice.” He proposed raising the gas tax by $.19 in 2009, but the Legislature rejected the idea for a sales tax increase.
“You remember I tried the gas tax a couple years ago and had my head handed to me,” Patrick said on WBUR Tuesday. To raise enough money for his agenda, he added, the gas tax would have to be tripled, making it the highest in the nation.
As Beacon Hill prepares for the tax fight, the governor has indicated he stands ready to marshal his supporters to back his plans.
Patrick began campaigning for a tax increase Monday, with a presentation arguing that the state needs to spend an additional $1.02 billion annually to modernize and expand its transit system. The presentation included proposals to shore up the MBTA and regional bus services and expand rail service from Boston to New Bedford and Fall River, from New York City to the Berkshires, and from Boston to Cape Cod.
On Tuesday, the governor continued the campaign with another presentation in which he called for an additional $550 million in spending on education this year, increasing to nearly $1 billion annually over the next four years. The plan calls for universal access to early education for children from birth to age 5, extended school days in high-need schools, making college more accessible and affordable, and allowing community colleges to expand efforts to provide skills needed in the workplace.