After no new taxes pledge, Baker faces grand bargain bill — with an $800 million new tax

Governor Charlie Baker campaigned on a pledge of no new taxes, no new fees. But in the past he has backed bills that charged for “new services.”
Aram Boghosian for The Boston Globe/File 2018
Governor Charlie Baker campaigned on a pledge of no new taxes, no new fees. But in the past he has backed bills that charged for “new services.”

It is Governor Charlie Baker’s most sacrosanct policy position. The one he repeated on the campaign trail. The one that helped him win his close race in 2014. The one that’s easiest for voters to remember: No new taxes. No new fees.

Now the Republican has a bill on his desk — one supported by large bipartisan majorities in the Legislature — that includes a sweeping paid family and medical leave program funded by imposing a new $800 million payroll tax on workers and employers in Massachusetts.

So, will he sign the bill?


Baker told reporters Monday he was still reviewing the legislation but indicated support for the measure. Asked if signing it would violate his no-new-taxes pledge, Baker did not directly reply, saying, “There’s a benefit that’s attached to this thing, and that benefit is a paid family leave provision that did not previously exist in state law.”

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The bill would establish a program that would allow almost all employees to take up to 12 weeks of paid family leave and up to 20 weeks of paid medical leave — with a guarantee that they could return to their same or equivalent positions, with the same status, pay, and employment benefits.

The program would be funded through a 0.63 percent payroll tax that would average between $4 and $4.50 weekly per employee, according to Senator Jason M. Lewis, a Democrat from Winchester, who helped craft the bill. The cost would be split roughly 50-50 between employee and employer, he said. Workers would see a deduction from their take-home pay starting in the summer of 2019, with the leave benefits available to them starting in 2021.

Speaking on the Senate floor last week, Lewis estimated the annual cost of the program at $750 million to $800 million, a range that outside analysts confirmed was in the ballpark.

The legislation, known on Beacon Hill as the grand bargain, would also raise the minimum wage to $15 by 2023, eventually eliminate time-and-half pay on Sundays and holidays, and create a yearly sales tax holiday. Baker has until July 1 to act on the package.


The bargain moniker comes from the expectation that, in return for the bill becoming law, advocacy groups will drop three proposed ballot questions that seek to lower the sales tax to 5 percent, raise the minimum wage, and create a paid leave program.

Several parts of the bill have drawn concern from the business community, including the new payroll tax.

“The grand bargain’s new paid family and medical leave program is funded by a payroll tax, very similar to how the unemployment insurance and Social Security programs are funded,” said Eileen McAnneny, president of the business-backed Massachusetts Taxpayers Foundation.

“While this version is significantly better than the language that would have been on the ballot in November had a compromise not been reached, it represents a sizable new cost to employers.”

Speaking to reporters, Baker also said that the version in the legislation makes more sense, especially for small businesses, than the one in the proposed ballot question, “which is a pretty important consideration.”


On the campaign trail in 2014, Baker said he would not raise taxes or fees. In TV ads during the race, he savaged his Democratic opponent, Martha Coakley, as having “only plans for higher taxes.”

And in a 2015 interview with the Globe before he was sworn in, Baker affirmed that his no-new-taxes, no-new-fees pledge was an irrevocable promise — with one caveat.

At the time, Baker said he would not consider it a violation of his pledge if the state rolls out a “new service” that has never been offered and attaches a charge to it.

If the governor signs the bill, it would fall under the new service category, aides said Monday.

That’s how his administration framed a law Baker signed regulating ride-sharing services such as Uber, which slapped a 20-cent per-ride fee on the transportation network companies.

It’s part of how aides framed Baker signing into law a rewrite of the voter-passed marijuana legalization measure, which increased the state’s not-yet-implemented pot tax above what voters had approved.

Baker also supports subjecting short-term rentals booked through websites such as Airbnb to a new tax, a move he said last week is about “leveling the playing field.” That is, if someone is running what is effectively a hotel out of their house using Airbnb, their guests should pay the state’s 5.7 percent room occupancy tax, just like someone staying at a Hyatt or a Hilton.

But even as he backs those new sources of revenue, Baker has touted his support for lowering one big tax and holding the line on others.

In his speech to the state Republican Party convention in April, Baker said that his administration supports “reducing the sales tax and making the sales tax holiday permanent.”

And in his State of the Commonwealth address in January, Baker said that his administration began its term with a $1 billion structural budget deficit. “Today,” he boasted, “we’ve reduced that deficit to less than 100 million [dollars] without raising taxes.”

But low-tax activists say talk is cheap.

Chip Ford, executive director of the Citizens for Limited Taxation, said without any corresponding tax cut, the grand bargain measure is an instance of businesses “getting hammered again.”

“There’s no way other than describing it as a new tax. It’s not an old tax, it’s not in existence now. Every tax increase has its rationale and its explanation and its excuse. It doesn’t make it any less of a tax,” Ford said.

“Charlie Baker is a politician. Politicians say what they have to say in the moment,” he later added. “But I still say, he’s the best Democrat out of the bunch to elect.”

Baker faces a challenger in the Republican primary on Sept. 4.

Joshua Miller can be reached at Follow him on Twitter @jm_bos. Matt Stout can be reached at Follow him on Twitter @mattpstout.