Senate tax plan adds complexity to state budget talks
In voting to freeze the income tax rate and offer a package of tax relief and tax credits to low-income workers, the Massachusetts Senate may have inserted language into its budget that the House objects to on procedural grounds.
That thorny area is in turn compounded by disagreement over a priority that the new Senate president highlighted in his inaugural speech and the prickly issue of further changing a voter-approved income tax cut. Taken together, the issues could complicate efforts to deliver a final budget to the governor in time for the July 1 start of the new fiscal year.
Senate President Stanley Rosenberg said Tuesday that if the six-member conference committee that will be appointed to reconcile differences between the two bills does not reach a resolution, he and Speaker Robert DeLeo would determine how to proceed.
"The conferees will be meeting and considering all of the differences. The next step would be if they can't come to agreement they would come to the speaker and the Senate president and we would have a discussion about it and determine at that point how to move forward," Rosenberg told reporters.
On a 29 to 11 vote Tuesday, the Senate voted to freeze the income tax rate at 5.15 percent, gradually increase the state's earned income tax credit by 50 percent and increase the personal income tax exemption for all taxpayers.
Current law includes economic triggers that can automatically ratchet down the income tax to 5 percent, and Senate Minority Leader Bruce Tarr, a Gloucester Republican, accused Democrats of an alternate agenda to prop up state revenues by removing the path to a lower income tax rate.
While five Democrats joined Republican senators in opposing the change, Senate Democrats supporting the measure have presented their action as a tax cut because of the increase in the personal exemption.
"There's no guarantee in existing law that they're going to get 5 percent anyway," said Sen. Benjamin Downing, a Pittsfield Democrat, who co-sponsored the amendment. He said, "This is a way to go about cutting taxes."
After the House adopted an amendment increasing the tax credit for conservation land, Rosenberg took that opening to classify the House budget as a "money bill," legislation where taxes can be raised or lowered. Money bills are required to originate in the House, according to the state's constitution and DeLeo has rejected the idea that the budget the House passed is a money bill.
An anonymous House official said in a statement on Friday the Senate's interpretation "directly contradicts 130 years' of Supreme Judicial Court precedent on the matter" and suggested that if the Senate turns the budget into a money bill the House "will assess its legal options at that time."
Asked whether the Senate is prepared for legal action from the House, Senate Chairman of the Revenue Committee Michael Rodrigues said, "I have no clue why they could take legal action. In my opinion the House chose to increase the conservation land tax credit and we chose to increase the earned income tax credit."
By mid-afternoon Wednesday, the Senate had adopted no other amendments changing tax laws and rejected a bid by Tarr to increase the conservation land tax credit. According to an aide, the only tax amendment remaining is a Tarr amendment making changes to corporate tax law.
Tarr, who believes reducing taxes does not transform a bill into a money bill but finds it hard to believe a $38 billion budget does not qualify as a money bill, said the speaker could seek an opinion from the state's highest court.
Gov. Charlie Baker, a Republican who supports increasing the earned income tax credit and helping pay for it by abolishing the film tax credit, said lawmakers made a "commitment" to a formula that would allow the income tax rate to drop to 5 percent.
Asked Wednesday about freezing the income tax rate, Baker said, "I just don't think it's a good idea to raise taxes on one group of people at the same time you're reducing taxes on another."
Barbara Anderson, executive director of Citizens for Limited Taxation, said in an interview she considers the Senate's action a tax hike.
"It's up above where it would have been, which is a tax hike," Anderson said. Providing press clippings to bolster her case, Anderson said when the income tax was raised from 5 percent to 5.75 percent in 1989, it was pitched as a temporary increase. She said, "We are still waiting for the 5 percent and so we're not buying any of the complexities here."
In 2000 Anderson helped lead a ballot referendum to reduce the income tax to 5 percent by 2003, but lawmakers halted the slide in 2002, adding economic benchmarks that would need to be triggered for the decrease to continue. State officials expect the income tax will go down to 5.1 percent in January.
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