Tax Bill Clears House, Moves Debate To Senate
Taking the first major step toward a significant tax hike this year, the House on Monday night approved $500 million in new revenue from increases in the state’s gas, cigarette and business taxes in an attempt to solidify the finances of the state’s transportation system and invest in local road repair projects.
The House voted 97-55 just before midnight to approve the tax package that would raise the state’s gas tax by 3 cents, increase the per-pack cigarette tax by $1 and impose new taxes on utility companies, software services and out-of-state corporations doing business in Massachusetts.
The margin of support for House Speaker Robert DeLeo’s plan, however, fell eight votes short of the two-thirds needed to override a threatened veto from Gov. Deval Patrick.
Opposition to the bill came from both sides of the debate, including liberal Democrats who support more revenue and fiscally conservative Democrats and Republicans that don’t want to support new taxes. Advocates speculated throughout the day about where the vote would land and how DeLeo might try to swing votes to his side should it come to that.
“I am proud of today’s House vote for a carefully calibrated revenue package that allows us to fund our transportation system without placing excessive burden on taxpayers. With this vote, we address the needs of business and commuters who rely upon our transportation system in a way that encourages economic growth while minimizing the pain on families and employers,” DeLeo said in a statement after the vote.
The focus of the tax debate now shifts to the Senate where the Senate Ways and Means Committee today is expected to release a revised version of the House-backed transportation financing proposal, hewing closely to the parameters of the $500 million target agreed to by House and Senate leaders last week.
The Senate bill, according to advocates and sources within the Senate, however, is expected to contain reforms and other changes that may require the two branches to reconcile the bills, a step that would delay the proposal from reaching the governor’s desk.
The Senate intends to takes up its bill on Thursday, and advocates for increased funding say there could be solid bloc of Democrats ready to vote against the proposal.
Gov. Patrick has promised to veto the bill if it arrives in its current form, calling it a “pretend fix” to years of underinvestment in transportation. Patrick has expressed his hope to negotiate a compromise with the Legislature somewhere in the middle of his $1.9 billion transportation and education plan, and the $500 million plan passed by the House.
Second Assistant Majority Leader Kathi-Anne Reinstein (D-Revere) after the bill passed called it a “responsible package” that avoided toll and fare hikes. She said the bill had “overwhelming support.”
“We had a good vote and it shows our members supporting helping our transportation system and helping our ratepayers and taxpayers by not overburdening them with taxes they can’t afford,” she said.
Rep. Carl Sciortino, a Medford Democrat who has pushed for more revenue, said he worries lawmakers are missing an opportunity to make lasting long-term investments in transportation.
“I hope the sizeable block of no votes would encourage our leaders to take a deep breath and go back to the table,” Sciortino said.
Republicans offered amendments striking the sales tax on software services, the utilities exemption, the gas tax and indexing the gas tax to inflation, proposals that were all rejected.
During the debate, Jones warned the majority, “You’re going to look foolish” for voting in favor of an amendment to study the idea of exempting municipalities from the gas tax –an idea that has been raised for nearly two decades, he said – while earlier voting against a proposal to study the entire $500 million tax package.
“That is a microcosm of what is wrong,” Jones said after the final vote, referring to the study amendments.
Jones said eliminating the utilities tax exemption, which would impact NStar and National Grid by charging them a corporate tax rate of 8 percent instead of 6.5 percent, would be passed on to consumers. The amendment to retain the exemption was rejected 44-102.
“It will be convenient because you’ll say blame NStar, blame National Grid. But blame yourself. You’re doing it to your constituents and ratepayers,” Jones said.
Kulik, in defense of the provision that will generate $48 million in new taxes, called the utility exemption an “antiquated and outdated” tax break intended to encourage utilities to bring electricity to rural parts of the state that were not served years ago.
Several amendments that found new ways to raise or cut taxes were ruled out of order during the course of the debate, but other proposals to eliminate specific tax increases found bipartisan support while still falling short.
Rep. Marc Lombardo (R-Billerica) proposed to scrap the tobacco tax increases because he said they would amount to a “stimulus” for New Hampshire where a pack of cigarettes would be that much cheaper. His amendment won the support of 19 Democrats.
“We’re counting on them not to quit to the tune of $150 million,” said Assistant Minority Leader George Peterson (R-Grafton), disputing the notion that the tax is intended to encourage smokers to quit.
Another Republican-led amendment to scrap the proposed tax on computer design service was backed by 26 Democrats.
The House also voted 46-103 against striking the gas tax increase. Peterson argued that increasing the gas tax by three cents may seem like a small tax, but will increase the cost of delivering goods hurting truck drivers or the small business that will pay increased delivery fees for products.
Also falling short with 53 votes in favor to 95 opposed was Rep. Paul Frost’s effort to block the indexing of the gas tax to inflation, which the Auburn Republican and others suggested was a shirking of legislator’s duties to allow the gas tax to increase on its own without future Legislative approval.
Straus said the plan was intended to preserve the purchasing power of the gas tax, which has not been increased since 1991, by tying it to economic indicators instead of political forces.
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