Massachusetts governor wants tax hike for $34.8 bln budget

Wed Jan 23, 2013 5:11pm EST

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Jan 23 (Reuters) - Massachusetts Governor Deval Patrick proposed on Wednesday a $34.8 billion state spending plan for fiscal 2014 that would hike income taxes by 1 percentage point to raise revenue for new education investments.

Patrick's plan would raise the income tax rate to 6.25 percent from 5.25 percent, double the personal exemption and strip the commonwealth's tax system of several itemized deductions.

The plan, which state lawmakers will be asked to approve, would also lower the sales tax rate to 4.5 percent from 6.25 percent, and would dedicate sales tax revenue to transportation projects that Patrick said were critical for the state's future.

He also repeated a call to tax soda and candy sales, which are currently exempt, and said the cigarette tax should rise by $1 to $3.51 per pack.

"I do not submit this proposal lightly," he said of his plan to hike income taxes. By focusing on education and transportation, Massachusetts will be able to grow its economy, he said.

The governor's total spending plan did not include a $1.6 billion pension contribution, an increase of about $78 million from fiscal 2013.

The commonwealth will also have to spend $62 million more on debt service payments next year, for a total of $2.4 billion.

Massachusetts, called "Taxachusetts" by some citizens who complain about high taxes, had been facing a projected budget gap of at least $1.28 billion in fiscal 2014, according to the Massachusetts Budget and Policy Center.

In a call with reporters, Massachusetts Finance Secretary Glen Shor said the budget was balanced.

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