* Income tax rate would rise, sales taxes would drop
* State lawmakers must still approve budget
* On the rise: spending on education, transportation,
pensions, debt service
By Hilary Russ
Jan 23 Massachusetts Governor Deval Patrick
proposed on Wednesday a $34.8 billion state spending plan for
fiscal 2014 that would raise income taxes by 1 percentage point
to increase 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 for
taxpayers and strip the commonwealth's tax system of several
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 during his budget presentation, which was streamed on
Massachusetts, which has a population of 6.6 million, has a
median household income of $65,981, well above the average in
the nation of $52,762. Its unemployment rate stood at 6.7
percent in December, compared to 7.8 percent nationally.
The governor's total spending plan did not include the
state's required pension contribution of $1.6 billion, an
increase of about $78 million from fiscal 2013.
The state's pension funds were funded at a combined level of
71 percent, with a total unfunded liability of nearly $64
billion, as of fiscal 2012, the Pew Center on the States
reported in June.
The commonwealth will also have to spend $62 million more on
debt service payments next year, for a total of $2.4 billion.
Not included in the total budget number is more than $13
billion of additional revenue from the federal government and
The proposed tax changes makes the system fairer, said Noah
Berger, president of the Massachusetts Budget and Policy Center,
in a statement.
Rebalancing the state's tax regime to rely more on income
taxes and less on sales taxes would make the system less
regressive, the center has said.
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
In a call with reporters, Massachusetts Finance Secretary
Glen Shor said the budget was balanced.
The proposed budget uses new revenues while holding spending
nearly flat in many areas, Shor and other officials said.
New revenues include the increased taxes, additional federal
money for Medicaid, tougher enforcement of tax collections,
expanded gambling venues, and an agreement with online retailer
Amazon to begin collecting sales tax on goods sold in the
The state's use of one-time revenue sources would drop to
$555 million next year from $919 million this year. And
Patrick's proposal would leave the state with at least $1
billion in its reserve fund at the end of fiscal 2014, officials
Patrick's budget also calls for the commonwealth to borrow
$400 million by issuing notes backed by the new, anticipated tax
revenue that would be generated in fiscal years 2015 and 2016.
Overall, spending would rise by 6.9 percent over current
levels, while base tax revenue - which doesn't include the new
revenue sources - is projected to grow by about 4 percent.
Spending on education would rise to $6.8 billion from $6.2
billion under Patrick's proposed budget.
The governor also focused on transportation systems, saying
the state should boost spending by $269 million.
That proposal would eliminate the structural operating
deficit of the Massachusetts Bay Transportation Authority
(MBTA), which operates the "T" mass transit system, and would
allow officials to expand service, according to a budget
It would also be used to trim the MBTA's use of borrowing
through bond sales to pay operating costs.