In a victory for dissident Democrats shut out of last week's tax cut debate, the
House of Representatives last night unanimously approved a $160 million package of tax
credits that lawmakers said were designed to help working families.
Worked out in closed-door negotiations yesterday with House Speaker Thomas M.
Finneran and Taxation Committee chairman John H. Rogers, the package quadruples the
deduction for one dependent to $4,800, increases the deduction to $9,600 for two or more
dependents, and doubles the child-care deduction to $4,800 for one child and $9,600 for
two or more. The package, passed by a 153-0 vote, brings the cost of the total tax cut
approved by the House to $435 million. The income tax rate reduction to 5.75 percent
passed last week would cost $275 million of that total, according to estimates. The
current tax rate on income is 5.95 percent.
"This is a victory for the progressives," said Representative John P.
Slattery, a Peabody Democrat who last week decried the House leadership as obstructionist.
Slattery was more conciliatory afte the vote last night, praising Finneran for his
willingness to accept a targeted tax cut.
"This is both good politics and good policy," said Representative Jay
Kaufman, a Lexington Democrat who also was a force behind the legislation.
The package would be partly funded by setting at 2 percent the lowest tax rate on
long-term capital gains on assets held six years or more. Under current law, the capital
gains rate drops incrementally from 6 percent to zero during six years of ownership of
Slattery and Kaufman estimated that the change would generate $90 million toward
the targeted relief. Asked where the remaining $70 million would be found, Slattery
responded, "I think it's an appropriate and prudent cost."
The dependent deductions, which would be phased in over three years, would be
expanded to include elderly and disabled dependents. The new child-care deduction would be
phased in over two years beginning Jan. 1, 2001.
Representative James J. Marzilli Jr., an Arlington Democrat who hosted a St.
Patrick's Day get-together at which the tax package was born, said the House has undergone
a "sea change" in the last two weeks in embracing targeted tax relief. The
effort,he said, has won the support of traditional urban Democrats, upper-income
Democrats, and even the backing of many Republicans.
"I think the speaker accurately read the sentiment of the majority of members
of the Legislature," Marzilli said.
Last week, the two dozen Democrats actively lobbying for the "working
families" tax package assailed Finneran and his leadership team for refusing to allow
consideration of their alternative. House Majority Leader William P. Nagle Jr. had ruled
that debate on the tax package was not germane to the rate cut question.
"Last week there was some civil unrest, I guess you could say, in this
chamber," Slattery told the House yesterday when he pressed for members' support.
As the so-called progressives savored their victory, the size of the tax cut
evoked cautionary words from some observers. James St. George, executive director of the
Tax Equity Alliance of Massachusetts, questioned whether the state can afford such a cut
once the economy begins to sour.
"When the economy slows down," St. George said, "we will have
forfeited the hard-earned fiscal strength we now have."
"We can afford this cut," he continued, "but not this added to the
$275 million tax cut" approved last week.
The Senate has yet to begin deliberations on its budget, and the shape of its tax
proposals are not yet known. But Senate President Thomas F. Birmingham is known to favor
targeted tax relief, such as the "working families" package, as opposed to
straight rate reductions that provide more relief to the wealthy.
This heartens the package's Democratic supporters, who will need support if
Governor Paul Cellucci decides to veto the package on the grounds that the capital gains
freeze is a tax increase. Cellucci proposed a 5 percent income tax rate in his budget.
"This is a great victory for working families across the Commonwealth,"
said Elaine Fersh, director of Parents United for Child Care. "With the cost of
quality child care beyond the reach of most working families, allowing them to deduct what
they actually spend on child care will be a boost for their economic security."
Under the current child-care deduction, a family can claim $2,400 per child and a
maximum of $4,800 per family.
The package also would increase deductions up to $9,600 for families who adopt a