Senate President Thomas F. Birmingham and his chief budget lieutenant
drew a line in the sand yesterday and said Massachusetts should not cut its income-tax
rate.
Framing the argument in traditional Democratic concerns for working
families and senior citizens, Birmingham and Ways and Means chairman Mark C. Montigny said
separate plans by Governor Paul Cellucci and the House to trim the state's 5.95 percent
income-tax rate would endanger education overhaul efforts and other important social
programs.
The Senate leadership plan would accept many of the targeted tax
breaks approved by the House last month, but would not adopt that chamber's move to cut
the income-tax rate to 5.75 percent. Cellucci has proposed cutting it to 5 percent.
Even the more modest House reduction, Birmingham said, "leads us
ineluctably down the road to the $1.4 billion tax cut that the governor has proposed. ...
A rate cut inures disproportionately to the benefit of some of the most advantaged people
in our society."
The Senate proposal, which will be included in the full Senate budget
to be released this week, would provide a property-tax credit for senior citizens,
increase the deduction for renters, double the earned-income credit, increase the
deduction for dependents, expand the dependent-care credit, and increase the deduction for
interest on student loans.
The plan also would freeze the lowest rate on capital gains at 2
percent. Birmingham said that this freeze would pay for all the targeted tax cuts, except
for the $48.5 million estimated cost of the property-tax credit. "It has been the
Senate's preference over the last several years to do tax cuts that are more focused,
which are more progressive, which are more directly beneficial to those in our
Commonwealth who are more demonstrably needy," he said.
Cellucci derided the Senate proposal as a "shell game" that
effectively includes a tax increase by its freeze of the capital-gains rate minimum.
Cellucci vowed to veto the freeze, which would halt the rate's incremental drop from 6
percent to zero during six years of ownership of long-term assets.
The Republican governor also pledged to press ahead with a referendum
to force the state to impose a 5 percent income-tax rate. "That's the kind of cut
that will fuel the Massachusetts economy," Cellucci said.
Birmingham accused the governor of a fiscal "shell game" as
well, applying the term to what he said was Cellucci's plan to divert $200 million in
education and tobacco settlement funds to pay for the first year of his tax cut, estimated
to cost $225 million.
The House tax plan, combining the rate cut and targeted relief, is
estimated to cost $109 million in fiscal 2000, according to House Ways and Means Committee
staff.
"If there's a shell game going on, the governor is the one
moving the shells," Birmingham said. "When you talk about the $1.4 billion tax
cut, that had to be premised on the sanguine and facile belief that the good times are
never going to end. It's no different fiscally than if somebody proposed a brand-new $1.4
billion spending program."
He also ridiculed the notion that the state's economy needs a 5
percent income-tax rate to flourish. "I dare him to find a legitimate economist to
say the same thing," Birmingham said of Cellucci's comments. "This economy is
hot enough as it is."
Birmingham, Montigny, and Senate Taxation Committee chairwoman Marian
Walsh said they are committed to fully funding education overhaul efforts. The proposal
calls for $245 million in unrestricted aid to local schools in fiscal 2000, but the House
and governor's budgets provide $158 million and $155 million respectively, said Alison
Franklin, the governor's spokeswoman.
"We made a solemn commitment" on education changes,
Birmingham said, "and we in the Senate will keep that commitment."
Representative Jay Kaufman, one of the architects of the House
package, lauded the Senate proposal. He called the announcement of the plan a good day
"for the working families of Massachusetts."
The debate about how to provide tax relief for Massachusetts
residents comes during a time when the state is enjoying robust revenue collections.
Although the state Revenue Department yesterday announced a 10 percent drop in May
collections when compared with last year, the year-to-date figures are up 2.9 percent, or
$354 million. DOR attributed the May decline to a tax cut signed into law last year.