Gov. to call for increased income tax rate, lower sales tax

BOSTON (State House News Service) - Gov. Deval Patrick plans to call Wednesday night for $1.9 billion in new revenue to support investments in transportation and education, recommending an increase in the state income tax to 6.25 percent, and an accompanying decrease in the sales tax to 4.5 percent.

“There is no good time to raise taxes. I know how tough times have been on the people and families of the Commonwealth,” Patrick plans to say, according to prepared remarks. “I would not ask if I did not believe in my heart that investing meaningfully today in education and transportation will significantly improve our economic future. But because we all have a stake in that future, we should all contribute to paying for it.”

The governor’s proposal, if accepted by the Legislature, would represent one of the largest tax increases in recent memory, raising the income tax to a level unseen since at least before the 1967, according to records from the Department of Revenue. It would also be the first time the governor, or Legislative leaders, broached the topic of raising broad-based taxes since 2009 when the sales tax was increased to 6.25 percent.

Patrick will call for the income tax to be increased from its current level of 5.25 percent to 6.25 percent, a 19 percent increase that would net the state an additional $2.8 billion in annual revenue.

To offset some of the burden placed on residents by the increase, Patrick will ask that the sales tax be reduced from 6.25 percent to 4.5 percent, a 28 percent reduction. Sales tax revenue, under the governor’s plan, would be dedicated to a public works fund to support transportation projects, the school building fund and other public infrastructure.

The decrease in the sales tax would cost the state an estimated $1.1 billion in revenue each year. The governor will also propose eliminating some corporate tax deductions worth $200 million, netting the state $1.9 billion in annual new revenue.

Patrick will also call for personal tax exemption to be doubled and for a number of “special favors” in tax code to be eliminated to broaden the tax base.

“That is what I propose. There will be debate. I encourage it. Every one of us here has to think twice before asking people who already feel strapped to contribute a little more. But this time, instead of sinking into the same old slogans, let’s have a serious, fact-based debate,” Patrick plans to say.

Mindful of the sensitivity associated with such a major tax increase, Patrick aides circulated lists of government reforms enacted under Patrick’s watch as well as lists of planned investments using new tax revenues.

Patrick on Monday called for major revenue increases to finance state transportation infrastructure investments and on Tuesday outlined his plans for massive new public expenditures in education. The plans would require an infusion of $1.5 billion to $2 billion a year in new revenue over the next four years.