IN AN ordinary year the Legislature would be starting hearings on the governor's proposed budget about now, and then the House would leisurely submit its own spending proposal sometime in March, followed by the Senate. But these are not ordinary times. The state is facing a $1.3 billion budget gap, and a recession looms. House Speaker Salvatore DiMasi should be congratulated for coming forward yesterday with a plan to balance the budget, including new revenues that will be essential to keeping Massachusetts progressive and fiscally responsible.
Despite a year of fierce resistance from DiMasi to Governor Deval Patrick's plan to close corporate tax loopholes, the speaker yesterday agreed to end certain tax reporting practices that Patrick correctly called "gaming the system." These include the way some Massachusetts businesses shift income to out-of-state susidiaries in order to avoid paying their fair share. DiMasi emphasized yesterday that his agreement comes only as part of an overall package of sweeteners for business, so his reputation as a friend to business should remain intact. Still, the corporate tax reforms net an additional $204 million. "I think this is a fair way of doing it," DiMasi now says.
DiMasi also got ahead of Patrick by supporting a $1 increase in the cigarette tax, with the expected $152 million in revenue dedicated to make sure the state's landmark universal healthcare law remains sound.
Other proposals in Patrick's budget DiMasi gave the nod to yesterday include $166 million in tax enforcement measures, such as revoking sales-tax exemptions on bug sprays and lawn chemicals and certain airplane parts. These special exemptions are hard to justify in any economy; removing them will make for a more level tax system.
Key to corporate happiness with the DiMasi proposal is an immediate freeze in a scheduled unemployment insurance tax hike - a savings to business of $150 million. A recession may not be the best time to reduce contributions to the unemployment trust fund, as laid-off workers could be applying for benefits at a faster rate. But the fund will still be a healthy $1.3 billion, and the especially high per-worker cost of the unemployment system in Massachusetts has been a long-standing thorn to business. DiMasi also proposes a staggered cut in the corporate tax rate, the details of which may still require some tinkering.
Getting to yes with the House on his revenue proposals is a major breakthrough for Patrick, who was deeply frustrated in his first year as governor. We hope the collaborative new mood will be infectious in the Senate. No one wants to thwart the creation of new jobs. But business also benefits from a robust education and healthcare system, a functioning transportation network, and a high quality of life. That's why it's called a commonwealth.
