Back tax amnesty proposal advances
Legislature OK's a partial reprieve to bolster budget
Massachusetts residents and businesses who owe back taxes to the state would get a partial reprieve under an amnesty plan approved by the Legislature yesterday, part of an effort to shrink the $1.4 billion hole torn in the state budget by the national financial crisis.
The amnesty proposal would waive penalties, but not interest, on unpaid state income taxes for a two-month period between now and July, with the specific timing to be set by Governor Deval Patrick.
But Patrick did not immediately embrace the amnesty plan yesterday and was reviewing the issue last night, his aides said.
If he signs it, it would be the first time the state has let taxpayers off the hook for paying late taxes since 2002, when Governor Mitt Romney's administration offered the incentive in the midst of another budget crisis.
This time around, it would bring in a lot less money, however.
The 2002 amnesty brought in $174 million, but it was the first time one had been offered since 1984.
The Department of Revenue estimates that now it would bring in $10 million to $20 million in new revenue because the pile of taxes owed to the state is much smaller.
The House and Senate adopted the measure while approving other budget-balancing moves proposed by Patrick, including transferring $200 million from a reserve account, slowing payments to the state pension fund for a savings of $100 million, and making $73.6 million in spending cuts.
The governor has ordered nearly $1 billion in cuts to state agencies that he is authorized to make without legislative approval.
But the Legislature balked at some of the more controversial aspects of Patrick's budget plan. For instance, lawmakers did not take up a system of tiered healthcare premiums for state employees, an idea that is opposed by unions.
And they left out Patrick's request to allow communities to tax utility poles.
They also did not consider some Medicaid cuts sought by Patrick, including more than $64 million in cuts that would affect Boston Medical Center.
Mayor Thomas M. Menino of Boston and BMC officials were concerned the reductions would mean deep cuts in services to low-income patients, including interpreter services, transportation to the hospital, and asthma, diabetes, or primary care.
"I feel like if there's any commitment we make to any institution, then we should keep it," said Representative Robert A. DeLeo, chairman of the House Ways and Means Committee.
Those issues are likely to reemerge in January when the Legislature reconvenes in "formal" sessions.
During the current season of "informal" sessions, an objection by a single lawmaker can block a proposal.
The House approved the budget package without debate after it was hammered out behind closed doors.
"I think we took a giant step towards addressing the fiscal problem that we have in the Commonwealth with the legislation we put out today," DeLeo said.
"We are encouraged that the House has included many of our proposals in their legislation to solve the $1.4 billion budget gap, including spending cuts, a modest withdrawal from reserves, and extending the state's pension funding schedule," said Leslie A. Kirwan, secretary of administration and finance.
A reduction of 1,000 jobs and $1 billion in cuts and savings initiatives have left many social service groups and hospitals concerned about serious cuts in services to vulnerable populations.
They also have forced the delay of some of Patrick's promises to boost funding for education and life-sciences research.
Michael Widmer, executive director of the Massachusetts Taxpayers Foundation, said the Legislature did not do much yesterday to help the state's bottom line.
"There are no real cuts to address the revenue shortfall," he said. "The Legislature's doing most of what the governor asked, but it doesn't really help address the revenue shortfall on an ongoing basis."
He called Patrick's plan to create a tiered system for health insurance premiums "a modest proposal."
The administration has estimated it would bring in an additional $28.5 million in revenue.
His proposal to end a tax loophole that spares telecommunications from paying taxes on utility poles would bring in an estimated $13 million. Both initiatives have failed in the House previously.
In addition to the amnesty proposal, lawmakers also proposed giving cities and towns more time to opt into the state's Group Insurance Commission, which the Legislature hopes will reduce healthcare costs for municipalities.
The Metropolitan Area Planning Council praised extending the deadline for cities and towns to join the commission beyond Oct. 1.
Joining the commission requires the agreement of municipal employee unions in most cases.
"For those municipalities who were considering the GIC but couldn't seal the deal by October 1, this deadline extension could be a lifesaver," Marc Draisen, executive director for the Metropolitan Area Planning Council, said in a statement. "There are dramatic savings in health insurance costs under this plan, and cities and towns are really paying attention to that as fiscal challenges grow deeper."
John C. Drake can be reached at jdrake@globe.com. 