Reilly shifts stance, favors cutting tax
Healthy treasury the key, he says
Attorney General Thomas F. Reilly yesterday said the Legislature should roll back the state income tax rate to 5 percent early next year if the state's revenues and reserves continue to grow.
Reilly, a Democrat who plans to run for governor, said in an interview he previously opposed the tax cut because the state could not afford the $600 million it would return to taxpayers each year. Voters approved the cut in 2000.
But given a steady climb in tax revenues and the longstanding growth of the state's ''rainy day" reserve fund, Reilly said, the Legislature should cut the tax rate first thing in the new year if the state's revenue numbers for this month are strong.
''If these numbers hold up, then we should do it," Reilly said.
In March, Reilly said the income tax rollback championed by Governor Mitt Romney was tantamount to ''short-changing the future," and added, ''We have difficult financial challenges ahead of us over the foreseeable future, over the next few years, and right now we cannot afford to be rolling back taxes."
Eric Fehrnstrom, Romney's communications director, welcomed Reilly's newfound support.
''I haven't seen a conversion like that since Bob Dylan became a born-again Christian," Fehrnstrom said. ''We hope he puts as much energy into lobbying for a tax cut as he did in lobbying for tuition breaks for illegal aliens."
In the 2000 election, voters backed a ballot question to drop the personal income tax rate to 5 percent. But amid a fiscal crisis, the Legislature later passed a law that froze the income tax at 5.3 percent, and even took away the charitable deduction.
This fall, House Speaker Salvatore F. DiMasi and Senate President Robert E. Travaglini have continued to dismiss calls to drop the tax rate, saying the state's fiscal health is still in question.
Deval Patrick, a former assistant US attorney general who is competing with Reilly for the Democratic nomination for governor, yesterday said he agrees with delaying a tax cut.
''I support a rollback in the income tax when we can afford it, but I'm not persuaded that we can afford it right now," Patrick said in an interview. ''I have spent a lot of time with city and town leaders who are having to make decisions about how to balance increases in healthcare costs for public workers, for example, and maintaining staffing for police and fire and public schools."
Both Romney and Lieutenant Governor Kerry Healey -- who will run for governor if Romney decides against seeking reelection -- have advocated an immediate rollback of the income tax rate since their 2002 campaign.
Currently, the state's ''rainy day" fund, an emergency reserve account, holds $1.7 billion -- or roughly the amount it held prior to the fiscal crisis. In addition, tax revenues in the fiscal year that ended June 30 came in $1.2 billion higher than anticipated, and revenues are expected to climb another $509 million in the current fiscal year.
Reilly said such numbers, should they remain intact by Dec. 31, would present a strong argument for the tax cut.
''We're getting to that point of having sufficient reserves," Reilly said.
Reilly declined to discuss specifics, such as whether he would urge an immediate rollback or a gradual reduction.
''I think the approach has to be fact-driven," Reilly said. ''You take a look and make that decision based on the circumstances. The first thing you do is find out what the facts are, what are those revenues at the end of the year." 