Top Mass. lawmakers: Raise state, cigarette taxes

BOSTON (AP) -- Legislative leaders in Massachusetts unveiled a transportation financing plan on Tuesday that called for $500 million in new revenues, including increases in state gasoline and cigarette taxes, while rejecting a heftier tax increase proposed by Gov. Deval Patrick.

The lawmakers' proposal calls for eliminating a chronic operating deficit in the state's transportation system and forestalling any immediate need for further fare hikes or service cuts in public transit. It would also provide for some new capital investments in the system, though likely not to the extent sought by the Patrick administration.

"In order for our state to remain competitive, we need a transportation system that works," said House Speaker Robert DeLeo at a Statehouse news conference with Senate President Therese Murray and other key Democratic leaders.

"Yet we also recognize that Massachusetts is still struggling to emerge from the financial downturn Families and businesses are still sensitive to any additional burdens," DeLeo added, in explaining why lawmakers opted for the scaled down tax plan.

DeLeo also said he wanted to make sure the state preserved its positive bond rating.

Patrick, also a Democrat, had proposed a series of tax changes that he said would raise nearly $2 billion in new revenues for transportation and new education initiatives. The governor's plan called for hiking the state income tax from 5.25 percent to 6.25 percent, while also lowering the sales tax from 6.25 percent to 4.5 percent.

While the legislative plan only deals with transportation, the chair of the House Ways and Means Committee, Rep. Brian Dempsey, ruled out further tax hikes in the overall state budget proposal expected to be released by his panel next week.

Patrick issued a guarded statement on Tuesday, thanking lawmakers for reviewing his plan and promising a thorough study of their proposal.

"My principles continue to be whether the financing is enough, dedicated and fair, and I will review the Legislature's proposal in that light," he said.

The legislative plan — which must be approved by the full House and Senate — would increase the state's gasoline tax by 3 cents to 24 cents per gallon, raising $110 million and costing the average driver in Massachusetts between $12 and $30 per year. The gas tax would also be indexed to inflation beginning in 2015.

The proposal also calls for a $165 million increase in tobacco taxes, including a $1 per pack increase in the excise tax on cigarettes. Taxes would also be hiked on cigars and smokeless tobacco.

It also would change the state's tax code to apply the sales tax to computers system design services and modification of prewritten software, a move that legislative leaders say would raise $165 million. Another business tax change, in utility classification, would generate $83 million, according to a summary of the plan.

Legislators said they would seek to end a longstanding practice by the state of borrowing funds to pay for operating costs in transportation, including some employee salaries.

The plan would also make a key policy change by dedicating all motor vehicle sales taxes to transportation — instead of a fixed percentage of the total state sales tax as is currently done.

DeLeo and Murray downplayed any serious rift with the governor, who has heavily promoted his tax and spending plan in recent weeks. They said the legislative approach represented a "different method" of addressing the state's most critical transportation needs.

"Nobody wants to go over a bridge that is going to fall down," said Murray.

In a report delivered to Patrick earlier this year, state transportation officials detailed a chronically underfunded system that is heavily in debt from the Boston's massive Big Dig highway project and other past commitments, and called for at least $1 billion a year in new state spending.

The Massachusetts Bay Transportation Authority has said it needs more than $100 million in new state funding to avoid another round of fare hikes or service cuts later this year.