By Edward Mason
Staff writer
February 13, 2008 05:54 am BOSTON — House Speaker Salvatore DiMasi yesterday proposed increasing the state cigarette tax and largely adopted Gov. Deval Patrick's plan to close corporate tax loopholes as part of a broader plan to close a $1.3 billion budget deficit. DiMasi would raise the cigarette tax by $1 a pack to bring in $152 million. He also would raise $289 million by closing corporate tax loopholes, use $427 million from the state's Rainy Day Fund, and reduce spending by more than $350 million through spending cuts and reforms. Unlike Patrick, DiMasi did not count on casino gambling money. But, like Patrick, he increased local aid to cities and towns by $223 million. "We feel this is a balanced approach," DiMasi said at an afternoon press conference. DiMasi, flanked by House Democratic leaders, rolled out the proposal that will serve as a blueprint for House lawmakers writing their version of the fiscal 2009 budget, which begins July 1. The House budget is traditionally released in April. One of those Democrats, Rep. David Torrisi of North Andover, supported DiMasi but wasn't enthusiastic about the corporate tax loophole closings, which he has opposed. He said DiMasi had to compromise with lawmakers. "I have some colleagues who wouldn't hesitate to raise sales, income and cigarette taxes all at once," Torrisi said. "We're dealing with a lot of different philosophies." Torrisi's biggest concern was over the cigarette tax increase. DiMasi would raise the tax to $2.51 per pack, giving the state the highest cigarette tax in New England. "Anyone who lives on the New Hampshire border knows full well that (our) taxes ... put us at a competitive disadvantage," Torrisi said. Barbara Anderson, executive director of Citizens for Limited Taxation, called DiMasi's plan "thoughtful," but said the cigarette tax increase isn't sustainable. "Sooner or later they're going to run out of smokers," Anderson said, "and they'll have a program that depends on cigarette revenues and they'll be coming for the rest of us." Patrick called DiMasi's adoption of his business tax plan "a step forward for tax fairness." DiMasi and Patrick have clashed over the corporate tax issue. But speaking to reporters in his office, Patrick wouldn't gloat. "I don't think this is about personal victories," Patrick said. "It's about us being responsible and responsive both to the interests of the people of Massachusetts above all, but also to proposals that we are putting forward. The point is we're all collaborating." In DiMasi's plan, the largest source of new revenue would come from corporate tax law changes. He would require companies to report their income for tax purposes as a single entity, preventing multi-state businesses from shifting income to low-tax states. DiMasi stressed he offsets the cost to businesses by cutting the corporate tax rate from 9.5 percent to 7 percent over three years, a 26 percent cut. Patrick had proposed dropping the rate to just 8.3 percent. He also would save businesses $150 million next year by freezing unemployment insurance rates businesses pay. The savings could be reinvested by businesses to create jobs, DiMasi said. DiMasi didn't include $124 million in casino license revenue Patrick used. DiMasi, who is skeptical of the governor's plan, said a casino bill won't be approved fast enough. "I think this is a more realistic approach and ask(s) cities and towns fix their budgets on real revenues, not on hopeful, magical revenues, nonexistent revenue," DiMasi said. Under DiMasi's plan, the House would realize $350 million in savings by level funding some accounts and wringing savings from others, such as by having state workers pay more for health insurance. He also includes $166 million Patrick would get from more vigorous tax collection methods.
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