House Dems Turn Argument Lost by Senate Republicans into Win at the End

Here’s one way to think of the controversy over how the state should fund an increase in the Earned Income Tax Credit (“tax credit”), a benefit for low-income working families: the Minority Republican Leader of the Massachusetts Senate lost the battle but won the war because he had many allies-of-the-moment in the Democrat-dominated House of Representatives, and none bigger than the Speaker of the House.

Back in May, Minority Leader Bruce Tarr of Gloucester attempted unsuccessfully to persuade a majority of his colleagues not to fund an increase in the tax credit by postponing a scheduled January 1, 2016, reduction in the state income tax rate from 5.15% to 5.1%. 

The Minority Leader favors increasing the tax credit but staunchly opposes linking the increase to the timing of a reduction in the income tax rate.  The reduction was mandated by voters in a statewide referendum back in the year 2000, he emphasized, and ought not to be tampered with.

Tarr’s recent activities in this regard centered on two proposed amendments to the Senate version of FY 2016 state budget. 

The first amendment, sponsored by Tarr himself, would have increased the tax credit by 100% over a three-year period. 

The second, sponsored by Michael Rodrigues of Westport, Senate co-chair of the Joint Committee on Revenue, would have increased the tax credit by 50%, but done so immediately...and it would have erased the budget shortfall resulting from that increase by putting off the scheduled reduction in the income tax rate. 

The Senate rejected the first amendment and adopted the second.

Eight senators voted for the first amendment and 32 voted against.  Of the eight on the losing side, two were Democrats: Joan Lovely of Salem and Dan Wolf of Harwich

Twenty-nine senators, all Democrats, voted for the second amendment.  Eleven voted against, including five Democrats: Eileen Donoghue of Lowell, Jennifer Flanagan of Leominster, Anne Gobi of Spencer, Michael Moore of Millbury and James Timilty of Walpole.

There can be no doubt that those votes constituted a major policy development in the upper branch.  The Senate declared, boldly, its intent to help some of the most hard-pressed citizens of the Commonwealth by delaying a tax cut for all taxpayers.  

Interestingly, this development did not originate in Senate Ways & Means, the nearly all-powerful budget-writing committee.  It erupted, rather, during the budget amendment process, a kind of semi-free-for-all that occurs after Ways & Means has finished its version of the upcoming year’s budget.

This was definitely a win for Senator Rodrigues, long one of the quiet dynamos under the dome.

[It would be a serious omission if I failed to note that the Rodrigues amendment included a provision to increase the personal/household/married couples’ exemptions available to taxpayers when filing their state income taxes, which made it possible for Rodrigues to plausibly assert, “We are providing the whole tax cut (intended by the 5.15%-to-5.1% reduction) in the form of tax relief (via higher exemptions).  No taxpayer will pay more.  In fact, every taxpayer will pay less, even if you don’t qualify for the EITC (Earned Income Tax Credit).”]

A win for Rodrigues it was, albeit a preliminary win...

The state budget is a beast produced by three strands of DNA, one each contributed by the governor, House and Senate.  The Rodrigues amendment ensured only that the Senate strand would have a higher tax credit funded by a delay in reducing the income tax rate.

A legislative conference committee appointed to work out the differences between the House and Senate versions of the budget would have the final say on whether that strand showed up in the final budget, The Beast.

When that conference committee reported out a final budget this week, it contained an increase in the tax credit -- an increase funded by repealing a scheduled tax break for corporations rather than delaying the reduction in the income tax rate.

It is only sensible to infer that the Senate conferees pushed to include the wording of the Rodrigues amendment in the final budget, and that only a more strenuous counter-push from the House conferees prevented that from happening.  The House had to be more dug in on the issue than the Senate.

Both branches quickly endorsed the conference committee budget, totaling $38.1 billion, and sent it to the governor for his mandatory review.

In a TV interview last night, House Speaker Robert DeLeo of Winthrop said his biggest disappointment with this year’s budget process “would have been the fact relative to the freezing of the income tax in terms of how we would have funded the Earned Income Tax Credit.”

Some where, Bruce Tar was smiling.

NEXT: Considering the Strong Sentiments Unleashed in Debate on Tax Credits