GloucesterTimes.com, Gloucester, MA

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November 21, 2012

State tax break pegged for Jan. 1 snuffed out

BOSTON — With Congress considering whether U.S. taxpayers will get hit with major federal tax increases in 2013, Patrick administration officials have confirmed that the next scheduled dose of broad-based state tax relief will not be delivered on Jan. 1, 2013.

In a letter to Administration and Finance Secretary Jay Gonzalez obtained by the News Service, Department of Revenue Commissioner Amy Pitter said recent tax collection levels didn’t satisfy legal requirements to trigger a reduction in the income tax on Jan. 1 to 5.2 percent from 5.25 percent.

State officials have estimated the cut would have been worth $110 million to $124 million annualized — tax relief that a disappointed House Minority Leader Brad Jones described as “thwarted” by negative tax revenue growth over the past three months.

Massachusetts voters in 2000 approved a ballot question calling for the income tax to be reduced from 5.95 percent to 5 percent by 2003. But in 2002, in order to raise $215 million as part of a larger tax hike package, the Democrat-controlled state Legislature froze the income tax rate at 5.3 percent and conditioned further reductions on triggers that were met last year for the first time precipitating a reduction in the income tax rate this year to 5.25 percent.

Under the formula, the income tax rate would fall to 5.2 percent on Jan. 1, 2013 if growth in fiscal 2012 inflation-adjusted baseline revenues over fiscal 2011 exceeds 2.5 percent and if, for each consecutive three-month period starting in August and ending in November 2012, there is positive inflation-adjusted baseline revenue growth as compared to the same consecutive three-month period in 2011.

According to state finance documents, Pitter in September certified that fiscal 2012 inflation-adjusted baseline revenues grew by 2.77 percent from fiscal 2011, exceeding the initial trigger for the tax cut.

But in a letter dated last week, Pitter said that after revenue growth exceeded triggers for two straight months, baseline revenue fell by 1.29 percent for the three-month period ending on Oct. 31, 2012.

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