Baker abandons 'no tax' pledge in budget proposal

File photo/Gov. Charlie Baker

BOSTON — When Charlie Baker ran for governor in 2014 he pledged not to increase taxes or impose new fees to help plug the state's chronic revenue shortfalls.

It was a campaign promise Baker mostly kept throughout most of his first term, political observers say, by holding the line on broad-based tax increases despite pressure from special interest groups and Democratic lawmakers to come up with new sources of revenue to make investments in infrastructure, transportation, public health and the environment.

But as the popular Republican embarks on a second term following a landslide re-election in November, he is increasingly backing away from the no-tax mantra.

Baker's $43 billion budget proposal for the next fiscal year, unveiled on Wednesday, is loaded up with new taxes and fees, including a proposal to extend sales tax to third-party sales through online retailers, a tax on opioid sales to pay for state-run drug treatment programs, and expanding the cigarette excise tax to include nicotine vaping products.

He's also proposed to hike the real estate transfer tax to pay for climate change resiliency and adaptation programs, which is expected to generate more than $137 million a year.

Baker defends the tax proposals, saying they are targeted toward specific programs and initiatives that will benefit the state's taxpayers.

"Bottom line is, from the beginning we said if we’re leveling the playing field or we’re creating new services that we believe on a targeted basis are important, then we’re going to propose those," he told reporters this week.

But the move has prompted criticism from tax watchdogs, some of whom accuse Baker of breaking a key campaign promise.

"For a candidate who campaigned on opposition to raising taxes, Gov. Baker has become, well, a disappointment," said Chip Ford, executive director of Citizens for Limited Taxation.

Paul Craney, spokesman for the Massachusetts Fiscal Alliance, called Baker's real estate transfer tax "particularly egregious" given the high cost of housing in the Bay State.

"These are the types of short-sighted mistakes we saw our neighbor to the south, Connecticut, make all through the last decade," he said. "The end result was disastrous for their economy, as residents and businesses fled the oppressive cost of living and doing businesses in the state."

Craney's group, backed by Republicans, is calling on Baker and other state leaders to put a moratorium on new taxes and focus on health care reforms and lowering the state debt.

"This isn’t a revenue problem, it’s a spending problem," Craney said, a reference to one of Baker's 2014 campaign slogans. "We need more reforms, not more revenue."

Reaction from Democrats

House Speaker Robert DeLeo, a Winthrop Democrat who has also largely rejected broad-based tax hikes, said he has poked fun at the governor over his embrace of new revenue streams.

But he's not ruling out Baker's proposals.

"I would say that when you take a look in terms of where that money would be going towards, in terms of climate change or housing or whatever, again I think it's something for us to take a close look at," DeLeo told reporters Thursday, when asked about the governor's tax proposals.

Senate President Karen Spilka, D-Ashland, said she welcomes the governor's willingness to tap new sources of revenue to support state programs and initiatives.

"It's an acknowledgment that our shared priorities might need some revenue to implement them," she said in an interview. "These are things that are important for all of us."

Some groups, including the left-leaning Massachusetts Budget and Policy Center, say the money generated from expanding sales and use taxes under Baker's plan won't be enough to support essential programs.

Marie-Frances Rivera, the group's interim director, said while Baker's budget proposal "acknowledges the need for additional resources, it will be difficult for state lawmakers to make important investments without significant new revenue."

To be sure, Baker pushed through several revenue-raising measures during his first term, including a fee for employers that don’t provide health care coverage for a majority of their workers, an $800 million increase in payroll taxes as part of the "Grand Bargain" agreement to pay for family and medical leave, and a tax on short-term rentals.

Making his mark?

Jeffrey Berry, a political science professor at Tufts University, said the tax proposals suggest Baker is more concerned about his legacy than seeking a third term, which he is allowed to do under state law.

"He's been focused very much on making government run better rather than expanding what government does," he said. "With this likely being his last term, he's looking to make his mark by expanding some programs and innovating in ways that improve life for Massachusetts residents."

Baker has been coy about the possibility of running again in 2020, saying he's focused on the next four years. There are no term limits for Massachusetts governors, though most only serve two terms.

Maurice Cunningham, a political science professor at the University of Massachusetts at Boston, said Baker's willingness to increase some taxes is typical for a second-term governor "free of the shackles" of running for re-election. But he points out that Baker doesn't fall into categories of an anti-tax ideologue or a free-wheeling tax-and-spend politician.

"He's not the type who's going to slap a tax on a galloping horse just to do it," he said. "He's a problem solver and the fact is some of these problems require money to help fix."

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhi.com.

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BAKER TAX PROPOSALS

Real estate transfer tax — An increase of the real estate transfer tax from $2 to $3 per $500 of property value: $137 million.

Opioid tax — A 15 percent tax on gross sales of opioids in Massachusetts by drug makers: $14 million.

Sales tax expansion — Extending the state's 6.25 percent sales tax to third-party online marketplaces such as eBay and Etsy for deliveries to Massachusetts customers: $42 million.

E-commerce — Taxing nicotine liquids or gels for electronic cigarettes at 40 percent of the wholesale price: $6 million.

Source: Executive Office of Administration and Finance, fiscal year 2020 budget proposal.

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