BOSTON (State House News Service) – The state’s projected fiscal 2018 budget funding, which includes an anticipated $27 billion in state tax revenue, should be sufficient to cover “key investments” without a broad-based tax increase, House Ways and Means Chairman Brian Dempsey said Thursday in another sign that top House Democrats want to steer clear this year of income or sales tax hikes despite the state’s revenue struggles.
The Haverhill Democrat’s remarks after the first public hearing on Gov. Charlie Baker’s fiscal 2018 budget puts him in line with the governor and Speaker Robert DeLeo on broad-based taxes. The 160-member House and 40-member Senate will formally weigh in on taxes and spending in April and May budget debates but the posture of House leaders usually carries extra weight and sets the tone on taxes.
“Looking at the projected revenue growth we feel that we can provide a balanced budget that makes key investments without increasing broad-based taxes,” Dempsey said, leaving room for targeted taxes on short-term room rentals or potentially other revenue-generators.
It appears that on major taxes, House leaders may be holding their fire until 2018, when they hope to put on the statewide ballot an income surtax aimed at generating up to $2 billion per year from households with incomes above $1 million per year.
Dempsey and DeLeo joined Democrats last session in advancing the proposed tax increase, which needs a second favorable vote to lock in a 2018 ballot spot.
Despite low unemployment, tax revenue growth has labored in the 2 percent range for more than 18 months and a crushing wave of enrollment-related bills for the massive MassHealth program has swept aside the bulk of new tax revenues.
Asked about those who think sluggish tax revenue growth is insufficient to meet spending demands and service needs, Dempsey outlined some priorities.
“It’s always a balancing act. Each and every budget is about priorities. It’s about a balanced approach,” he told the News Service. “It’s about making key investments with respect to education, the substance abuse issue, mental health issues, but also paying down our pension obligation, committing money to rainy day [reserves]. So I think we look at the funding we’re projecting, and we’ll make the investments accordingly.”
Dempsey’s counterpart, Senate Ways and Means Chairwoman Karen Spilka, said the Senate would consider whether the state has sufficient revenues to meet spending needs, and said she is not clear on what the speaker has meant by ruling out broad-based tax increases.
“I’m not exactly certain what he means by that, but we’ll certainly have discussions with the House and Senate,” the Ashland Democrat told the News Service on Thursday.
Watch: Rep. Brian Dempsey and Sen. Karen Spilka
State officials have agreed on projected tax revenue growth of 3.9 percent in fiscal 2018, which Baker used as a building block for his $40.5 billion budget proposal. Eight months into fiscal 2017, tax collections are up 2 percent.
While generally opposed to new or higher taxes, Baker has not shied away from tax policy debates.
The governor has proposed applying the state’s room occupancy tax to anyone who provides 150 days or more of accommodation in a calendar year, which is estimated to generate $12 million in fiscal 2018. The governor also proposed charging certain employers that fail to meet proposed health coverage obligations a per-worker assessment of $2,0000 that is expected to raise $300 million in fiscal 2018. Critics say the assessment amounts to a new tax.
The company Airbnb, a leader in the short-term rental market, supports taxation of the room rentals it facilitates online. Dempsey said “no decisions have been made” about the room rental issue, though he and others are looking at it.
Rep. Aaron Michlewitz, the House chairman of Financial Services who last session was involved in regulating another relatively modern business – ride-hailing apps – was asked by DeLeo to investigate the short-term rental market.
Michlewitz filed legislation that would apply taxes and regulations to entities that rent units more than 60 days per year, which would generate an estimated $50 million in revenue for state and local government annually, and $25 million in fiscal 2018.
After an address to the Greater Boston Chamber of Commerce on Tuesday, DeLeo told the News Service he believes lawmakers should consider regulation of the room rental industry in addition to the potential for revenue.
“When it comes to the governor’s proposal, I think that we really have to go a little deeper in terms of regulations,” said DeLeo. Asked about the amount of revenue he hoped the state could receive from the short-term rental market, DeLeo said he has not yet spoken to Michlewitz “at length” about it.
Dempsey said he and others would look at the various proposals.
“There are other proposals that we’ve seen that have numbers that are north of $25 million, so we’ll look carefully at all of that. There’s some policy decisions around that as well,” Dempsey told the News Service.
Baker, DeLeo and Senate President Stan Rosenberg have indicated a willingness to alter taxes applying to retail marijuana, which can be sold legally under state law once regulations are in place. Dempsey said he did not think changes to the state’s marijuana law would be addressed by the House in the fiscal 2018 budget bill, deferring to a newly formed committee on the subject.
Spilka and Dempsey were on opposite sides of the ballot question that legalized adult use and cultivation of marijuana. Dempsey told the News Service he opposed it, and Spilka said she voted for it.
Tax bills must originate in the House. The House takes up the budget before the Senate, and Spilka said it was a “little early” to talk about the approach she wants to take toward short-term rentals.
[Michael P. Norton contributed reporting]