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House speaker asks court to sort out tax dispute with Senate

May 22, 2015

BOSTON (AP) — Amid legislative work on a budget, Massachusetts House Speaker Robert DeLeo is asking the state’s highest court to weigh in on a Senate-approved measure to freeze the state income tax rate at 5.15 percent while gradually increasing the earned income tax credit for low-income working families.

DeLeo made the request Friday on behalf of the House, saying that “legal ambiguities” surround the tax measure and its inclusion in the Senate budget plan now heading to a conference committee along with the House-approved state budget. The committee will hammer out a compromise spending plan that will then go back to both chambers for a final vote.

DeLeo wants the Supreme Judicial Court to determine if the Senate measure, and consequently the Senate budget plan, amounts to a so-called “money bill.” Under the state constitution, “money bills” must originate in the House.

The court has previously defined money bills as “bills that transfer money or property from the people to the state” — as in the form of new or higher taxes — but do not include bills that appropriate money from the state treasury to particular uses of the government — as in budget bills, the House speaker said.

He said the budget passed by the House in April contained no new taxes and therefore wasn’t a “money bill.”

But he argues that Tuesday’s Senate vote to freeze the rate at 5.15 percent is effectively a tax increase since it blocks a voter-approved process that would allow the rate eventually to fall to 5 percent. He argues that the Senate measure amounts to a “money bill” that should have originated in the House and that puts a legal cloud over the Senate budget plan.

“The Senate clearly disagrees with this,” DeLeo said.

In 2000, voters approved a ballot question to cut the then-5.95 tax rate to 5 percent. The Legislature later stepped in and set the rate at 5.3 percent, but with triggers that would allow the rate to fall incrementally until it settled at 5 percent.

The Senate plan would expand the state’s earned income tax credit by 50 percent over the next three years, from the current 15 percent to 22.5 percent of the federal earned income tax credit. When fully implemented in 2017, backers say it would save the average low-wage earner about $470 a year.

To cover the anticipated $145 million cost of the expanded tax credit, the Senate voted to freeze the state’s income tax rate at the current 5.15 percent.

Senate President Stan Rosenberg said Friday that for years the Senate and House have agreed in writing on what makes a “money bill” under the Massachusetts Constitution. Rosenberg said that this year, the House “departed from that long-established interpretation, resulting in a difference of opinion between the House and Senate.”

“Requesting a ruling by the Supreme Judicial Court is a legitimate means to resolve this matter,” Rosenberg said in a statement.

Gov. Charlie Baker said he’s hoping for a swift ruling from the court.

“There’s been a fair amount of discussion about what makes a money bill a money bill, and I think in some respects having the House ask this question will certainly make it possible for the SJC, which is ultimately the authority on this, to render an opinion and make a decision,” Baker said.

Baker said he still prefers his plan, which would pay for a larger earned income tax credit by phasing out the state’s film tax credit, something lawmakers have balked at.

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