Winners And Losers In Patrick’s Plan To Eliminate 44 Tax Deductions

Last month, Gov. Deval Patrick submitted what he called a "growth" budget. (Michael Dwyer/AP)

Last month, Gov. Deval Patrick submitted what he called a “growth” budget. (Michael Dwyer/AP)

BOSTON — As part of his plan to boost state spending on transportation and education by nearly $2 billion, Gov. Deval Patrick has called for a hike in the income tax and a drop in the sales tax. But that’s not all.

He would also eliminate nearly $1 billion worth of income tax deductions now on the books, and he’d use the savings to double the value of personal exemptions taxpayers could claim.

Getting rid of special tax exemptions would simplify the state tax code, but there would be winners and losers.

How Tax Changes Would Affect An Amesbury Pastor

When Pastor Michael John joined the Market Street Baptist Church in Amesbury about 15 years ago, the pay wasn’t exactly sky-high. But there was an important perk: He could live in the church’s parsonage for free.

The Patrick administration's overall tax revenue proposal, using projections from its January budget filing (Click to enlarge)

The Patrick administration’s overall tax revenue proposal, using projections from its January budget filing (Click to enlarge)

“I like the setup,” he said. “It’s about a quarter-mile from the church, but people don’t know it’s a parsonage. And I can be a regular neighbor in the neighborhood.”

John says the parsonage would rent for about $11,000 a year. And to add to the benefit, he does not have to count that value as part of his salary when paying federal or state income taxes. But under Patrick’s plan, he would have to count it as income, adding approximately $690 to his state tax bill.

John says his budget can handle it. But he worries that the plan could hurt recruitment efforts at other churches.

“They’ve got buildings, but they don’t have much of a budget,” John said. “The only reason they can have a pastor is because they have a parsonage, and they can scrape up maybe 20,000 bucks or so and they can have a guy and he can serve them. When you’re paying taxes on that parsonage, that can be a hit when you’re not making a lot of money.”

But Glen Shor, Patrick’s new administration and finance secretary, says the loss of some tax deductions needs to be put in perspective.

“Ever single one of these itemized deductions has a constituency,” Shor said. “It doesn’t surprise us when we hear questions about the governor’s proposal. But we’ve been very encouraged when we’ve explained when people have asked questions — this is not the only aspect of the governor’s proposal.”

For instance, Patrick’s plan would double the personal exemption that John — and every other taxpayer — could deduct from income calculations.

For married filers like John, the effective savings would be approximately $640. That’s not quite enough to counterbalance the added taxes he would pay for counting the parsonage as income, but it’s pretty close.

Every Tax Benefit Has Its Constituency

Some other itemizers would take a more substantial hit. Perhaps the biggest, according to Robert Authier, CEO of the Massachusetts Association of Realtors, would come from the governor’s proposal to impose the state capital gains tax on home sale profits.

“The people that this will hit the most are the people who’ve been living in their homes in Massachusetts the longest,” Authier said.

He added that there are tens of thousands of homeowners who would face new taxes of $4,000 or more if they made a sale under Patrick’s proposed tax regime.

“They pay property taxes every year, spend lots of money locally to keep their property in good shape,” Authier said. “But they do that so they can count on using that equity to move to their next home or for retirement. So we think this is a bad idea at any time, but it’s particularly a bad idea at a time when the housing market is beginning to recover. ”

As Shor says, every tax benefit has its constituency: deductions for college tuition, for health savings accounts, for child care expenses. In all there are 44 tax benefits Patrick wants to eliminate. (PDF: See all of them.)

There are constituencies that are buying in to the overall plan. They like the way Patrick would shift some of the tax burden from the poor and middle class to higher-income state residents.

Harris Gruman, executive director of the Massachusetts chapter of the Service Employees International Union, says the union will lobby hard for the plan, as well as for a similar plan of its own.

“We have meetings set up with many of the legislators now in the areas where the membership is densest,” Gruman said. “And they will be meeting with our members in their districts, with the people that actually vote for them, and talk about why they want to raise taxes in a fair and adequate way.”

Those ground troops will be needed if Patrick’s plan is to survive the Legislature, even in broad outline. Last week, Speaker Robert DeLeo told reporters he was hearing opposition to the tax plan, and he singled out treatment of tax deductions as one big area of complaint.

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  • http://pulse.yahoo.com/_ADZ6TZZKHWRLDNAOP6R2MBBP6A Bob S

    Now that he is a lame duck governor, Patrick is showing some balls. Better late than never. Hope Obama does the same thing at federal level soon. Of course, leaches like tax accountants and tax lawyers will do their best to block this.

  • Joe Donovan

    Eliminating the deductions will not simplify the tax code. Because most of them are wired into the federal law, eliminating them will COMPLICATE the tax code.

  • J__o__h__n

    Why is Pastor John whining about $50? I’d like to live rent free. The value of his free rent is probably more than the $11,000 he is claiming.

    • maryrita

      I’m not hearing any whining there.

  • Shawn

    So the state gives a stipend to Foster Parents to take care of children who are the responsibility of the state. Now it wants to tax that stipend.. thus adding administration and cost to give back to the state part of what it just gave to the parents. Why not just be up front and say you are reducing the stipend to foster parents by 7%?

  • wareinparis

    It is long past the time when all property owned by religious groups of all stripes be taxed like other property. To not tax this property is simply wrong.

    • mmulvey

      At least any income producing property.

    • http://www.facebook.com/people/Michael-Knowfler/583184842 Michael Knowfler

      Should we tax non-profits too?

  • P H

    When will the Governor ask welfare recipients and illegal aliens to contribute?

    • just sayin’

      You’re an idiot. And a jerk.

    • Regula

      Welfare in Massachusetts is $300 per month plus $125 in food stamps. How far do you think that amount of money can actually be stretched? Just so you don’t have to pay more taxes others should be forced to starve? Really couragous.

      • http://www.facebook.com/people/Michael-Knowfler/583184842 Michael Knowfler

        PH is venting because there is clearly a lot of abuse in the welfare system. I don’t think anyone out there disagrees that we need a safety net for the needy. But I think there is a lot of abuse. For example, there are 40,000-50,000 welfare recipients that are unaccounted for. No one knows where they are or if they still qualify, but they are still receiving benefits. There are many other cases of people with multiple EBT cards fleecing the system as well.

        • Regula

          No doubt there is some abuse, as in every system. The same could be said for agricultural subsidies where people who weren’t even farmers or were long dead still received subsidies – such “abuse” appears to be more the consequence of negligent administration of entitlement programs. But even if some 40’000 to 50’000 persons receive benefits even if they may no longer need them or even exist, that isn’t such a large error. The amounts that are usurped by companies hired by i.e. the DMH to house the mentally ill strip the HUD quite literally clean ( a group home resident pays 30% of his income for a double occupancy room, for a person on SSI that is about $250. HUD subsidizes these rooms to the tune of $1372 per person. As was explained to me, the price is the same for a shared room as for an apartment under the explanation that the people can use the kitchen and living room. That would however also be the case if they rented an apartment as a group in Jamaica Plain, Mass. Assuming double occupancy that would amount to $343 per person. Why does a company who owns a house with 7 bedroom need to make a rent of over $144’000 per year?

          Why so uptight that welfare recipients also pull some games to get an extra benefit? At least that is necessary to survive on $300 a month. A commercial company could make its profit honorably easier.

  • lori

    Why is the author using a pastor living in a church as a prime example in his article? What does his situation represent of the overall people affected by the tax increases? .001 percent?

    • Andrew

      Agreed. Couldn’t figure out how his situation is even remotely applicable to anyone else’s.

  • Andrew

    I’m not a fan of getting rid of tax credits for those of us who pay college tuition. We all know it’s expensive.

    • noslack2327

      Yes, Colleges are TOO expensive. The cost of college has out paced all other costs in the U.S.

      • Bear Walker

        It’s a bubble. Someone really needs to look at the correlation of higher tuition and administrative salaries/cost. People in academia are getting mighty rich and I would hope it’s not on the backs of the students and parents paying.

        • mmulvey

          That is not a valid statement for the rank and file Professor/Instructor. Give us some examples? You may be right with administrators salaries being out of whack, especially with our University of Mass system.

    • Bear Walker

      Of course not. That’s just it. We will all be affected, welcome to the adult world.

  • noslack2327

    There is pretty much no chance that all these deductions will be eliminated. That said, the fact that they have even been proposed by Gov. Patrick speaks volumes about the Comm of MA Welfare State. This is the state, you will recall, in which President Obama’s Aunt Otuni collects welfare, although she is here, and has been for years, illegally. Perfect.

    • yerpski

      ^ Slander?

      • noslack2327

        There is NOTHING slanderous about the comment. She IS here illegally, and she IS collecting welfare. Here’s an idea since you think the truth is “slander”; YOU pick up the tab for her, rather than burdening hard-working tax payers.

        • yerpski

          The president doesn’t have an aunt named Otuni, you must have made that one up. His aunt is not in this country illegally. She has been a political refugee since 2002 when she sought asylum. She was denied political asylum and went on to appeal and win in 2010. She is a legal resident of this country. God bless America.
          P.S. I should credit Joe Wilson when I say, “You lie!”

          • noslack2327

            You are correct that the President’s aunt name is not “Otuni”. The correct name is Zeituni Oyango. You are INCORRECT that she won a political asylum case. She is a parasite on the tax payers. To learn her attitudes and views, watch the following UTube interview from Channel 4, the CBS affiliate in Boston.
            President Obama’s Aunt Zeituni Onyango ‘This Country Is Owned By Almighty God’ – WBZTV.Boston.
            You are also INCORRECT that I am a LIAR. She and her drunken relative should cease being a burden on us taxpayers and go back to Kenya where they belong. Perhaps you should go there, too.

          • http://www.facebook.com/people/Michael-Knowfler/583184842 Michael Knowfler

            noslack2327. I just watched the WBZ interview on YouTube . You are correct.

  • Jay Tiffany

    The Liberals are showing their true colors. They not only want to take away your hard earned deductions but want to give your money to layabouts and Obama phone recipients.

    • rushthis

      It’s called funding the government. Republicans won’t do it. So we don’t elect them.

      • wareinparis

        You are SO right!! Republicans seem to have forgotten that it is necessary to pay for things like roads, police and fire protection, schools for our children, and the myriad other things best done by the government. Call me what you will, but I do not want items like police and fire protection managed by “for profit” companies.
        Deval Patrick is doing a great job.

        • fedupinbr

          What are you talking about, He’s the worst governor we’ve ever had.

  • glp

    What about the referendum that reduced the income tax rate to 5.25%? Does governor suggest to disregard the voice of the people?

    • Thomas Dylan

      Yes, all Mass politicians ignore you after you vote them in. Please continue to be a stupid worker bee so the Dem pols can tax your income. The Dem pols will lower the sale tax so all the people on the dole can pay less. Remember you work for a living and as the Dems running the state say “We don’t give a crap about you!”

  • pd

    You must collect a state check

  • Regula

    This doesn’t seem to me such a great budget/tax proposal. Income tax goes up, personal exemption is increased to offset the tax increase. Beyond that the sales tax is lowered but added to all services, not just finished goods, that means large inflation on plumbing, house building/repairs etc. Even a sales tax on legal fees, as if they weren’t already through the roof. Cigarettes are made the scapegoat again plus candy and sodas – chocolate is good for you isn’t it? Why should it be taxed extra? The regularization of utility companies means utility costs will go up. So in addition to a tax increase, people will be hit with rising costs. Seems to me a proposal on how to create large inflation. So much manipulation to get an additional $1.9b revenue and attempt to fool the taxpayer that it isn’t the public at large who foots the bill. Maybe he could tax the state government a bit too!

  • http://www.facebook.com/people/Duke-LaCroix/100001050195169 Duke LaCroix

    Deval Patrick sucks.

  • http://www.facebook.com/people/Duke-LaCroix/100001050195169 Duke LaCroix

    Obama sucks too.

  • http://www.facebook.com/people/Michael-Knowfler/583184842 Michael Knowfler

    De Toqueville said and I am paraphrasing: a Democracy can only exist until the people figure out that they can vote themselves largesse (i.e. gifts) from the public treasury. At that point the country is doomed to failure because of loose fiscal policy. The Democracy will crumble and be followed by a dictatorship; most democracies last about 200 years.

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