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Mass. tax revenues eclipse $18 billion mark

BOSTON --Massachusetts collected a record-high $18.4 billion in tax revenues in the fiscal year that ended last month, officials said Monday.

The preliminary total breaks the record set last year when the state took in $17 billion, according to the Department of Revenue. The 8.2 percent increase was led by income taxes, capital gains and corporate taxes, Commissioner Alan LeBovidge said.

The record revenue is proof that the Legislature can afford to cut the income tax to 5 percent, said David Tuerck, executive director of the Beacon Hill Institute, a Suffolk University think tank that supports tax cuts.

"This is very embarrassing to the Legislature, which always wants to claim things are terrible to keep the taxes up," Tuerck said. "There are no more excuses for not cutting the rate."

Voters in 2000 approved a gradual income tax cut from 5.95 percent to 5 percent. But two years later, lawmakers froze the rate at 5.3 percent during a budget crisis.

Others, however say a tax cut can cost more than $520 million in a full year, and that increases in revenue get absorbed by inflation and growth in Medicaid and pensions.

"It's not as if our economy is booming," said Michael Widmer, president of the business-backed Massachusetts Taxpayers Foundation.

Widmer called it a "very good year" but noted that corporate and capital gains taxes are the "most volatile revenue sources." Job growth offers longer-term benefits, he said.

Alan Clayton-Matthews, an economist at the University of Massachusetts at Boston, said the state has failed to regain most of the more than 200,000 jobs lost in the last recession. He opposes a tax cut and said extra revenue should be spent on services.

"State and local government as a whole still haven't restored the level and quality of services that existed before the last recession," he said.

Spending on K-12 and public higher education "make the state an attractive place to live. That helps us keep young college educated families in the state. That's still an advantage that Massachusetts has and we should exploit that."

The year-end figure is about $1 billion more than the revenue estimate used by lawmakers in crafting the state budget. But because they planned to use about $600,000 from the "rainy day" fund, the accurate revenue surplus is around $400,000, Widmer said.

Gov. Mitt Romney called on lawmakers to approve a cut in the state income tax rate to 5 percent. Democratic leaders in the House and Senate said the state can't afford the cut in revenues now.

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