Dems float $500M transportation plan; Alternative to Patrick's approach; GOP version expected to include no new taxes.

• Position: NEWS

Byline: John J. Monahan

BOSTON - House and Senate Democratic leaders have settled on a 3 cents per gallon hike in the state gas tax, a $1 per pack hike in cigarette taxes and expansion of the income tax to cover computer design services, but Republicans are arguing those tax hikes are not needed.

The tax package outlined Tuesday by House Speaker Robert A. DeLeo, D-Winthrop, and Senate President Therese Murray, D-Plymouth, is aimed at raising about $500 million in new revenue to close a chronic MBTA operating deficit, fund new transportation initiatives and provide more funds for regional transit authorities and local road maintenance.

Both legislative leaders said the revenue increases will mean no hike in fares on the MBTA and commuter rail service for the next year and no additional tax increases in the 2014 budget.

They said their plan was an alternative to the transportation elements included in Gov. Deval L. Patrick's $1.9 billion tax hike proposal aimed largely at boosting transportation spending, lowering state college costs and expanding early education programs.

While the governor had sought more than $800 million in new revenues for transportation alone, the legislative agreement would provide just over half that amount in new funding for transportation, including an increase in Chapter 90 funding for local road projects from $200 million to $300 million.

The governor had proposed a hike in the income tax rate from 5.25 percent to 6.25 percent and a cut in the sales tax from 6.25 percent to 4.5 percent. The legislative plan also changes the tax status of utility companies to raise $83 million. The cigarette tax hike would raise $165 million. The gas tax from 21 cents per gallon (not including the 2.5-cents per gallon underground tank storage fee) to 24 cents per gallon, would raise $110 million. The new tax on computer software design services would raise $161 million.

Mr. DeLeo said the plan, which calls for no changes to the state's sales and income tax rates, was needed "to keep and grow jobs in Massachusetts." He added, "Massachusetts is still struggling to emerge from the economic downturn."

The new revenues, he said, will allow the state to put 1,800 state highway workers now paid with borrowed bond funds on the state's regular payroll over three years, fill an annual $150 million MBTA operating budget deficit and boost funds for regional transit authorities. The Democrats' plan also calls for continued tolling on the...