State House Nixes Tax Increase

The Massachusetts House handed Speaker George Keverian '53 a personal defeat yesterday and struck a potentially fatal blow to a deficit-reducing tax package by voting against a 50 percent increase in the capital gains tax.

After the defeat, the House, which planned to work through the weekend on the tax package, recessed until Tuesday and sent the bill back to the budget-writing Ways and Means Committee for reworking.

Keverian (D-Everett) had taken to the floor and promised to back amendments to make the capital gains increase effective Jan. 1, 1990, instead of retroactive from Jan. l, 1989. He also promised to support an investment tax credit and a capital gains exemption for owner-occupied single-and multi-family homes, up to four families.

But the promises weren't enough to bring victory, as the House voted, 94-64, to knock the capital gains tax increase out of the huge tax package. The House, on a 93-65 vote, refused to reconsider the decision.

Keverian's promise to support the elimination of retroactivity came a day after he told reporters the move would be "silly" because it would cost the state $100 million in new revenue for this deficit-ridden fiscal year.

The move was a tacit admission he did not have the votes for the original, retroactive capital gains tax increase, and the defeat indicated Keverian was in trouble with other key provisions.

Earlier, the speaker had promised members he would scale a sales tax increase back to one cent, instead of two cents, in another compromise aimed at getting a majority of the 160-member House to pass some from of tax package and send it to the Senate, where support for higher taxes is stronger than in the House.

Rep. Marjorie Clapprood (D-Sharon) a candidate for lieutenant governor and a vocal supporter of higher taxes, said the capital gains vote was "a bad sign" for the entire tax package.

"It's definitely a major blow. Nothing we do tonight will fill the gap," Clapprood said.

Minority leader Steven Pierce (R-Westfield) urged House members to reject the pleas to increase taxes by well over $1 billion over the next 18 months.

House Taxation Committee Chair John Flood (D-Canton), who opposed the capital gains increase and opposes a taxincrease now, suggested that lawmakers work withthe Senate on further budget cuts and then extenda temporary increase in the income tax this springif it is needed to resolve the deficit.

The tax package is part of an attempt to solvea 1990 fiscal year budget deficit now estimated at$825 million. The House earlier this fall passed abill that combined cuts, savings and non-taxrevenues to lower the deficit by about $350million.

Republican legislative leaders have disputedthe deficit estimate and contend it has beeninflated in a Democratic push for new taxes.

The current tax package was attached to a $45million "survival package" supplemental spendingbill that restores money to social programs and tohigher education. The original package would haveraised about $1.2 billion on an annual basis andmoney for this fiscal year by $626 million