King assesses his 'pro-people' Bay State governorship

After more than two years in office, Democratic Gov. Edward J. King is being buffeted by the greatest tax upheaval in Massachusetts since the Boston Tea Party. The following are excerpts from an interview by Monitor State House reporter George B. Merry.

What are the main accomplishments of your administration toward strengthening the business climate?m

We are lower in unemployment than the national average and have been lowest of all states in three or four of the past six months. There are now 137,000 more people working in the commonwealth than two years ago. We are "pro-people, " which some call "pro-business." We went ahead to put in the first 4 percent tax cap. And with or without Proposition 2 1/2, taxes are going down. We cut income taxes, although only slightly, and we reduced capital gains taxes and unemployment taxes [paid by employers] were cut.

Has Massachusetts really shed the "Taxachusetts" image?m

Yes, I definitely think so. That label is no longer deserved even though you may still hear it. In fairness we were the heaviest property tax bearers in the mainland United States, but things are changing. "Make it in Massachusetts" is sticking and it has substance. The only thing we need is time. The percentage of income we take from the public in taxes has come down significantly. And Proposition 2 1/2 can only help.

What changes would you like to see in Proposition 2;[2]?m

I am for a version of a zero cap [on local spending] and would be perfectly willing to try to go for it again. But the people voted for 2 1/2. Cities and towns should have the right to increase the fees they charge. Whether they should have the right to impose new taxes [hotel room or sales] is something to consider, if they want it. We would have to weigh the consequences if we are trying to make our state competitive.

Can we get by the Proposition 2(1);[2] squeeze without need for new state taxes?m

We may well have to do something, depending on what happens [to municipal jobs and services]. I don't know the accuracy of figures being thrown around. Propostion 2 1/2 was not my idea, but its general thrust I support.

So will Massachusetts be able to go on indefinitely without boosting or adjusting taxes?m

There are no taxes I can see that are going to bring the level of taxation [ state and local] about or even equal to where it was prior to 2 1/2. But there will be, in the interest of fairness, an upand down within existing taxes. We are very high compared with competing states in [personal] income taxes. In fact, we are more disproportionate on income taxes than on property taxes, and 2 1/2 will take care of property taxes. We are quite low in sales and miscellaneous taxes and it might be we would want to get close to average, but not just to make more money.

Then increasing the sales tax may be in the offing?m

It certinaly would have to be considered. Local taxes cannot be cut more than 2 1/2 without some compensating way of making up the loss.

In the interest of equality and tax-collecting efficiency, should unearned income (dividends continue to be taxed at a higher rate than earned income (wages, etc.)?m

That is something I would be willing to take a look at. I do not know its consequences.

Do you favor a graduated income tax like the federal government and the vast majority of other states?m

We could not have that under our state constitution and any change would take four or five years. In the past the people have rejected that.

Can business taxes be cut further?m

That is a possiblity which should not be precluded from discussion. We are going to see property taxes go down. This benefits business and so does the unemployment tax going down because we are doing well.

Could you go along with a Proposition 2(1);[2]-type rollback or spending ceiling for the state?m

No, not unless the people wanted it. This would mean holding back on money we have put in [the state budget] for tourism an job training which benefit the economy.

The state now has an outstanding debt in excess of $3.1 billion with additional borrowing of $1.3 million authorized. Shouldn't there be a debt ceiling?m

I have no real objection to one. If I were not here, I suppose I would be more for a state debt ceiling. I am certainly more amenable now to the idea than I was in 1979 [when such a measure was vetoed]. But I am reminded that the federal government, which has a debt ceiling, is always having to raise it.

Isn't the state's financial stability & now in excess of $4.5 billion? threatened by the large substantially unfunded publi employee retirement account?m

No, I don't think so. The pension fund is a huge problem but we are no worse off than the vast majority of other states. I owuld not want to raise taxes to put more money against pensions. We put some $16 million in the fund last year and will add more this year.That is not enought but it is all we can do. There are a couple of ideas we are working on to help improve things. One would have new people coming on [the payroll] bear more of the cost [through their contributions]. We also are looking at the possibility of putting a small portion of the [accumulated] fund into our native industries here so we can share in their growth.

Now that Massachusetts is nearing the third step of a three-phase reduction in taxes on capital gains, what about further reduction to bring the commonwealth in line with the federal government and some other state?m

That is certainly a possibility which might be looked at.

Wouldn't cutbacks in various federal programs like Urban Development Action Grants (UDAG) be a serious blow to the state economy?m

I believe that President Reagan, who is very sound economically, will recognize the good the UDAGs have done, how they encourage private investment, which he wants and needs. We've lost $38 million in revenue sharing this year and $76 million next. I'm for a balanced budget and I can't keep saying give me more and still expect a balanced budget.