Weld Squares Off Against Clinton Budget

MASSACHUSETTS Gov. William Weld is expressing his distaste for President Clinton's tax package in unmistakable terms - by proposing a countervailing state tax plan of his own. The Republican governor's plan will highlight cuts, of course, not hikes.

The Weld proposal's $207 million in tax reductions include a decrease in the state gasoline tax by 4.3 cents a gallon, which exactly offsets the federal gas-tax hike under the Clinton plan. It would also roll back the Massachusetts income tax a bit and increase the tax exemption that senior citizens can claim on bank interest earned in the state - also measures aimed at Clinton tax increases.

The plan's chances of getting through the Democrat-controlled state legislature are considered slight by most observers. Yet whatever the impact of Mr. Weld's proposal on the Bay State economy, it has already paid some political dividends for the governor. The idea of a Republican governor squaring off against the president's tax increases so enthralled GOP leaders in Congress that they asked Weld to deliver the rebuttal to Mr. Clinton's weekly radio address last Saturday.

In his speech, Weld said "Simply put, raising taxes is the wrong way to create jobs. And raising taxes is not the way to close deficits."

Some Weld supporters hold out a hope, however slim, that the tax-cut plan could make it through the legislature. "The bill will come up. The Republicans will attach it to some piece of legislation," says Barbara Anderson, head of Citizens for Limited Taxation, a Boston-based group that campaigns tirelessly for lower taxes. A combination of Republicans, conservative Democrats, and lawmakers spooked by constituents' anti-tax feelings could coalesce behind the plan, she says.

But the real benefit of the Weld plan, Ms. Anderson says, is that it will "clearly draw the line, showing who are the enemies and who are the friends." In other words, who is for cutting taxes and who isn't.

On the other end of the political spectrum from Anderson is James Braude, director of the Tax Equity Alliance for Massachusetts. His group has sharply criticized the substantial cuts in social services already made by Weld. The governor has said the pinched state budget can't help struggling cities and towns or outraged water-rate payers, declares Mr. Braude, and "now, magically, there's $200 million more in 'painless' cuts."

"A $200 million tax cut means a $200 million service cut," Braude says. Weld's plan, he adds, is less a show of concern for the state economy that "a political move by a man who has ambitions for 1996." The irony, he says, is that while Clinton is trying to deal with the federal deficit, "Weld seems intent on trying to plunge us into one here."

The politics of the Weld plan might be more useful in helping the governor retain his present chair than gaining a new one in the White House, suggests Paul Watanabe, a political scientist at the University of Massachusetts in Boston.

If the state's economy is still weak come next election, Weld can say he offered the remedy and the legislature balked, says Mr. Watanabe. "He's very good at this - finding other people to take the heat for him."

What Michael Widmer, leader of yet another tax watchdog group - the Massachusetts Taxpayers' Foundation - is concerned with the difficulty of finding further cuts to balance proposed revenue losses. One must remember, he says, that it's not taxation levels but a balanced budget that Wall Street rating agencies look for when assessing a state's creditworthiness.

As for the Weld plan's ability to do much for the state economy, Mr. Widmer has his doubts. A $207 million tax cut would add about $2 a week to the average family's bank account, he says, and "they won't be buying any new appliances with that."

The trouble with the Massachusetts economy springs from the decline of defense contractors and the makers of mini computers - the industries that boomed here in the mid 1980s. Other industries are coming along, Widmer says, but nothing will help that process more than an uptick in the national economy, something the Clinton deficit-reduction package is designed to accomplish.

How that package will work is still anyone's guess, Widmer adds.

In the short term, the impact on state economies will be "minimal," according to Chris Zimmerman, an analyst with the National Conference of State Legislatures. The hike in income-tax rates for the wealthy won't affect revenues in most states, since they don't tie their own tax rates to the federal rate. And the gas tax rise, while it competes with a state revenue source, is "very small," says Mr. Zimmerman.

From a state perspective, he says, it's more important to recognize what the Clinton bill doesn't include - a value-added tax, for example, which would be "real bad news at the state level."

And what about Weld's attempt to offset federal legislation by tinkering with his state's tax code? First, says Zimmerman, you have to realize that any short-term stimulative benefit from a tax cut will be negated by accompanying trims in government spending which take dollars out of a state economy. Beyond that, he says, "no amount of furious rowing on the part of one state can change the direction set by Washington."