Massachusetts income tax refund - not fair game for Dukakis

FOR perhaps the first time, Massachusetts has a chunk of money it cannot spend in the traditional way on new or expanded programs or pet projects. And long-suffering taxpayers are bound to benefit. Bay State voters saw to that last November when they voted to cap the amount of revenue the state can raise from taxes in any year and to require the refund of any excess. Gov. Michael Dukakis and many state legislators wanted no part of it. But now Massachusetts has more than $65 million that must be given back, and it's only a question of when and how it will be returned.

Instead of giving these funds back in the same proportion as they were collected, through the personal income tax, which was the intent of last fall's measure, the governor has a different idea. If enacted, his plan would give every taxpayer the same rebate in the form of an added $275 one-time exemption on his or her 1987 personal income tax. His proposal cleared the Joint Legislative Committee on Taxation, 10 to 7, on Tuesday.

Under Mr. Dukakis's plan, those taxed the most would receive no more back than citizens whose payments were minimal. Everyone would receive an estimated $13.75. The personal exemption in 1987 would be $2,475 instead of $2,200, as would the exemption for a spouse. Dependent exemptions would go from the $1,000 to $1,275.

From a political standpoint the Dukakis approach seems to make sense, since people in the lower- and middle-income tax brackets would benefit more from it than from the proportional distribution provided for under the voter-enacted law.

It is not a tax cut and should not be so considered unless state lawmakers and the governor are ready to go a giant step further and provide permanent increases in personal or dependent exemptions.

The issue now, however, is not be what might please the most voters but rather what is fair. In that respect the Dukakis plan breaks faith with the 863,130 Bay Staters who voted for the tax-cap measure just eight months ago.

There is nothing to suggest the people who voted for the initiative had in mind returning excess tax collections to taxpayers in any way but than as a percentage of the taxes each paid. The Dukakis plan, even though the amount returned to everyone would be modest, certainly borders on redistribution of wealth. It is an attempt to ``take from the rich to give to the poor,'' as critics have charged.

That is how Barbara Anderson, the articulate executive director of Citizens for Limited Taxation (CLT), views the Dukakis idea. It was her organization and the Massachusetts High Tech Council that pushed the tax cap to victory.

While some taxpayers would like to have whatever might be coming to them long before year's end, the expense of sending out checks, including postage, would eat up some of the rebates.

A better method of returning the money would be to have a line on the 1987 tax forms on which each taxpayer could claim his or her special deduction, based on personal income taxes paid.

Since prospects for any kind of a rebate before early next year are slim, lawmakers need not rush through the legislation to distribute the funds. The total amount that must be returned will not be known until mid-August when the final figure is certified by the state auditor. Dukakis administration had projected the excess would be about $65 million. This has been raised to about $70 million.

The tax cap allows state revenues to grow no faster than the increase in the average wage statewide over the previous three calendar years.

If the governor and others favor an across-the-board rebate as more equitable, such an arrangement might be placed on the 1988 ballot. If a majority of those going to the polls favor the idea, it could apply to any future rebates resulting from the tax cap.

While there is no question that lawmakers can amend measures enacted through initiatives and referendums, there is at least a certain moral obligation to respect the will of the people.

Had Mr. Dukakis and legislative leaders favored any kind of a tax cap, they almost surely would have enacted such a provision before the initiative was filed by the CLT and the High Tech Council. And if there was any doubt such spending restrictions would win voter approval, an alternative proposal more to the liking of legislators could have been put alongside the tax-cap proposal on the 1986 ballot.