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Council Ponders New Tax

By Frank Dabek

STAFF REPORTER

A reduction in financial support from Beacon Hill has prompted the Cambridge City Council to discuss a payroll tax that would affect local universities.

City Councillor Brian Murphy initiated discussion at last night’s council meeting on a proposal to create a 0.25 percent payroll tax that would generate $13M yearly and “tax universities as employers.” The proposal is in response to state cuts in aid to the city and the city’s dependence on property taxes, Murphy said.

The city lost $4.2M in state funds this year, according to a report of the council’s finance committee.

The future of the proposal, which is not yet a formal bill, is unclear as support remains spotty among fellow councillors and it would have to be approved by the state legislature.

Councillor Anthony D. Galluccio said that he had “no problem aiming new taxes at universities” but did not “believe this is a time to be looking at a new local tax.” Galluccio favors a renewed effort to remove the tax-exempt status of large universities instead. “Large institutes are run like corporations and corporations don’t deserve tax-exempt status,” he said. The tax exemption was “created for fledgling universities,” not those with “enormous endowments.”

A previous push to remove the tax-exempt status of large universities failed when Watertown struck a deal with Harvard University and withdrew its support, Galluccio said.

Galluccio, along with Councillor Henrietta Davis, proposed looking at restraining spending before creating a new tax. Galluccio also said that he had “concerns about the impact [of the payroll tax] on the business community.”

Tax requires home rule petition

The tax would also require a home rule petition or other action at the state level. Murphy said that while such a petition’s chances on Beacon Hill were unclear, it had a better chance this year than in recent years because of fiscal concerns. The legislature realizes it should “be giving localities tools” to deal with the current fiscal problems, Murphy said.

Galluccio tied the ongoing negotiations over MIT’s payments in lieu of taxes to the Institute’s tax-exempt status. It is “better for the universities and city to have consistency” in tax payments, Gallucio said. The current payment in lieu of taxes system “doesn’t bring the level of dignity both institutions would like.”

Murphy said that he had not discussed the proposed tax with local universities.

MIT officials could not be reached for comment last night.