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Organization Seeks Limits on Massachusetts Income Tax

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The grassroots Massachusetts organization that led a successful 1980 campaign to limit property taxes statewide has set its sights on state income taxes, but without the support of a former key ally.

Citizens for Limited Taxation--the group that initiated Proposition 2, one of the first property-tax-limitation measures in the nation--filed two new initiative-petition proposals this month.

The first would phase out over two years the state's decade-old 7.5 percent income surtax and would limit future increases in all state taxes to the percentage rise in annual wages in the state. A second proposal would repeal the surtax immediately and reduce the tax on unearned income from 10 percent to 5 percent. Seven other tax-cutting proposals have been filed by various other groups and individuals.

But Gov. Michael S. Dukakis, a Democrat, has apparently taken3some of the steam out of the petition drive, convincing the Massachusetts High Tech Council to work with the legislature in cutting taxes, rather than through the initiative-petition process.

The council, a trade group that represents the state's powerful high-technology interests, contributed about $1 million to the campaign for Proposition 2, which is "believed to be one of the reasons it passed," according to Terry Zoulas, media director for the state board of education.

"They need the High Tech Council for their political clout and their money," he said.

The Governor has proposed a one-time $64-million tax cut, but critics, including the High Tech Council, are seeking more cuts. The House has passed a bill that would phase out over three years the income sur-tax, but the Senate has yet to act.

Elimination of the income surtax, which dates from Governor Dukakis's previous administration, would have a small but direct impact on state aid for education, because 40 percent of the growth in income taxes goes into the state's local fund, most of which is spent on education, according to William O'Connor, the state's assistant secretary of administration and finance. The surtax raised about $220 million in fiscal 1985, he said.

But tying state revenues to wage increases could have a much greater impact on education spending, Mr. O'Connor said, because it would limit the state's ability to aid local units already restricted by Proposition 2.

"If you limit what the state takes in, communities may find that the place they turn to for help may be restricted, as well," Mr. O'Connor said.--jrs

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