MassBank would repair state's roads and bridges, but who will pay?

As hard as Gov. Michael S. Dukakis may try, pleasing everyone is usually impossible, especially in the topsy-turvy realm of Massachusetts government. Nowhere is this more apparent than in his ongoing effort to shape a financal plan to reconstruct worn out roads, bridges, water lines, and sewer systems across the commonwealth.

The governor - after nine months of sensitive planning and negotiations with the business community, organized labor, and other public-sector interest groups - has finally unveiled something he hoped all could live with.

While there is widespread agreement that something must be done to replace the state's decaying infrastructure, there is much disagreement over how to pay for such projects.

The proposal for a Massachusetts Development Bank (MassBank), an agency largely detached from state government, is pretty well accepted as the best way to raise the millions of dollars needed for reconstruction.

Beyond that, however, the accord begins to dissolve, particularly when it comes to how to raise money to secure the bonds that will be sold to fund the public-works projects.

The legislation, filed last Thursday, would fund MassBank through a series of tax boosts on the business community. Although the plan has been endorsed by the Massachusetts Business Roundtable, the Associated Industries of Massachusetts, and the Massachusetts High-Technology Council, a number of individuals within these groups are unsatisfied with parts of the measure's financing mechanism.

One example is the state's unitary tax. Currently, a multinational firm doing business in Massachusetts must pay state taxes on a proportion of all its total profits. The Dukakis provision would exclude from taxation the portion of profits the firm earned outside of the United States.

High-technology executives say the legislation doesn't go far enough. They want only the profits earned in the state to be subject to Massachusetts taxation.

But the governor has other special-interest groups to consider. The Massachusetts Teachers' Association, for instance, says adjusting the unitary tax will cost the state too much in lost revenue - money that otherwise would go to aid packages for communities and local schools.

The proposed unitary-tax adjustment is a sweetner for the business community. Without such inticements, it is questionable whether business leaders would be interested in MassBank's passage.

Support for the complex proposal is already fragile, and it's questionable whether it could survive much more tinkering.

If the legislation is to fly, Governor Dukakis and his allies will have to do a lot more selling than they anticipated.

State lawmakers are hardly enthusiastic about the measure, with its various trade-offs to win the backing of the business community. Particularly distasteful to lawmakers, in whose hands the fate of MassBank rests, is a provision for raising $96 million in fiscal 1985 and up to $145 million in later years through higher business taxes.

Raising taxes is never palatable to legislators, especially in an election year. And by whatever name presented, the Infrastructure Development Assessment plan is a tax hike.

Specifically, the package calls for a 0.5 percent boost in the corporate net income tax, and a $1.10 per $1,000 valuation in property tax on manufacturing companies. Modest levy increases are also in store for banks, utilities, and insurance firms.

To offset these moves, the MassBank legislation would reduce by 0.6 percent the unemployment insurance rates now paid by Massachusetts firms, and extend the scheduled expiration date for an investment credit for expanding or modernizing their operations.

The proposal would leave the planning and construction of roads and other projects in the hands of state and local governments. MassBank would be confined to borrowing the funds and making them available for infrastructure renewal. The bonds would be repaid over a period of years from money raised through the increased taxes.

The full faith and credit of the state, however, would not be pledged to that construction bond financing, as is usually the case.

The Dukakis proposal, with its intricacies, has much to recommend it, even though it is not perfect.

The idea of vesting control of MassBank in a five-member board makes good sense. So, too, does the governor's decision to name John T. Driscoll, chairman of the Massachusetts Turnpike Authority (MTA), as its chairman.

The Milton Democrat, a former state legislator and state treasurer, has competently held the MTA reins for 19 years. It is questionable, however, whether the $75,000 annual salary recommended by Dukakis is warranted. Why should anyone in state government, even a man of Mr. Driscoll's experience and strong political connections, earn as much as the Massachusetts head of state?