One by one, Massachusetts House Democrats on Monday rejected GOP-led proposals for tax breaks or suspensions within the state’s $50 billion budget plan. Many of the Republicans’ measures, Democratic leaders argued, were still being vetted or, as one put it, “premature.”
In most years, the actions could be viewed as legislative formalities, a Democratic supermajority flitting away the actions of a small Republican caucus. But during a boom time for state revenues and escalating inflation, the votes touched on deeper questions: As it rolls in cash, should the state spend more of it, including to help those in need, or should it “give back,” as Governor Charlie Baker has argued, by lessening the tax burden on residents?
For now, House Democrats have chosen the former — winning plaudits from progressive advocates and budget watchers along the way.
The Democrats’ budget proposal was already $1.4 billion higher than Baker’s plan before debate started, dedicating tens of millions of dollars more toward child care worker salaries, more than $100 million to extend a free school meals initiative, and $20 million to cover a proposal to eliminate the costs incarcerated people or their families pay for phone calls.
House leaders also left open the possibility of pursuing a separate tax package in the coming months. They have yet to specify when or how closely it could resemble Baker’s $700 million plan, which seeks to help renters, low-income workers, and families passing on generational wealth.
Still, the wall they’ve put between tax breaks and their $49.6 billion spending bill has done little to diffuse the debate over them.
“That’s the nature of budgets. Every dollar that is spent giving a tax break to the wealthy is a dollar that can’t be spent supporting students,” said Andrew Farnitano, a spokesman for the Massachusetts Education Justice Alliance, a teachers union-aligned coalition.
The group has lauded House leaders’ plan for putting more money toward other education priorities, including for special education, than what Baker proposed, and without major tax breaks they say are unlikely to help low-income taxpayers.
“The central debate,” Farnitano said, “is whether to invest in people and communities across the Commonwealth or to use the money to fund permanent tax breaks that overwhelmingly benefit the wealthy.”
Some economists and budget watchers argue the state could do both. Baker’s proposal, which the second-term Republican has rallied business leaders behind, would double the allowable tax credits for dependent children and child care, allow hundreds of thousands of low-income taxpayers to qualify for “no-tax status,” and double the maximum credit low-income seniors can claim to offset property taxes.
It would also double the threshold for the state’s estate tax from $1 million to $2 million, and slash the tax rate on short-term capital gains, or investments held for up to a year, from 12 percent to 5 percent.
Taken together, the measures amount to “generally progressive changes,” said Alan Clayton-Matthews, an economist and Northeastern University professor emeritus, and could help some of the same people — parents with school-age children or those juggling child care costs, for example — that the House is targeting with increased spending.
“There’s more than one way to meet a social end,” Clayton-Matthews said.
Representative Nicholas A. Boldyga, a Southwick Republican, sought several times Monday to thread versions of Baker’s proposals into the budget debate, including with amendments raising the threshold on the estate tax or slashing the capital gains tax rate.
Each time, Representative Mark J. Cusack, the House chairman of the revenue committee and a Democrat, stepped to the House podium to oppose them, calling them “premature” and urging lawmakers to allow the committee to “continue to do our work” vetting them. And each time lawmakers rejected them largely along party-line votes.
“That proposal is still under consideration by the revenue committee,” Representative Aaron Michlewitz, the House’s budget chief, said about Baker’s package. “But we felt the immediate needs of making these necessary investments were a more pressing use of the funds for this budget.”
It’s an approach progressive advocates have touted. Kurt Wise, senior policy analyst at the left-leaning Massachusetts Budget and Policy Center, said state policy makers’ “first priorities” should be investments, not tax cuts, arguing that the state partly owes its overperforming tax revenues to the surge of billions of one-time federal aid into the state economy during the pandemic.
The center has roundly criticized Baker’s pursuit of changes to the estate tax and short-term capital gains, arguing the $350 million in those tax cuts would do little to benefit low-income workers.
Republican lawmakers, however, have argued the state should seek out other short-term measures to address the pain residents are feeling from a 40-year high in inflation. The House on Monday voted down two separate GOP-led measures to suspend the 24 cents-a-gallon gas tax — and a third amendment was laid aside — weeks after House Republicans had tried, and failed, to push a similar measure. GOP lawmakers have argued that other states, including Connecticut and Maryland, suspended theirs.
“Taxpayers of Massachusetts have been told tax relief is on the way, that we’re looking at all options. But in this budget we don’t see that,” Representative Peter J. Durant, a Spencer Republican, said while advocating for a months-long suspension, which was rejected on a voice vote. “The people of Massachusetts need this break. They need to be able to see that we’re serious about providing them with some relief in their pocketbooks.”
Representative William M. Straus, a Mattapoisett Democrat and House chairman of the transportation committee, said House leaders understand residents are suffering, and said they are “exploring the idea of [offering] credits for people” shouldering high energy costs.
But how, and when, that or other measures of relief could emerge remain open-ended questions. So does another: With so much money at their disposal, will policy makers ultimately choose to use it well?
“When it feels like there’s more money than we know what to do with, it opens the door to bad policies,” said Evan Horowitz, executive director of the Center for State Policy Analysis at Tufts University. “It’s not a bad thing to be flush. But when you’re not, you face a totally different set of tradeoffs in terms of spending. And that kind of pressure is missing.”