Mass. lawmakers pledge a no-strings-attached $250 rebate to taxpayers — but not all of them

The proposal has to pass both legislative branches by July 31 and be signed by Governor Charlie Baker to take effect.Craig F. Walker/Globe Staff

Top Massachusetts lawmakers on Thursday announced a plan to send potentially millions of taxpayers a one-time $250 rebate by October to help offset the rising cost of gasoline and other consumer products, yet would exclude many of the state’s poorest residents.

The proposal has to pass both legislative branches by July 31 and be signed by Governor Charlie Baker to take effect. But legislative leaders pitched it as an initial step and separate from wider tax legislation they’re still weighing in response to months-long calls for substantive tax relief.

Dubbed the Taxpayer Energy and Economic Relief Fund, the proposal would provide the rebates by Sept. 30, with $250 going to taxpayers who file an individual return and $500 for married taxpayers filing jointly, according to legislators. Those eligible would have to have reported a minimum of $38,000 in 2021 income, and not more than $100,000 for individual filers or $150,000 for joint filers.

A Senate official estimated the package would cost between $500 million and $510 million, and could be financed by an expected multibillion-dollar budget surplus from the fiscal year that ended June 30. Representative Mark J. Cusack, the House chairman of the revenue committee, said more than 2 million taxpayers could receive a rebate.

“Whether it is the rising price of gas, groceries, or summer clothes for kids, the Massachusetts Legislature has heard loud and clear that increased costs due to inflation have cut into family budgets,” Senate President Karen E. Spilka and House Speaker Ronald Mariano said in a joint statement with the Legislature’s two budget chiefs, Representative Aaron Michlewitz and Senator Michael J. Rodrigues.

“These rebates represent the Legislature’s commitment to delivering immediate financial relief directly to residents of the Commonwealth,” the lawmakers said.

The legislative leaders said they also are weighing changes to the tax code to deliver “additional relief,” saying they “recognize the need for structural change as well.”

The rebate plan, while welcome news for many families, surprised some. Representative Bradley Jones, the House’s top Republican, said he first learned of it after reading it in the media, and said he hopes lawmakers can still pass “permanent and meaningful tax relief.”

Several budget watchers also questioned the decision to exclude those making less than $38,000 from the program.

Speaking to reporters Thursday, Mariano said the state had sent $500 checks to more than 800,0000 low-income residents as part of a sweeping COVID-19 recovery package. That $460 million initiative limited payments to those who made at least $12,750 in income from a job and whose total income did not exceed 300 percent of the federal poverty level. Under 2021 guidelines, that would be nearly $39,000 for an individual.

“We felt we had addressed a lot of the needs there,” said Mariano, a Quincy Democrat. “The next step was to move up and take care of folks who are in that middle-income area that is so often neglected.”

Alan Clayton-Matthews, an economist and Northeastern University professor emeritus, said he understands the legislators’ reasoning, but argued that some of the lowest-income workers would still benefit from the rebate despite getting a check from the state in the spring.

“So some people get $750 or $1,000 in total. Those would be the poorest filers anyway,” he said. ”That was then, and people do need this now.”

The state is awash in cash at the moment. The Massachusetts Taxpayers Foundation, a business-backed budget watchdog, projected this week that lawmakers will have a surplus of nearly $3.6 billion from the fiscal year that ended last week, an amount it called “historic.”

That money also comes on top of $2.3 billion in federal stimulus money the state has yet to spend.

Lawmakers have faced increasing pressure to move on taxpayer relief before their legislative session ends this month. Baker has pressed them to embrace a $700 million package of tax breaks he filed in January that includes proposals to double the maximum credit low-income seniors can claim to offset property taxes and double a pair of refundable tax credits people can claim for dependents or child care.

Anisha Chakrabarti, a Baker spokesperson, emphasized Baker’s changes would be permanent, not one-time measures.

“Cutting these taxes is the only way to deliver a real break to the seniors, renters, low-income workers, and parents who more than deserve it,” she said, adding that Baker would review any tax relief proposal that reaches his desk.

Democratic lawmakers have repeatedly rejected calls, including from President Biden, to suspend the state’s gas tax, arguing there’s no guarantee oil companies would pass the savings on to drivers at the pump. Representative William M. Straus, the House chairman of the transportation committee, said Thursday that the rebates would provide “real and significant relief” for those hit by rising energy prices.

“This approach will not depend on the ‘good will’ of the energy companies to pass along the tax cuts that earlier Republican proposals would have provided to them,” the Mattapoisett Democrat said in a statement.

But others wondered how far the rebates would actually go. Marie-Frances Rivera, president of the left-leaning Massachusetts Budget and Policy Center, said other avenues, such as through the state’s earned income tax credit, could provide “more substantive tax relief” for residents, including for poor workers excluded from the rebate plan.

Rebates that exclude those making less than $38,000 is “not targeted tax relief to folks who need it the most at this time,” Rivera said. A check for “$250 or $500 can be helpful, but folks are struggling to pay rent. And rent is due every month and is far more than $250 or $500.”

The Massachusetts Fiscal Alliance, a conservative group that’s pressed lawmakers to embrace a tax relief package, criticized the rebates as a “poorly thought-out gimmick” timed for an election year.

“Picking winners and losers through arbitrary brackets, as well as penalizing married couples more likely to have families depending on them, is a poor way” to show solidarity with struggling residents, said Paul Craney, a group spokesman.

The rebate plan emerged as lawmakers remain locked in negotiations over the now late $50 billion state budget. Massachusetts began the month as one of just three states that had yet to finalize a spending plan for the fiscal year that, in Massachusetts, began July 1, and it’s unclear when an agreement could ultimately surface.

Rodrigues, the Senate’s budget chief, said lawmakers intend to tuck the rebate proposal into a wider economic development bill that, too, has yet to emerge. The Westport Democrat said he could also not provide a timeline for a wider tax relief bill.

“There will still be other relief long-term,” he said.