Kids are back in school, summer vacations are in the rearview mirror, and lawmakers are ostensibly back at work on Beacon Hill. But when it comes to tax relief — the major tax relief package promised by two governors over the past nearly two years — well, taxpayers are still waiting.
A report out this week confirms that a major package that offers tax breaks to parents of young children, low-income renters, and elderly homeowners, and at the same time offers tax reform aimed at increasing the state’s competitiveness, is eminently affordable. Not just that, but it’s already paid for — the Legislature having tucked away $581 million in the recently passed state budget to fund a tax reform package.
Advertisement
But the question remains: Will the House and Senate get the job done before Nov. 16 ― the date they are scheduled to end the current legislative year? The other question is: Will they spend the next two months haggling over minutiae — a habit lawmakers have raised to a virtual art form this session — or realize that the state’s economy can support virtually all of the good ideas that both branches have put on the tax reform table.
“Massachusetts hasn’t really done tax relief in 20 years,” said Doug Howgate, president of the Massachusetts Taxpayers Foundation, which this week released its latest report that insists the “package is paid for, affordable, and overdue.”
“You know every 20 years it’s a good idea to take a look at your tax code,” he told the editorial board. “It’s about time we do that. Times change and circumstances change.”
As recently as Labor Day weekend Senate President Karen Spilka reiterated that “tax reform is still a top priority for me,” in an interview on WCVB’s “On The Record,” but she also added that she is “proud of the Senate version” of the bill that includes funds for a boost to the state’s low-income housing tax credit program and to the Housing Development Incentive Program.
Advertisement
On the other hand the House version of the bill includes a cut in the short-term capital gains tax, reducing the rate from 12 percent to 5 percent over a two-year period. Massachusetts is one of only three states in the nation that tax short-term gains more than long-term gains. It is one of several provisions the House phases in over several years.
Both branches included increases in the Earned Income Tax Credit for low-income workers, to the rental tax deduction, and to the senior circuit breaker that benefits older, low-income homeowners.
Both branches also approved an update to the state’s onerous estate tax (although in slightly different forms) — increasing the minimum estate value impact from $1 million to $2 million and eliminating the so-called “cliff effect,” which currently means any estate over $1 million is taxed from $1 on — making it an outlier even among the 12 states that levy an estate tax.
The bill’s odyssey began under former governor Charlie Baker, who rolled out his $700 million tax cut plan in January 2022. Despite some early success in the Legislature, it died on the vine as the session ended.
Governor Maura Healey made a tax relief package one of her first orders of business, filing a $742 million plan — again with a good balance of relief for low-income residents and reforms to the estate tax and the short-term capital gains tax. That was in February. The House and Senate have been parsing it and making their own additions ever since, sending their final versions to a six-member conference committee, where it has languished throughout the summer.
Advertisement
Meanwhile, the business community is growing nervous. The Greater Boston Chamber of Commerce and the Massachusetts Society of CPAs put out a joint statement in late August warning, “Massachusetts is moving in the wrong direction on tax policy compared to other states. … Competitive tax policies are a pillar for other states that are aggressively campaigning to attract businesses and talent, while Massachusetts is falling behind.”
The Massachusetts Taxpayers Foundation notes in its report that in 2022 and 2023 alone, “15 states reduced income and/or corporate tax rates, while almost every state enacted some form of tax relief since 2021.” At least 17 states, including New York and Connecticut, have cut corporate tax rates in recent years, Howgate said, all with an eye toward making themselves “more attractive to employers.”
In the end, a state’s tax code is a reflection of its values. Who is helped? Who is hurt? What message does it send to parents struggling to pay rising day-care costs or renters squeezed by a housing crunch that has sent rents soaring that lawmakers have dawdled for nearly two years to provide tax relief?
Advertisement
And what message does it send to businesses that want to expand here or residents who might like to spend their final years here without fearing their modest estates will be eaten away by taxes?
In the rarified air of the State House, too often small differences take on a life of their own. This year and this piece of legislation must be different. A tax relief bill is too important to be nibbled to death — not again, not this year.
Editorials represent the views of the Boston Globe Editorial Board. Follow us @GlobeOpinion.
