‘We’ll take it’: After 20 months, tax relief finally appears on the cusp of passage

Democratic leaders, including House Speaker Ronald Mariano (left), Governor Maura Healey, and Senate President Karen E. Spilka (right), have each pursued versions of a tax relief bill this legislative session.Suzanne Kreiter/Globe Staff

More than 600 days — and one gubernatorial change — since a suite of tax breaks first emerged for debate on Beacon Hill, Democratic leaders said they have a deal on an undefined tax package. Relief, and anxiety, quickly filled the void where details were lacking.

The long-awaited development, paired with plans to vote on the package next week, all but ensures a tax package of some form will soon reach Governor Maura Healey, a Democrat who built her campaign last year on promises to deliver relief to residents squeezed by the state’s expensive housing and rising costs.

To what degree the package delivers, and who may benefit most from it, remains unclear. For those who’ve tracked the debate from then-Governor Charlie Baker’s first proposal in January 2022, to a package’s collapse last fall, and to the months-long closed-door negotiations this year, its likely emergence 20 months later is a small celebration in itself.

“Would it have helped consumers and taxpayers and small businesses more if it was done 12 months ago? Yeah. But we’ll take it now,” said Jon Hurst, president of the Retailers Association of Massachusetts. “There are some who feel the next 12 months are going to be really difficult economically.”

Beacon Hill leaders have declined to detail the agreement, which is built from a pair of tax bills the House and Senate passed. The proposals share similarities but also deviate in scope and components.

By some estimates, the House’s $1.1 billion package, phased in over multiple years, ultimately could cost nearly $500 million more than the Senate’s. With everything from both plans included, the package could end up costing nearly $1.2 billion, according to the Massachusetts Taxpayers Foundation, a business-backed budget watchdog.

The Senate pumped more money into easing housing production; the House included more relief for businesses. Both increased tax credits for children and dependents, but to wildly different degrees.

“I don’t know what to expect,” said Doug Howgate, the Massachusetts Taxpayers Foundation president and a former adviser to Senate President Karen E. Spilka. “We’ve said all along a bill like this isn’t going to be a solution to what ails us. But hopefully it will be a good start.”

The package’s perceived success depends, in part, on who’s judging it. Business groups have lobbied for a series of changes, including slashing the state’s capital gains tax from 12 to 5 percent (the House adopted that, while the Senate didn’t) and easing the estate tax, considered among the strictest in the country. (Both chambers passed versions that would lift the tax threshold.)

Business leaders have also pushed for — and the House passed — language that would switch how state corporate taxes are calculated to what is known as the “single sales factor.” With some exceptions for certain industries, Massachusetts corporate tax is currently calculated using three factors: the size of a company’s local employment, property holdings, and in-state sales.

The House plan would simplify it to rely solely on the amount of a company’s sales within the state, a change that, when fully phased in, is expected to cost nearly $80 million a year.

Progressive Democrats, meanwhile, have not only lobbied against embracing the business-friendly tax cuts, but to include another change that would require all Massachusetts married couples who file joint federal returns to also file jointly at the state level.

The goal, proponents say, is to not allow wealthy couples to avoid paying the state’s so-called millionaires tax — a new surtax on annual incomes over $1 million — by filing separately. Critics say the change could affect tens of thousands of tax filers, and the Massachusetts Taxpayers Foundation called it “simply an expansion of the tax put in place six months ago.”

To not include it, argued Phineas Baxandall of the left-leaning Massachusetts Budget and Policy Center, would be “certainly a missed opportunity.”

To not pass it “would greatly inflate the price tag of the package without doing much for anybody,” he said, “except for some of the richest families who are most aggressive about tax avoidance.”

There are elements that appear all but assured to be included. Both the House and Senate embraced proposals to double the tax credit for seniors who rent or own in Massachusetts, raise the deduction for renters from $3,000 to $4,000, and increase the state’s earned income tax credit — designed to help low-income families — from 30 percent to 40 percent of the federal credit.

Each of those elements is expected to help middle- and low-income families, and should they emerge unscathed from private negotiations between House and Senate leaders, could cost more than $190 million.

The Senate and House also both sought to combine two existing tax credits — for child care and dependent care — into one. But the Senate would allow taxpayers to claim $310 per dependent, roughly half of the $600 cap the House and Healey sought. What version lawmakers agreed to could mean the difference of hundreds of millions of dollars.