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Mass. tax relief package has a little something for everyone (to hate)

Businesses see only marginal improvement to the state’s competitive standing. Equity advocates say the legislation doesn’t go far enough.

The compromise tax package that emerged from Beacon Hill on Tuesday had something for everyone to like — and to hate.Etan J. Tal

“Politics is the art of the possible, the attainable — the art of the next best.”

So said Otto von Bismarck, the Prussian prince who united Germany in 1871 (and who, in my opinion, doesn’t get quoted enough in the business press). Famed economist John Kenneth Galbraith had a different take: “Politics is the art of choosing between the disastrous and the unpalatable.”

For the state’s business community and advocates pushing for economic equity, the latest Beacon Hill work of art — a tax relief package nearly two years in the making — falls somewhere between “next best” and “unpalatable.”

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The always diplomatic Jim Rooney, chief executive of the middle-of-the-road Greater Boston Chamber of Commerce, commended the Legislature’s work while noting, “Public policy work in this arena of tax reform, it’s a long game.”

The conservative Massachusetts High Technology Council said out loud what many business leaders are thinking.

“The High Tech Council doesn’t believe these changes will do enough to stem the outmigration of people, investment, and wealth from the state,” the industry group said in a statement.

The group, proudly truculent, has a point.

If the full Legislature and Governor Maura Healey sign off as expected, the bill would only marginally improve Massachusetts’ appeal to employers compared with lower-cost states such as New Hampshire, Florida, and Texas. It would be impossible for lawmakers to in one fell swoop rewrite the narrative that the Bay State is expensive and tolerant (at best) of business interests.

And as I wrote last week, there’s a lot more the state needs to do, especially around housing and the T. That will require the governor and the Legislature to make many hard decisions.

The high tech group and others also slammed a clarification of the so-called millionaires tax passed by voters last year.

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The wording of the constitutional amendment implementing the 4 percentage-point surtax said it would apply to incomes above $1 million “reported on any return.” The new bill eliminates the flexibility that couples had under Massachusetts tax law to file separate returns with the state even if they filed jointly with the IRS.

Some see this move as closing an unintended loophole by requiring all federal joint filers to combine their incomes on state returns as well — potentially pushing them over the $1 million threshold. Others see it as a unfair bait-and-switch because supporters of the millionaires tax frequently argued that the measure would affect “only individuals” earning more than $1 million.

It’s not a surprise that the compromise reached by House and Senate negotiators is most aggressive on easing the high cost of living for lower- and middle-income families and seniors. It includes what lawmakers claimed is the most generous universal child and dependent tax credit in the country, and increases to the state’s earned income tax credit, renter’s deduction, and the “circuit breaker” tax credit for seniors who rent or own their homes.

Even so, the progressive Massachusetts Budget and Policy Center criticized lawmakers for not going far enough and agreeing to measures that “give away hundreds of millions of dollars to the richest families and large, profitable corporations.”

Specifically, the organization objects to a cut in the tax rate on profits on investments held less than a year from 12 percent to 8.5 percent, even though the House and Healey initially pushed for a 5 percent rate. Either way, Massachusetts remains just one of three states that tax short-term gains more than other income.

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The budget center called out the bill’s adoption of a more generous estate tax and a change in how corporate taxes are calculated that would reduce payments for companies with large workforces or property holdings in the state.

Which just goes to show that a real compromise is one that leaves both sides unhappy.


Larry Edelman can be reached at larry.edelman@globe.com. Follow him @GlobeNewsEd.