Barbara Anderson Strikes Again – Massachusetts Taxpayers To Get Tax Rebate Thanks To Obscure 1986 Referendum

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Massachusetts taxpayers are in line for tax relief whether state legislators give it to them or not, thanks to a little-known provision in state law that voters approved in 1986.

Estimates on how much vary. But it could be about 7 percent of what taxpayers paid to the state in 2021, state officials told The Boston Globe.

“I’m sure Barbara Anderson is up there looking down on us with a grin pumping her fist in the heavens,” said Chip Ford, executive director of Citizens for Limited Taxation, in a written statement Thursday, July 28.

Anderson, who died in 2016, was the head of Citizens for Limited Taxation when that organization and the Massachusetts High Technology Council pushed the proposal.

The 1986 initiative petition rolled back a surtax on state income tax that the state legislature had passed.

It also stated, in part:  “The allowable state tax revenues for any fiscal year are limited to the allowable state tax revenues for the prior fiscal year as increased by the average rate of growth of Massachusetts wages and salaries for the three immediately preceding calendar years. … If state tax revenues exceed the limit imposed by the proposed law, as determined by the State Auditor, a tax credit would have to be granted equal to the total amount of excess tax revenue. The credit would be applied to the then current personal income tax liability of all taxpayers in proportion to their personal income tax liability in the preceding year.”

That means that if increases in state tax revenues outstrip increases in wages and salaries of state residents, the state government has to give a tax credit to taxpayers.

Massachusetts voters in November 1986 approved the referendum, 54.4 to 45.6 percent.

The next year – 1987 – is the only time the law has applied to the state budget. But 2022 figures to be the second time, because of historically high tax revenues and lagging wages and salaries.

Paul Craney, spokesman for the Massachusetts Fiscal Alliance, which supports tax cuts, congratulated Citizens for Limited Taxation for the forthcoming tax rebate, which few knew about before CommonWealth magazine reported it on Wednesday, July 27.

“The legacy of Citizens for Limited Taxation and the advocacy by the late Barbara Anderson are so strong that they are still providing protections to Massachusetts taxpayers four decades on. Chip Ford, who continues to run the organization, should be proud to see Barbara’s legacy still benefiting Massachusetts taxpayers,” Craney said in a written statement.

Anderson is largely responsible for several limits on spending and taxes in Massachusetts — including, most famously, Proposition 2 1/2, a 1980 referendum approved by the voters that limits increases in the property tax levy of cities and towns in Massachusetts to 2.5 percent plus allowances for new growth.

Governor Baker on Thursday, July 28 signed a $52.7 billion budget bill for the state government for fiscal year 2023, which runs from July 1, 2022 through June 30, 2023.

“And based on the performance of our economy and our tax collections for the last fiscal year, we do believe there’ll be a significant return to the taxpayers, according to existing state law, sometime later this year,” Baker said during the press conference.

The tax rebate is “probably north of $2.5 billion,” Baker said during the press conference, though administration officials later put the figure at $2.97 billion, according to The Boston Globe.

The governor said the state government has plenty of cash to give back some to taxpayers.

“The tax breaks that are currently pending before the legislature are eminently affordable, within the context of the rest of this. I mean, you’re talking about a tax year this past year in which tax revenue went up by over 20 percent, which came on the heels of a tax revenue increase in the previous year that went up by 15 percent. I mean, these are sort of unprecedented increases in tax revenue, which is, in some ways, exactly what this thing was designed — to ensure that people of Massachusetts participated in that windfall,” Baker said.

State legislators have been slow to include tax decreases as part of the state’s fiscal planning, even though tax revenues are high. Legislative leaders are still evaluating $700 million in tax cuts proposed by the governor in April, including changes to the state’s estate tax that would decrease the number of people it applies to and the amount they would pay; a change in the so-called circuit breaker law that decreases the state income taxes of senior citizens whose incomes are low enough to qualify; lowering the threshold at which people pay state income taxes in Massachusetts; and decreasing the short-term capital gains tax to 5 percent from the current 12 percent.

The state legislative session runs out Sunday, July 31.

Barbara Anderson


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